An Intro to Investing (and why you should get started on your Gap Year) with CanGap Ambassador Anuj
Updated: Jul 15, 2022
AJ - 00:00
Hello everyone, my name is AJ and welcome back to the Canadian Gap Year Association channel. I'm one of the Gap Year Association ambassadors and today I'm going to be talking about finance, a topic that seems quite intimidating but is actually extremely important and rewarding once you start to understand it.
That's why I think a Gap Year is the ideal time to start improving your financial literacy and to get your feet a little wet in this somewhat intimidating field.
So right before I get into the content of this video, I just wanted to preface this with the disclaimer that none of what I mentioned in the video is investment advice, and this is my own take based off of my own limited experience during my gap year in investing in financial markets. So take everything with a grain of salt and do your due diligence and research before investing in any of these very risky assets.
So with that all out of the way, the first real question is why do we want to invest in the 1st place? What is the merit in doing so and why are people obsessed with all these numbers and why it's such a big deal.
AJ - 00:56
On a very basic level, you work hard for your money, so why not let it do some work too?
That's the central idea with investing. You're seeking higher returns with these investments, but that also means higher risk.
There comes this phenomenon called inflation, and that essentially means that you're $1000 today will not be worth $1000 five years from now, and that's because there's a general increase in prices over time, and that your money is worth less in relative terms over the certain period of time, and so people want to find ways to beat inflation and to ensure that they're not just losing money by doing nothing, and one way of doing that is savings.
That's pretty much when you would put your money in the bank account and in return you would get paid a particular interest rate, which is a percentage on the money that you've kept in your bank.
AJ - 01:41
So right now the Canadian interest rate is around 0.18%, so if you kept $100,000 in the bank at the end of the year, you would have gotten like $180.00. Obviously, savings are exceptionally important, but sometimes people want to allocate a particular portion of their money and their savings to put in more risky assets that could yield them a larger return on their investment and thus help them grow their money to a greater extent.
OK, So what do I invest in then? How do I get money? Where is the money? Unfortunately, before we get to that, you're gonna have to ask yourself a few questions. The first thing to really ask yourself is what are my financial goals?
AJ - 02:20
And this is something you want to constantly be thinking about and revising and understanding.
And talking to yourself about it, because we all have different values, we all have different ambitions, we all have different life situations and investment works the same way.
Maybe I want to save for retirement. Maybe you wanna save for your child going to university. Maybe someone else wants to save for this massive trip they want to go to in five years.
AJ - 02:42
We all have different goals. Whether it's short term savings, long term investment, whether we want to wake up in the morning and be shocked by rapidly changing prices in exchange for potentially higher rate of return.
Or maybe I like to wake up and just be calm and see not many increases or decreases, but have a steady growth overtime.
That's up to you to decide, and based off of that you can then pick your financial instruments and your portfolio mix that fits your current goals and your lifestyle and your needs.
In terms of the variety of financial instruments, there's truly a lot to choose from, and that's a good thing because diversification is important, because if you're putting all your eggs into one basket, if that basket falls, you're not going to do so well.
But if you diversify into stocks and bonds, and maybe a bit of cryptocurrencies, and maybe a bit of real estate, then if one crashes and another goes up, you're bouncing yourself and that's why diversification is so important.
AJ - 03:30
And while I haven't specifically got into what the different financial instruments are, as you can see from this pyramid from Investopedia, there is a variety of different instruments that you can invest in, ranging from low risk to high risk, and that starts all the way from government bonds or debt markets and leading into real estate or real estate funds.
So you don't actually need to own a house, and there's also equity mutual funds, which are stocks, and you can pick from a variety of different stocks which are medium risk, and then you can lead your way up to Options and Futures and I would even add cryptocurrencies up there as well, which could be a lot more riskier but also serve the potential of having a lot of rewards.
So although I unfortunately don't have the space in this video to talk specifically about each of the different instruments and derivatives and what they are and what they comprise of and their specific risk level, by the way, if you are interested in that, leave a like and comment and let me know and I can get that done.
But since I'm not able to do that here, I want to give you some tips about how I got started and how I really made the most of my gap year and learned so much about investing in the process.
AJ - 04:25
First and foremost, the best way to learn is to just get started. I know it seems intimidating.
There's so much going on, there's so much jargon, which, by the way, makes things seem so much more complicated than it really is. But, just start!
For me, getting started meant to actually take my savings and put my money on the line, because that motivated me and that pushed me to constantly check and constantly learn because I was scared of losing money.
If you're not comfortable with that, there are so many online simulators that follow the exact markets of so many financial instruments that you can literally Google right now and in terms of learning about what's going on, there are so many online Resources and courses that you could really leverage and take advantage of.
Firstly, there are so many Coursera courses and online modules that are university accredited that in my opinion give you a good understanding of the financial environment of the markets but not necessarily the specific steps to invest.
AJ - 05:09
That's when I turned to good old YouTube and good old Google and that's really where most of my learning took place. I tried doing something I was like. How do I do this? How do I pick what stock to invest in? What is fundamental investing versus technical analysis? How do I read the charts? What do these patterns mean?
AJ - 05:23
I would have questions along the way during my process of getting started. And I would go to YouTube or go to Google straight away and start to learn about it and overtime more and more questions came up as I learned more and the process just kept going and that was really the root of real learning to me.
And if you would like to supplement that specific knowledge that you derived from the YouTube videos, I think books are a great way to get a holistic perspective and really learn from some experts in the field.
So some recommendations would be the Psychology of Money, The Intelligent Investor, A Random Walk Down Wall Street and there's so many more financial books that can pretty much teach you whatever you like to learn.
And then finally, here are some of my bite size personal takeaways that I learned. One, invest for you, for your personal goals and for your personal lifestyle.
AJ - 06:01
Because for me cryptocurrencies were a great way to invest a little money and really see a great return. But it brought about a lot of stress in my life. I was emotionally attached to the value of the cryptocurrencies I was holding and that really affected my mood and I woke up in the middle of the night on several occasions just to check the stock prices or the cryptocurrency prices.
Two, try dollar cost averaging. It's a great way to step back from the market and allocate a specific portion of your funds. For example, 10% of my monthly salary will be invested on the 2nd of every month. You could say that and you could do that without looking and overtime you will average into the market at a good price.
AJ - 06:32
Three, try not to invest in things that you don't understand.
Four, be afraid and cautious when people are greedy and be greedy when people are afraid and cautious.
Five, you can't really time the market. No one can. If someone knew how to, we would all be very rich.
Next, diversify index funds and ETFs. You can just Google that to figure out what exactly it is are a great way to diversify your long term investments
AJ - 06:56
That concludes my introduction video to financing and what it is and how you could really leverage that during your Gap Year to get a good grasp about what it is and what your
financial goals are.
It's great to start thinking about this at such a young age, because as you know the power of compounding will really make you a lot more well off in the future so it's worth it.
Get started. Get learning. Thank you for watching!
AJ - 07:17
Please give this video a like. Subscribe and comment, If you enjoyed it and I'll see you next time.