If I Started Investing In 2025, I'd Do THIS

Look, we all know that inflation is probably here to stay. You also already know that investing is the only way to get ahead of inflation and create financial stability for the future. You've also heard the horror stories of people who absolutely lost their shirts by investing their money the wrong way. Over the 10 plus years that I've been investing, I've learned that there is a right way to invest and a wrong way to invest. And even though I'm a millionaire now, I obviously didn't start out that way. But investing as much as I could, even when I didn't have a lot of money to begin with, is one of the ways I got here. Contrary to popular belief, investing isn't only for the rich. It's actually how you get rich. That's why I want to share with you if I started investing today from scratch, this is exactly what I would do. There's no gatekeeping here. I'm going to share with you the five things that I would do. Okay, number one is I would do index funds instead of trying to stock pick. The average person really doesn't have the expertise, let alone the time to successfully pick stocks. A lot of people think that investing is about finding the next apple or pinpointing that one superstar company that's going to outperform all the others and hitting it big. But really that type of investing is for professional investors like Warren Buffett. And it really takes full-time research and in-depth knowledge of financial statements of the company's management and a lot of work to successfully do this. This is what you call an active style of investing. Now compare this to passive investing, which is another way of investing, where instead of investing in one company and hoping that you've picked the right one, you just invest in the entire universe of companies that makes up the US economy or the world economy. One example of how to do this is to buy an S&P 500 index fund. The S&P 500 is an index that contains all of the 500 largest companies in the USA. So instead of trying to pick the one company out of the 500 that might do better and grow your money over the long term, you just buy all 500 companies in the index, which would be the equivalent of buying a small piece in the entire US economy. Now we all know the US economy grows. This is the growth trajectory over the last 100 or so years. So why not just bet on the inevitable growth trajectory of the economy rather than hoping and praying that one CEO does a really great job and creates the next Apple. And there is a lot of data to back this up. Passive investing does a lot better than active investing over the long run. According to SPIVA, which is a research arm of the S&P 500 Global, they did a study on the performance of actively managed investment funds compared to passively managed investment funds. And their findings are really eye-opening. Over the most recent year, 59% of actively managed funds underperformed the S&P 500. This means that just by investing in the S&P 500, you would have done better than 59% of the hotshot Wall Street fund managers. Now over the course of a year, you could try stock picking, you could invest in an actively managed fund and maybe get lucky. But it's really over the long term where it really becomes about skill versus luck. So the SPIVA data spans the course of 15 years. And so let's look at what SPIVA found about performance over a span of 15 years. Over the last 15 years, 87% of actively managed funds underperformed the S&P 500. That's almost the majority. Now here's the other thing, actively managed funds, funds where some really smart guy is getting paid the big bucks to stock pick, they actually charge a lot of fees. So that just adds insult to injury. In addition to not performing any better than an index fund, they actually charge a lot more in fees. Index funds usually have super low cost, almost non-existent fees that are usually well under 0.2%. On the other hand, actively managed funds charge at least one and sometimes even 2%. That may not seem like much, but over the course of many decades, and hopefully you'll be living a long time and investing for a long time, that results in hundreds of thousands of dollars. So check this out. I did a calculation where if you invested $10,000 every single year for the next 30 years, with a low cost index fund of 0.2%, you would have ended up with $1.045 million. However, if you had invested in a more expensive fund charging a 1% expense ratio, you would have only ended up with $895,000. That is a difference of over $100,000. Now, if you invested in a fund that charged a 2% fee, you would have ended up with $740,000. That's almost $300,000 less. So fees truly make a difference, especially over the long term. So all that being said, I would just forget about trying to stock pick or finding that hot actively managed fund and just going with index funds. Luckily, there are so many different index funds you can choose from. They're all super low cost. An index fund is basically a basket of stocks all in one easy purchase. And each index fund will always tell you which index that it tracks. Now, there are funds that track every imaginable index in the world. The main ones that you probably want to be aware of are the S&P 500, the NASDAQ, the Russell 2000. And we'll get into a few more later on in this video. And now the second thing that I would do if I started investing today is I would diversify internationally as well as across asset classes. So let's talk about internationally. In this day and age, we have so many things going on with the US elections. That's a total black box right there. We also have geopolitical risks with the US dollar declining in dominance and then Russia and China making more moves in the world. So there is really a lot of uncertainty these days. So you do want to diversify and put your eggs in different baskets versus everything in the US basket. Because let's keep in mind the US stock market only makes up 50% of the global stock market. There are many other countries to invest in that are doing really well. There's India, there's Canada, Australia, there's France, there's Japan, there's China. So you want to diversify internationally. Another way to diversify is by investing in different sizes of companies. So stocks are usually categorized as small cap, mid cap, and large cap. Small cap is companies with a market cap of under $2 billion. By market cap, I mean total number of shares outstanding times the stock price. And large cap companies have market caps of $10 billion or more. And mid cap is everything in between. Now, although stocks all kind of perform the same, whether it's small cap or large cap, they do perform slightly differently at times. So nowadays, the Russell 2000, which is an index of 2000 US small cap companies, has been performing almost the opposite of the S&P 500, which is the 500 large cap US companies. So to truly diversify, you want to invest in both small cap, large cap, and mid cap. The best way to do this is by investing in what's called total market index funds. That basically means small, mid, and large cap, the whole selection. That way, you have maximum diversification. Another way to diversify is across different asset classes. So asset classes are different categories of investments, and each asset class responds differently depending on the economic conditions. They perform differently as well. So for example, in times of inflation, like we have now, stocks tend to perform quite well. Because if you think about it, companies, even if they have higher costs, they'll just raise their prices and pass on the cost to you as the customer. So stocks tend to keep up with and outpace inflation. Whereas on the other hand, bonds, because they are fixed interest payments and a return of a fixed amount of principal, they tend to perform very badly during times of inflation. They also don't perform very well during times of growth. It's really stocks that perform well in times of growth. And then during recessions, the opposite is true. Bonds tend to do better in recessions and times of economic stress. Other asset classes you could consider are things like inflation protected securities. These are bonds whose payments are indexed to inflation. So they actually keep up with inflation. You can also invest in real estate through REITs, which are real estate stocks. So by diversifying across different asset classes, you can really de-risk yourself and bulletproof your investment portfolio as much as possible. By the way, if you like the way I teach and you're excited to learn more about investing, I wanted to invite you to my free upcoming training, The Freedom Formula. All about how to invest your way to financial freedom, even if you're scared, don't have a lot of money, and feel totally intimidated by financial jargon. I'll be teaching all about my five steps for achieving financial freedom through investing, and you won't want to miss it. To sign up, just go to rosehan.com slash freedom formula. The link is also below. And now back to the video. Next up, I would also dollar cost average instead of trying to time the market. Dollar cost averaging is where you decide on a set dollar amount to invest at regular intervals. So for example, let's say you've got a bonus or an inheritance or some sort of windfall of, I don't know, $10,000. You would divide that by six or by 12, and invest that amount at the same intervals over the next six or 12 months. So $10,000 divided by six, that's about $1,600. I would invest $1,600 on the first of every month for the next six months until all of my money is invested. And even after that, I would continue investing the same amount of money out of my paycheck. This is way better than investing all $10,000 into the market at once, because that is a real shock to your nervous system. And we all know that the number one thing that stops people from investing is the fear of losing your money as soon as you invest, and the market just crashing as soon as you invest. Now, that is always a possibility, right? And that's why we dollar cost average. Dollar cost averaging has two major benefits. The first obviously is the psychological benefit. It's much easier on your nerves to be dripping your money in and kind of dipping your toes into the water gradually, instead of just a shock to the system, jumping straight into that cold plunge pool with a bunch of money at once. And the second reason is it's actually a really smart strategy that improves your investment returns over time. Because think about it, if you're investing the same fixed dollar amount every single month, then you're getting in at different levels of the market. When the market's high, you're buying the same amount. If the market's low, you're buying the same amount. And so what ends up happening is when the market is high and things are expensive, you get less shares. But when the market is low and things are cheaper, that money buys you more shares. So you end up buying less when it's expensive, buying more when it's cheap. And over time, this really improves your average entry price. But the bottom line is dollar cost averaging works. And the best way to make it work for you is to automate it. Pretty much every brokerage platform out there allows you to automate your investment. So just decide on a dollar amount today, set up your investment in dollar cost average. The key is to take yourself out of the picture, automate it on a monthly basis so that it's not a question of if you'll invest every month, it's just happening no matter what. It's really about having a long-term mindset and investing consistently over a long period of time. According to this Blackroth study, the longer you stay invested, the more likely you are to make money. So check this out. If you only stayed invested for one month, you had a 37% chance of losing money. Whereas if you stayed invested for a year, that went down to a 24% chance of losing money. And then where the numbers really change is over longer periods of time. If you stayed invested for 10 years, you only had a 5.1% chance of losing money. And then if you stayed invested for 16 years, then you had a 0% chance of losing money. That's because the market always goes up and it recovers from all the different little shocks and ups and downs, such as the recent Japanese yen panic in August. The market also recovered after the global pandemic in 2020. We also recovered after the 2008-2009 financial crisis. The market always recovered. So if you just stay invested and dollar-plus average over this entire period of time and stay in it for the long run, you will make money. Okay, the fourth thing I would do is I would also be really smart about which account that I invested in. A lot of people don't know about this, so they'll just open a brokerage account at Robinhood or some random brokerage without realizing that there are other accounts where you can save a lot of money in taxes. Now, taxes are everybody's single largest bill in your lifetime. So it makes sense to invest in a tax-savvy way. Because I don't know if you know this, but when you make a gain on your investments or you receive a dividend or an interest payment, all of that is subject to taxes. But not if you shelter those investments in the right accounts. So one really great account to start with is the 401k. This is a workplace-sponsored retirement account that allows you to take deductions out of your paycheck and put it straight into your 401k. What's great about the 401k is anything you contribute to it is an immediate tax deduction to your taxable income that year. And then while the investments are in the account and they're growing, they're also completely sheltered from taxes. And because you're contributing pre-tax money and then that money is growing tax-free, you end up with a much bigger nest egg at the end. Now, when you withdraw the money, you do have to pay taxes, but it still beats investing in a regular brokerage account where you don't get any tax advantages. Another account to consider is the Roth IRA. This account allows you to make after-tax contributions so you don't get any benefit for contributing the money. However, all of the money grows in there tax-free and then when you withdraw the money, it's also tax-free. This is amazing because even if you put $5,000 in and that grew to $5 million, that entire $5 million is yours tax-free. Otherwise, you would have to pay a really good chunk to Uncle Sam in the form of capital gains. So Roth IRAs are an amazing deal. Another thing to look into is the health savings account. This is an account that not everyone qualifies for, but if your health insurance plan allows for it, I would definitely consider opening one. And with this account, anything you contribute is pre-tax. All the investment growth is pre-tax and withdrawals are also tax-free as long as it's for health-related expenses. So that makes this the triple tax loophole. It's an amazing account to open to hold your investments in. Now, if you're self-employed, you wouldn't have a 401k, but you can open the Roth IRA and the HSA. And I would also look into the Solo 401k or the SEP IRA, which is the equivalent of a 401k, but it's sponsored by your business. Now, the caveat to a lot of these types of accounts is in return for the huge tax savings, they do come with restrictions. You're typically not allowed to make withdrawals until you turn 59 and a half. However, there are ways to access that money sooner, such as through a Roth conversion ladder. And in the meantime, you're saving so much money on taxes that it really doesn't make sense to not invest in these accounts. You're really only allowed to contribute a certain amount every single year. And after those years pass, you can't do makeup contributions for past years. So try to max out these accounts as much as possible and start your investing in these accounts. And last but not least, if I started investing today, I would make sure I had a really good financial foundation first. By this, I mean paying off all credit card debt before I start investing and having an emergency fund of three to six months of living expenses. So let me explain. If you have credit card debt, you are probably paying anywhere from 20 to 30% APR a year on that debt. Whereas if you invested in the stock market, which typically returns about 10% a year, then you are actually net net losing money because you're paying more interest than you're making in the stock market. Not only this, but credit card debt is just a huge wealth killer. So I want you to walk before you can run and pay that off and then invest. You got to do things in the right order. Another way to get your financial house in order before investing is having a cash cushion of emergency fund money. The reason why is because your biggest edge as an investor is your ability to stay invested for the longterm. Remember the stats I showed you from BlackRock? So let's say worst case scenario, next month, the market crashes, you get laid off from your job and you have no other money to pay rent next month other than your investment. Then you'll be forced to sell your investment, which means locking in your losses at the lows. You won't be invested to benefit from the recovery. And you've probably paid taxes, fees and penalties on early withdrawals from your retirement accounts. So being forced to sell your investments to pay for expenses is the worst thing that can happen to you as an investor. So you want to make sure you have an emergency fund that you can draw on in times of unexpected financial situations. So these are the two non-negotiable prerequisites before you start investing. Now I know investing can be super intimidating, but something that really helps me is thinking about the future version of me. I'll think about future Rose, the 60, 70 year old version of Rose, who will be so happy that 35 year old Rose planted the seed and started learning investing today. I know one of the things that really stops people is always waiting for the perfect time to invest. I know the market is very volatile these days. There's a lot of uncertainty in the world, but if you really think about it, there's always been uncertainty in the world and the economy has always managed to grow. So I would not bet against that inevitable upward growth trajectory of the economy and also I would really put the things into place to make sure future you is well taken care of. And with that, I'll see you in the next video. Bye.