How to Start Investing in 2020 [From 0 to $1,000 Fast] (2024)

A complete one-year plan to start investing fast!

If you’re just starting investing, I’ve got a simple strategy you can use to grow your portfolio to a thousand dollars in one year.

In this video, I’ll give you a 12-month plan to start investing from how much to deposit each month to learning how to find the best investments.

How Many People are Not Investing Yet?

Nation, we did a poll a few months back in thecommunity tab on the channel and I was floored by the answers. I asked how longyou’ve been investing in stocks because I wanted to get a feel for whereeveryone is at in terms of experience and what videos you need to besuccessful.

Over two hundred and fifty of the 1,400 totake that poll, about one-in-five said they hadn’t started investing yet andhalf of our growing community has been investing for a year or less.

I love touching base like that with everyone in the nation and this video is coming right out of those results! In this video, I’m going to take you from zero to a $1,000 portfolio, show you how to get started and give you everything you need to meet your financial dreams.

We’ll look at a month-by-month plan fordifferent types of investments. I’ll show you how much to deposit to grow thatportfolio but without having to skimp and save every penny.

By the time you’re done, at the end of theyear, you’ll have a thousand dollar portfolio and just look at this graphic forwhat that can mean. If you never invested anything else, that $1,000 can growto over twenty-times your money in 40 years.

But creating that habit of saving andinvesting like I’m going to show you how to do and it’s going to be so easy tokeep adding a thousand a year. Do that and you’ll have over $280,000 for your retirement…turningless than $85 a month into almost $300,000!

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How Should You Invest?

Let’s get started because I’m excited to sharethis strategy and show what it can mean for everyone in the nation that wantsto get started investing.

If you’re not investing yet and you’re worried about finding the money to get started, I put together a monthly plan for how much to invest. You see here, we’re starting low at just $50 in that first month. So maybe go out to eat one less time or whatever you need to do, I want you to make that commitment and get $50 into an investment account.

After that first month, we’re going toincrease it very gradually so you’re not stretching to pay the bills or enjoyyour money. We’re slowly creating that habit of finding a little more to investup until we get to just under a hundred dollars a month.

That’s all you need to grow your portfolio toa thousand dollars in one year. In fact, you only need to invest about anaverage of $80 a month and compound interest is going to take care of the rest.

We’re starting slower here because I want youto get into the habit of investing and not skimping to find the money. That’sone of the biggest problems, especially for new investors is that they get soexcited to start investing that they dump every spare penny into their account.

What happens though is that an unexpected billcomes up or they forgot to budget for a vacation or something and they end uphaving to take money out of their investments.

I don’t want you to do that! I want you tostart small, work up to what you can invest and keep your money growing foryou!

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One-Year Plan to Start Investing

Now I want to give you a month-by-month planfor investing your money. And I think I might actually make this two videosbecause it’s going to be a lot to cover.

We’ll walk through each month, adding a new investment. I’ll show you why each should be in your portfolio, how to find the best investments and where to look. I’ll also be including links to videos covering each investment so you can learn more about each topic.

Investing in Value Stocks

So January is a pretty easy month, justdepositing $50 but this is a huge opportunity, not just in what we’re going tobe looking at for investments but in getting you started investing.

One of the most well-known market trends, the January Effect, is where the market and especially a lot of the lagging stocks from the previous year tend to rise during the month.

Besides just the optimism for a new year, newinvestors coming into the market, all these factors pushing stocks higher, alot of investors look for those last-year’s losers to play the turnaroundtheme.

So while you’re looking for the first stocks to put in your portfolio in January, I’d recommend looking for value stocks. That’s shares of companies that are trading below their fair value, maybe the return lagged the market last year for some reason.

For that, we’re going to look for stocks thatmeet three criteria; first is for a valuation metric like the price-to-earningsor price-to-sales that’s lower than competitors. We also want to find stockswith sales that are increasing over the last couple of years and a lowerdebt-to-equity ratio than peers.

With these criteria, you’re not only findingstocks that trade more cheaply than others but that have a solid businesstrajectory. A lot of value stocks are cheap for a reason like sales or earningsare on a downward slide. By screening for companies with improving sales and alower debt-to-equity ratio, which means they’ll have more financial flexibilitythan peers, then you’re going to find those value stocks with reboundpotential!

Watch this video to learn more about finding value stocks.

I do also want to note though that you want tobe using a commission-free investing site if you’re using the plan. You’regoing to be buying stocks each month and with smaller amounts so you don’t wantany of that going to fees.

I’d recommend M1 Finance, one of the platforms I use, not only for that commission-free investing but also for the easy portfolio investing tool. Basically with M1, you can put all the stocks you want to buy in your portfolio, then turn on this auto-invest tool and the site is going to automatically spread any new deposits across all your investments.

Put your investments on auto-pilot and never pay a fee to buy or sell stocks with M1 Finance – learn more here.

Start Investing in Dividend Stocks

For February, you’re going to take that $55 and start adding some dividend stocks.

Now everyone out there in the nation knows I’m a huge fan of dividends. We set up our 2019 Stock Market Challenge with ten dividend stocks and ended up beating the market with almost a 30% return on the year.

Dividend stocks just beat the market. Frombeing able to reinvest that cash flow to a return that’s always positive nomatter where prices go, you have got to have dividend stocks in your portfolio.

One of the strategies I talk about is investing in what’s called the Dividend Aristocrats. These are companies in the S&P 500, so the largest companies in the United States, that have increased their dividend payout for at least 25 consecutive years.

This is the easiest way to invest in dividendsand a pretty darn good strategy. You don’t have to look through companyfinancial statements, there’s no analysis to do. You know these are solidcompanies on that spectacular ability to increase the cash they pay toshareholders every single year!

And the easiest way to invest in theAristocrats is through the ProShares S&P 500 Dividend Aristocrats Fund,ticker NOBL. Right now it’s got shares of 57 companies that meet that dividendcriteria, spread across different sectors of the economy and some solidcompanies like Target, AT&T and Procter & Gamble.

Watch this video for my three favorite dividend investing strategies!

How to Start Investing in Real Estate Stocks

In March, we increase the deposit again to $65and start looking at another investment favorite of mine, real estate.

There is just something about owning a realpiece of land, a physical building that produces cash flow every month! Noother asset has produced as much legacy wealth.

But that direct ownership isn’t for everyone.You’re constantly managing properties and it can cost tens of thousands justfor a down payment.

So we’re going to be looking at the next best thing, maybe even a better way to invest in real estate, through real estate investment trusts.

A REIT is a special type of company that ownsreal estate and gets a tax break for passing the majority of profits on toinvestors.

So REITs are not only a super-efficient way ofmanaging property because you don’t get that corporate tax drag but it’s alsoan easy way for regular investors to diversify their portfolio. Whether you’vegot residential rental properties or are saving up for that first investment,REITs give you the opportunity to invest in different property types and inevery region of the U.S.

And if you want to talk returns, even throughthe worst real estate crash in U.S. history, REITs have way outperformedstocks. Here I took data from the National Association of REITs equity REITindex, the blue line, versus the S&P 500 index in red. Over 30 years to2017, the total return on REITs is 10% a year versus a return just over 7%annualized for stocks.

For this real estate portion of yourportfolio, you can buy individual REITs or just go with the Vanguard REIT fund,ticker VNQ, which holds shares of 184 individual REITs in different propertytypes and has produced a 13% annual return over the last decade.

If you’re going to invest in individual REITs, make sure you get at least two or three companies specializing in different property types, so maybe you look for a company that holds office property, one in the hotel & leisure space and maybe one in healthcare properties. This will give you some diversification and smooth out those real estate returns.

A new way I've been investing in real estate recently is through Fundrise, a real estate crowdfunding platform. The platform holds properties in different portfolios designed for cash flow, capital appreciation or a mix and then let's investors buy shares in the funds.

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How to Start Investing in Tech Stocks

April we bump the deposit up to $80 and look another popular segment of the market, tech stocks.

By now, you’ve got a few months saving andinvesting in and the idea is that you can increase your deposit without havingto skimp. By gradually increasing the amount you deposit each month, I want youto find where you’re comfortable at, how much you can save without sacrificingtoo much.

And what better time to increase your depositthat a month looking at tech stocks? The tech group is an investor favorite andfor pretty damn good reason. Tech stocks, shown here by the Select Sector Fund,ticker XLK in green, have easily beaten the rest of the market over the pastdecade. Tech stocks have produced an annual return of 15% over the ten yearsversus that 10% annual return on the S&P 500 market index.

Now those returns and the kind of growth you see in tech companies can mean some very expensive stocks. For example, as I research for this video, shares of Netflix trade for a price of 100-times the company’s profits over the last year. That’s four-times as expensive as shares of Disney trading for 25-times earnings.

So when I look for tech stocks, I like to look for what’s called Growth at a Reasonable Price or GARP for short. Here instead of just looking at the price-to-earnings ratio which is that measure of how expensive a stock is, I would look at the price-to-earnings-to-growth or the PEG ratio. This takes that price-to-earnings ratio and divides by the earnings growth rate to get an idea of how much investors are paying for that faster growth.

There are other things you want to considerwhen picking tech stocks like a competitive advantage through patent-protectedassets but this one screen, investing in stocks with a low PEG ratio, has beenshown in a study by Morgan Stanley to outperform the S&P 500.

Watch this video to see the five best tech stocks to buy this year!

How to Start Investing in Bonds

You keep your same $80 deposit level in May and start two months of looking to invest in safety stocks and bonds for your portfolio.

The reason safety stocks are important isbecause May tends to be the start of the negative summer season for stocks. Onstock market data from 1950 to 2012, the only four months to average negativereturns for investors are between May through September.

In fact, there’s even a maxim, sell in May andgo away. Some investors and traders will sell much of their stock portfolio inMay and just not worry about it during the summer.

Now I’m actually not suggesting you sell outof your stocks in May but I do think you need to shift to the kinds of stocksthat will protect your money if the stock market wobbles during those summermonths.

I’ll detail those safety stocks in the June plan below but now I want to add a few bond funds to the portfolio.

Bonds are debt borrowed by companies with theinterest paid twice a year and then the entire loan paid at the end of theinvestment, usually from five to 30 years. Because they’re a debt, bondinvestors get paid before stock investors so these are the ultimate in safetyand can provide some good cash flow as well.

Now instead of trying to pick individualcompany bonds which can cost in fees and trading, we’re going to take a simplerapproach and just look to invest in bond funds. These hold hundreds and eventhousands of individual bonds, passing the interest on to investors, but tradejust like stocks.

For example, a good option is the VanguardLong-term Bond Index ETF, ticker BLV. This fund holds over 2,300 individualbonds, mostly in U.S. government Treasuries but also in highly-rated companies.The fund pays a 3.3% dividend yield and has returns almost 7.5% a year since2007.

Other good bond funds include the iShares CoreU.S. Aggregate, ticker AGG, and the Vanguard Total Bond Fund, ticker BND, butreally here, you probably only need one maybe two bond funds at the most.

Watch this video for the three steps to easy bond investing!

Investing in Safety Stocks

In June, you’ll deposit another $85 into youraccount and stick with that theme of safety.

Here we’re looking at the stock sectors that do well even when the rest of the market wobbles. For example, when the rest of the market fell 50% to March 2009, stocks in the consumer staples sector, shown here by the Select Sector SPDR Fund, ticker XLP, in green, they only fell 24% over the same period.

The stocks in these safety sectors of the economy like consumer staples and utilities, they provide that protection because their sales aren’t going to rise and fall as much in a recession. People need food and electricity whether the economy is doing well or not so these companies can do well in any market.

Just like a lot of the stocks and themes inthe video, you can invest broadly in safety stocks with a fund like that ConsumerStaples ETF, ticker XLP, or the Utilities Fund, the XLU. Or you can pickindividual companies in these sectors.

If you’re picking individual stocks, make sureyou’re comparing things like price-to-earnings and dividends against similarcompanies to get that fair measurement. You’re not comparing these measures orratios for utility companies against tech stocks because the business modelsare different. Always make sure you’re comparing similar companies whendeciding which stock to buy.

Check out this video for the top utility stocks for safety and dividends!

Remember to watch for part two of the video for the July through December plan. I'll publish it immediately after this video next Friday.