How to Start Investing in Stocks in 2021? (w/ @Value-Investing)

Hey guys, welcome back to the channel! In this video, I'm super excited. I got to do a sit down, kind of quick 20-minute interview with Sven Carlin. Of course, you guys all know Sven from over on his YouTube channel. The topic of this conversation was how to get started with investing because obviously it has become a hot topic of conversation in 2020 with all that's been happening in the markets.

So I hope you guys really enjoy this sit-down conversation that I had with Sven Carlin, who has just a wealth of experience and knowledge when it comes to investing. Of course, he's studied in the area and has been an investor for a long time. So I really hope you enjoy the video. Leave a like on it if you do, and make sure you check out Sven's channel as well—link down in the description below. But for now, let's get stuck into it. This is my interview with Sven Carlin.

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"Well, good day fellow investors! Or I suppose where I'm from, it is g'day fellow investors. I'm joined by Sven Carlin from the Invest with Sven Carlin PhD YouTube channel today. Sven, how are you going?"

"Very well, thank you, and it's great to be here after a while."

"Yeah, it has been a long time. I think it's probably like over a year ago when we last spoke. But thank you very much. I understand it's late where you are, so we'll get straight into it. I wanted to pick your brain because I was talking to someone from YouTube the other day, and they were saying that in 2020, the search volume for people looking for content around getting started in the stock market, self-sufficiency, getting on top of your finances has absolutely skyrocketed.

So I thought with your background, in particular, as someone that's studied this field previously, I thought that I'd pick your brain, and maybe we could go through some beginner tips on how to get started in the markets and with personal finance. So with that said, first question, really basic: just for someone who's looking to get started to even just be better with money and maybe potentially start investing, what are some things to start thinking about before you even get started?"

"Before you even get started, I think it's always easier if you have a goal. So if you want, ‘Okay, I want to think about money’—but why am I doing that? Because when you have a goal, when you know why you're doing something, then everything is easier. Because if you do it, 'Oh, everybody is trading stocks, everybody is doing this, everybody's doing that,' then it's not really related to your heart, and then it brings you nowhere.

So knowing exactly what you want—be it, ‘Okay, I want to retire in 20 years, I want to take off 10 years from retirement, I want to buy a bigger house, I want to live better’—think. And when you start focusing on those things, then you'll find what you need to do. Then you find the vehicles to do it."

"Yeah, no, I totally agree. I think that's really important because I think it's very intimidating when you start out because you hear—you ask three different people and you get three different investing strategies. You might hear, you know, ‘margin of safety’ chucked around, or you might hear ‘passive investing,’ or you know, you might hear ‘day trading.’ It can be very, I suppose, difficult to understand what you're trying to do. So no, that makes total sense. If you start with the goal, then you learn what you need to do to achieve that goal."

"So when you start with a goal, then you say, ‘Okay, if you are a slow and steady long-term investor, you want to go for safety.’ When I look at the Australian stock market, you have dividends of five to seven percent, which is mind-blowing here in Europe. But a good company with five to seven percent dividends will— and that is a business that will likely continue to grow.

And everything, in 10 years, you will have two times your money, three times your money. And slow and steady, three times your money in 10 years—that's a lot! For example, if you start with $10,000 and the dividend yield is now $500 per year, in 10 years it's not $500, but if you reinvest it, it becomes $1,500, $2,000, and then it starts compounding and going for the long term.

But on the other hand, if you go just trade something, buying some hot stock, maybe on some hot stocks you'll do well, but on other hot stocks, you lose everything. And then, from your starting $10,000, you can be at zero very quickly, and then it's very hard to restart again. Then most people say, ‘I will never invest’ because I've been investing for 20 years now. And I've seen these cycles just repeat themselves.

People go in; something is hot. It was gold in 2012, it was, I don't know, 3D printing stocks in 2013. We had marijuana stocks, or cannabis stocks just two years ago. Everybody was crazy about them; now nobody speaks about that. Slow or steady—my way is always slow and steady, and you slowly compound. Those trading techniques, I don't know that many rich traders or that stay rich for longer; so I can't help there."

"I tend to agree definitely. I think people underestimate, first of all, they don't understand the compounding effect. And I think that if someone's brand new to investing or learning about money, learning about the compounding effect is really something next level. But yeah, I definitely agree. I think people underestimate the power of compounding because I think if you play out compounding over, say, five years, it doesn't look that fantastic. But if you play it out over 20, 30, 40 years, then all of a sudden this is like the best deal you've ever gotten in your life.

My favorite example is Buffett's purchase of Coca-Cola. So the stock didn't go anywhere for the last 20 years. So you might think, ‘Oh, that's such a boring investment.’ But Warren Buffett paid $1 billion to buy 10% of the company, and he is now getting every year $600 million back in the form of dividends. That's unreal; that's crazy!

So imagine that you put your money now, and then for the rest of your life, you get that money back every year just because it's long term. You allow the business to grow and compound. Some businesses will do better; some businesses will do less, but that's investing for the long term. And so when we hone in on investing specifically and actually the process of starting investing, are there any things that you put on a checklist to actually check off before you place that first buy order?"

"Alright, so what I see a lot—and especially, as you said, in 2020, investing has become a hot topic, an interesting topic—but I see a lot of people in Facebook groups and everything; they have a few thousand dollars, for example, and they spend six hours trying to make something of that money. If they would spend 15 minutes with five good companies and just focus on those and spend the other five hours and 45 minutes working, even in McDonald's, their returns will compound exponentially.

Because by working, you can make more than $3,000 a year, which is 100%. So first, see how much money you have and how much time you're spending on it because investing should be something when you buy a business, and the business works for you. If you trade or if you spend six hours a day looking at those tickers going up and down, it's better than you do what you are really good at—whatever your job is—and you will make ten times the money than you would make by investing."

"I suppose that's the idea of investing: you want your money to be working for you. You want to set it up so that over time, without you thinking about it too much, it creates more money for you. And you're right; if you're a trader, you're just switching out working as a physiotherapist or a doctor or something out. You're switching that time to try and make more money, you know, every single day. So it makes total sense."

"I had a friend who had the strategy of trading options. He made 36% per year."

"Right, okay. That's very good."

"Yeah, his—he could do it up to a capital of $20,000. Because if he would try with more money, then the other traders would see what he's doing and they would eat him up, right? So he would spend a year working for $26,000 or $20,000, 36% for a 10% gain. So that's a salary of $1,000 per month, which doesn't really make sense."

"Yeah, and you raise a good point there. When you start investing, usually you don't have that much money to put towards it. So obviously when we talk about the compounding effect, you know, the compounding effect on $1,000 isn't going to be the most amazing thing ever. However, the compounding effect on, say, $10,000 or $20,000 is going to be much more substantial over time. So I think you raise a good point that early on in your investing journey, maybe actually keep working, keep trying to accumulate, you know, save up money at the time so that you can really reap the rewards of the compounding effect and the stock market later on in life."

"I would say put your toe in the water so that you understand a little bit how the broker works—buy, I don't know, five companies with, I don't know, $500 or $1,000, just to see how it works. The worst thing that can happen, you can lose $1,000, but you will learn so much. And later in life, when you will have $10,000, when the bonus in February comes, which will be $50,000 or some stock options vest or something, then, okay, now I know how to not do the same mistakes that I made when I started. Because it's inevitable that you'll make mistakes.

So I would say, okay, start with little and make it not the goal, ‘Okay, I have to make a million from a thousand.’ That's very difficult to do. To make a thousand from a million, it's easy; it's easy to make a million from a thousand. It's difficult, and if you can do that, then you will be rich beyond your means because you will do for others and everything. So if you start slow, learn a little bit, even invest that money in your knowledge, and then you'll also see different investments—perhaps some dividend stocks, perhaps some growth stocks, perhaps some value stocks or something.

And then you'll see, okay, you put— or 10 stocks, you put $100 into it, and then in a year, okay, I don't like these growth stocks, I like dividend stocks, I'm a dividend investor, I'm happy with that. And then you'll see also what your style is because each of us has a different investing style."

"Moving on, I wanted to talk about—so I think a lot of investors, they get so excited by, you know, they learn about the stock market a little bit, and they get very excited about the potential of it. But I think on the flip side, a lot of people get in a bit blindly. But on the flip side, a lot of people don't get in at all because they end up being a little bit too worried about, you know, ‘Oh, I don't think I'm gonna do it right, I'm afraid of losing money,’ and that sort of thing. So are there any things that you would advise new investors? Are there any common traps that new investors should look to avoid?"

"I think that, for example, as we started this with YouTube and everything—search on YouTube exploding on stock market; everything is exploding in 2020! We're now 10 years in the biggest bull market in history, right? The stock market went up four times from where it was 11 years ago. That's mind-blowing and amazing, and now at the top of the tops, more and more people are attracted to the stock market, right?

So if I could say one thing to all the people is if the stock market crashes next—which is what usually happens, history—I would just beg you not to stop investing. I would tell you, okay, when the stock market crashes, that's the best time to continue to do what you have been doing because 90% of people see now, ‘Okay, we can make 20, 50 on this stock, this or that; everything is going up, let's put our money.’ Then usually what happens is it goes down, and then people say, ‘Oh, stock market, just gambling, crazy!’ No. Then you keep investing, and then you start understanding the fundamentals and everything, and that's my message. So just, whatever happens tomorrow, just keep doing it. Like keep doing what you are doing now, and if stocks go down, especially if you're in a beginning of your portfolio building or wealth building, then you are happy when it goes down because when the next salary comes, you can buy more. And that's it."

"Yeah, and I think to add on that point, I did a video once, and I looked at the global financial crisis, the worst financial crisis since the Great Depression, obviously. And I think if you invested in the S&P 500 at the peak right before the big crash started—it was a big crash; I can't remember; it was over 50%, I think—but it only took, I think, five to six years—and this is not including any dividends that you might have earned—it only took about five to six years before you were back to where you were before. Now, I understand that five to six years, that's still quite a long period of time, but it's not the end. It's not crippling, I suppose.

And that is the worst financial crisis we've seen in 100 years or so. So I think that point is very relevant: that, you know, even if you get knocked down, you know, get back up again—and I'm sure Warren Buffett would say the same, if the stock market plummets tomorrow. Then he doesn't get fearful; he gets excited. It's that classic, you know, be greedy when others are fearful, I suppose.

And we have all seen it this February in March—the stock market went down 34% on the 22nd of March. It looked like the world will end; soon we will all go back to caves or something like that. And that was actually when it looked the worst; it was the best time to buy stocks. Whatever you bought that day, it was the best because then in the few days, governments reacted, started building the stimulus laws, etc., etc.

And always, it's when it's the darkest, it starts to be bright again. And that's what happened again. There will be more problems ahead, but we'll see how we'll deal with them. And I think an interesting point to touch on here finally is kind of the psychology of investing during a market crash because one thing that new investors will find is that when the market's going down, the news articles will also be extremely negative. Like they'll all be saying—like all of the major news articles will say, ‘Oh, this is a terrible time to invest; you should avoid the market at all costs.’

But it—and I think it really is quite difficult to look past that because you think as a new investor that, you know, I'm watching these different news channels, and all of these fund managers are coming on, and they're all screaming and saying the same thing. It can be quite hard to overcome that, that kind of authoritative message from the media and actually say, ‘No, you know what? This actually is a really good time to invest if I'm someone that's going to invest for a long period of time.’"

"I have one system that always helps, and whenever there is a difficult situation and something like that, I check if there is electricity—if the power turns on, you're all good! Because if the power is still on, turning on, it means that the company is selling you; the power is still there, it's not going bankrupt. People are still going to work. If you still have food in your refrigerator and you can see it because you have power, it means that the world will not end.

So there is still something working, and then you know, okay, this will get improved, and the headlines will also change, and things like that, and that's normal. I have been through hyperinflation twice when I was a kid, through one war here in Croatia, then we have seen the 2000 dot-com crash and everything—also been there, 2009 crisis, European crisis, 2012, and now crisis again. And I've seen the emerging market crisis two years ago, etc. So it's always—usually I say the world is about to end every year or two, and it never does! And never does, surprisingly.

So when it's ugly, then it's time to invest."

"Oh, thanks very much, Sven! That was really good. Thanks for sharing your insights as well and giving up your time. I won't keep you too long because I understand it's pretty late at night over where you are! Hey, are you still working on your research platform?"

"Yes, yes, we do research. We research companies—we just did some natural gas, did the Woodside from Australia."

"Oh, from Australia? What's up, Petroleum?"

"Yep, a little bit costly on the production there. So, but if oil goes up, that's a stock that will double, for example. Yeah, but oil prices have to recover because that's now it looks like the world will end for oil. We'll see if it will happen."

"Oh, thanks! Yeah, thanks again very much! I definitely recommend checking out—you've got so much content over on your research platform. And of course, even if you're just looking for some free content to help you get started with investing, Sven runs his own YouTube channel as well, Invest with Sven Carlin PhD. Overall, Sven, thank you very much for giving me your time and helping out the viewers of the channel. Hopefully, we've helped a couple of people today get started with investing. So I certainly appreciate your time."

"I'm just begging them when things look ugly to keep investing, and they will be happy over the long term, and that's it."

"That's a good message to end on—very powerful, and it works too! Sven, thanks very much for your time."

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"Um, [Music] you."