hey everybody I’m Sam and this is Entiversal and today’s video is probably one of the most important videos that I have

shared ever and it is about why is investing so important why all of us

should invest and what if you started right now with zero dollars you get your

nine point seven percent annual rate because you invest in the S&P 500 and

you say five hundred dollars per month for 30 years and the numbers that we get

actually really really interesting into the first ten years starting from zero

and investing into the SMP 500 you have a hundred thousand dollars in 20 years

you have weakened with sixty eight dollars and into thirty years you have

over a million saved so why is investing and having equity so important because

of the alternatives are really bad right what are the main two alternatives cash

and charging your money into a savings account into a bank so first I want to

discuss cash and why holding cash is actually quite bad because cash by

design is inflationary object cash is made so that there is inflation and then

there is amazing video by the amazing Vitaly oh that explains how economy

works in about 30 minutes it’s very easy to understand it’s brilliant I’ll put a

link into the description of this video and you can go watch it and understand

how economy works so you know in order for economy to grow you need inflation

and when the inflation is controlled is actually very good and I’m gonna read a

bit about that what’s behind inflation that’s on investopedia inflation comes

about this demand for goods and services grows in an economy as the money supply

in the economy Rises there is likely to be more demand from customers looking to

buy various goods the rising demand creates a pressure on prices in the

rise as more people are willing to pay for these goods sellers hiked up their

prices another situation that could lead to inflation is when there is an

increase in the cost of production so overall growing economy having more

money means that there is inflation but let’s look at the effect of inflation

let’s say you have $100 into a savings account that pays a 1% interest rate

after a year you have 101 dollars into your account during this period if

inflation runs 2% you would have to have to 102 dollars to make up the impact of

the higher prices since you have 101 though that means that you have actually

lost 1% of your purchasing power which means that if you hold cash you are

vulnerable to inflation if you hold cash over time even though that the number of

how much money you have doesn’t change your actual buying power decreases over

time you lose your buying power another thing that’s very important about case

is that you are subjected to swings into the price compared to other currencies

because when you have cash you probably have mainly one currency let’s look at

the pound against the door into a period of what four years the pound has lost

over 24 even over 25 percent of its value which means that people that had

thousands of pounds you know back in 2014 now even though this you have these

thousand pounds their buying power against the door

is 25 percent lower in the same time remember that inflation is also

compounding it around one to two percent per year which means that these thousand

pounds if they want to buy something from America now can buy them probably

somewhere around 35 to 40 percent less what they could buy just four years ago

so they these people lost more than 30% of their buying power in a short span of

four years now there’s a lot of news about the Turkish lira right that’s you

know being falling in five years the Turkish lira has lost 68 percent of its

value compared to the US dollar in a single month the Turkish lira had lost

over 28 percent of its value against the US dollar and we know that the US is the

strongest economy in the world we know we in a globalized world so you know

their imports from a lot of different countries so buying a car or buying

anything that’s manufactured even parts of it into a different country puts you

at a vulnerable position of swings of currencies so in short if you’re holding

cash over time you are losing buying power because of inflation and

compounded with that you lose power because it’s very probable that your

currency might lose value against other currencies

what about savings accounts right this is the second option which a lot of

people go about and you know this was my mindset in the problem with that and why

this video is so important is because if you don’t have someone that’s you know

doing finance or business or entrepreneur entry of a million around

you it’s very hard to get out of this mindset I didn’t talk anything about net

worth about shares about equity you know how inflation affects you and

you know how you can make use of that and turn your money to work for you

instead of you losing your bank power the second thing that gets so many

people is savings accounts and we know that banks these some of the highest

rates of savings account we see today around 1.8% per year but if we look at

the actual inflation per year we can see that in u.s.

it is between 2 to 2.8 percent in the last two three years

which means that if you hold your money into a savings account you still lose

buying power because of inflation the second thing is you still subjected to

swings in two currencies and the third thing is most banks will not let you

actually withdraw money or you know handle your money which means that you

don’t even have access you know to your own funds let’s talk about why investing

is so good so this is a chart of the S&P 500 index which basically tracks the 500

biggest companies in u.s. which are basically some of the biggest companies

in the world overall which means that it is a quite good indicator what the stock

market overall is doing so we can see here I’ve opened the all-time chart of

the S&P 500 and what we could observe is that at any period over 15 years the

stock market is higher than where it was before that and into a very big

percentage of the time in every period of five to ten years

the stock market is higher than it was and you know we can follow that from

1950 to 2018 if you invest into the S&P 500 which means that it’s super simple

right you invest into an index you don’t have to choose companies don’t need to

understand companies you just invest into the economy right because these

basically tracks the economy if you invest introduced the economy into an

index let’s see what happens so if I opened here a kind of reverse compound

calculator and here have calculated the interest rate that you would gain if you

get invested in sa P 500 back in 1950 when it began so I want to see how much

on all the data that we have over time how much is the interest rate and we can

see that back from 1950 based the ACP started at

around 16.9 and now in 2018 it is a 2,850

this is sixty eight point six years and we are calculating the annual interest

rate and we can see that we get an annual appreciation of seven point seven

six percent seven point seven six percent with inflation we said at around

two percent at the moment right so okay but let’s look at some more interesting

stuff okay let’s look at if you invested exactly at the best possible time at the

downturn in through the 2008 crisis if we look at this back in 2008 the ACP was

around six hundred eighty three and now as we said this at two thousand eight

hundred fifty and that’s it into a time frame of nine and a half years we can

see that this is again of sixteen point three percent per year with a savings

account giving you one point eight and with cash giving you zero right so we

can see the difference and you would say yes but nobody can time the market right

that’s what you say all the time like you know nobody can invest the best time

and I say okay let’s look what you invested at the worst time okay if you

invested exactly at the top before the crisis and you never sold state invested

into the index let’s see what happens okay the peak here before the crisis

around one thousand five hundred and fifty sixty and as we said now we had

two thousand eight hundred fifty and that’s almost eleven years what we get

is again if we invested at the worst time in the last ten years you still get

five point seven compounded interest rate per year five point seven which

means that you cover your inflation wait you still get 3.7% game of buying power

per year what is even better is that stocks have something called dividend

yield which means that stocks give you back money just to hold them and on

average tsap 500 companies which is what you’ll be invested in you have a

dividend yield as we see in the last 20 years around 2% overall over time it’s

been actually much higher but let’s take the last 2% which means that on top of

this 5.7 percent compound interest rate when you put 2% up you get 7.7 right

this is the worst time if we – if we take the 7 point 7 percent which is on

the all-time average interest rate and you put 2% that’s nine point seven

percent historically on average you would get as a game if we invested just

into basically the economic of United States and here I have opened a very

simple compound interest calculator and what if you started right now with zero

dollars you get your nine point seven percent annual rate because you invest

in the S&P 500 use a new safe five hundred dollars per month for 30 years

and the numbers that we get actually really really interesting into the first

ten years starting from zero and investing into the SI P 500 you have a

hundred thousand dollars in 20 years you have $368 and into thirty years you have

over a million save if you decide to save five hundred dollars per month for

30 years but you do not invest them and hold them cash that means that you have

annual interest rate of zero and you have to account for the inflation which

means that at the end you have 180,000 but the inflation would have eaten at

least 63 thousand dollars from that money which means that you have 120

thousand buying power in over 40 s Dobie that would be even worse after 50 years

that would be even worse which means that the younger you are the more

important for you is to start investing right now now this is yes ap let’s look

at the Nasdaq right Nasdaq tracked special technology companies and it is

perceived as a more risk investment but again into the long haul it’s always

been up as we see here can take much longer the decline we see here is the

2000s tech bubble burst stocks took 15 years to recover but still let’s

calculate some interesting stuff if you invested here in the absolutely low

after the 2008 crisis into the Nasdaq you would have captured 20.8% in your

game let’s see even if you are so unlucky and you invested literally at

the worst time in history into the Nasdaq you invested at exactly the peak

the top of the 2000 tech bubble what we get is over the 18 years you would still

have got 2.4 in your game which is to better than a savings account and it’s

still better than the inflation which means that you still have increasing of

your buying power if we take the gains of the Nasdaq for all time what we get

from 40 almost 8 years of data is that on average the Nasdaq has yielded 9.5

almost 6% per year also the Nasdaq is around 1.4 percent

dividend yield which would grant you around 11% in your game 11% if you just

invest into an index and you can forget about it and just put money in so you

know that’s why investing is the biggest value equation it’s the only long-term

reliable wealth creation that’s how all the rich people have money that’s how

they become richer as you can see over time the markets go up because there are

more people there is more Commerce there is more trade economy stronger that’s

how the world works that’s why we are advancing if you are not some kind of

person that believes that the world is gonna crash and it will never recover

and will go back in time and into civilization instead of forward you

should invest your money five hundred dollars per month for thirty years into

the S&P 500 on average historically looking will let you save 1 million

hopefully over time your salary will grow so instead of five hundred to start

coaching seven hundred thousand and so on which means that in two thirty years

it is absolutely realistic with stuff that’s absolutely achievable by anyone

you can save millions thanks to compounding and investing

that’s how all the rich people have money that’s how they become richer and

that’s why over time the richer become richer because they invest their money

they don’t call them cash they don’t spend them on stupid stuff that loses

value they invest them thank you for listening I hope you enjoyed this video

comment on anything you want to down into the comments thank you for

listening see you next time