assets and you'll become very very rich

there are five main asset classes to

know about when you get started

investing the ultimate goal is to own a

little bit of each asset class so you

have a really strong diversified

portfolio in this video I'll explain

each of these five asset classes in

detail and I'll also give you some tips

on how you can get started investing in

them even if you don't have a ton of

money to invest right now and before we

get started go ahead and hit that

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week the first asset class is equity aka

stocks or shares when you buy equity you

become a co-owner or a shareholder of

the issuing company if the company has

10,000 shares outstanding and you own

1000 shares then you own 10% of the

company as an equity investor you get

returns in two ways when the stock price

increases the market value of your

equity stake goes up which you can sell

at a profit so that's the first way you

can make money investing in stocks

the second way equity investors make a

return is via dividends since you're a

part owner of a company you're entitled

to a piece of its profits and you

generally receive that in the form of

dividends dividends are typically paid

quarterly and back in the day every

shareholder would actually receive their

quarterly dividend as a paper check in

the mail but nowadays you'll most likely

get an electronic deposit in your

account that looks something like this

there's two ways to buy stocks you can

either buy stocks via a fund which are

pooled investment vehicles or you can

buy individual stocks now if you want to

invest in individual stocks you should

only pick stocks and invest in companies

that you're knowledgeable about and it

does take a bit of skill and knowledge

to do that so I talk more about how to

assess companies and what factors to

consider when picking stocks in this

video right here and if you also want to

learn more about funds then check out

this other video right here so if you

want to invest in a fund then that's

gonna be really convenient for you

because funds package a bunch of stocks

into a nice diversified portfolio this

is the best way to earn the average

market return and benefit from the

wealth building upward trend of the

stock

get without having to go down the rabbit

hole of analyzing individual companies

because let's face it not everyone wants

to do that I personally love doing that

but it's not for everybody

before you can invest in stocks you

first need to open a brokerage account a

brokerage account is kind of like a bank

account but it's a place to hold your

investments instead of holding cash so

brokerages that you can look into our

fidelity Vanguard TD Ameritrade and

Robinhood the second asset class is debt

or bonds when you buy a bond you become

a lender so bonds are very different

from stocks because unlike equity

investors bondholders don't own anything

you're just lending money to the

borrower in return for periodic interest

payments which are typically semiannual

and then at the end of the loan you get

the original principal amount back you

can invest in either government bonds or

corporate bonds government bonds are

issued by governments in order to fund

infrastructure projects education and

pay for all the other things that

governments do corporate bonds are

issued by firms that need funding for

projects and initiatives to grow the

company so you can either buy government

bonds or corporate funds the number one

factor to consider when investing in

bonds is creditworthiness as long as the

borrower is in good financial shape

you're pretty much guaranteed the

interest payments and the return of your

principal but if the borrower goes

bankrupt then you're out of luck Moody's

Standard & Poor's and Fitch are agencies

that publish blood ratings to show a

borrower's creditworthiness so this

makes it easy for you to do your due

diligence before you invest your money

in a bond triple-a bonds are about the

safest you can get with basically zero

chance of default triple-a companies

have a lot of cash flow compared to

their debt payments so it's a very low

risk of default for you as a lender and

the further you go down the ratings

table you'll see bonds offering higher

interest rates obviously as a lender you

want to get as high of an interest rate

as possible but the key is to balance

that with the risk of not getting your

money back when you see a bond offering

really high interest that's because the

borrower is in shaky financial condition

and there's a high chance of you not

getting your money back so they have to

pay really high interest rates to

compensate for this risk for example

Argentina's government bond is paying

around 12 percent whereas US Treasuries

are paying

only around 2% and go figure Argentina's

defaulted eight times on its debt

throughout its history whereas the US

has never defaulted so that's kind of

how it works you know you get what you

pay for and something's too good to be

true then it probably is hey and if

you're liking this video so far give it

a thumbs up to let me know bonds are

considered to be safer than stocks

because when a borrower goes bankrupt

bondholders are usually first in line to

get their money back where stockholders

are usually the very last to get paid in

a default situation so you get a lot

less upside with bonds and with stocks

but it also comes with less risk if your

goal is to grow your money then you'd

want to invest most of your money in

stocks not in bonds that's why generally

for young people for basically people my

age around to in 20s and 30s then

definitely most of your money should be

in stocks you can invest in bonds using

the same brokerage account that you use

for stocks however the minimum

investment is usually $1,000 so unless

you have tens of thousands of dollars to

invest in bonds it probably makes more

sense for you to invest via bond runs

which are again pooled investment

vehicles just like stock funds except

they do bonds and they give you access

to a wide range of bonds with no minimum

investment some example of bond funds

you can look up to jumpstart your

research is the fidelity long term

Treasury bond index fund or FN bgx and I

shares Treasury bond exchange-traded

fund or IES the third asset class is

cash and cash equivalents so anything

that's sitting in your checking or

savings account or in your wallet that's

cash and cash equivalents also known as

the money market are securities that

earn a little bit of interest and can

easily be converted to cash any form of

debt that has a loan term of one year or

less is considered a cash equivalent so

that's CDs one month's Treasury bills

three months Treasury bills six months

Treasury bills repurchase agreements and

commercial paper have you ever seen

those news articles talking about how

some companies are sitting on tons of

cash like Apple they always have

hundreds of billions of dollars of cash

on hand that's obviously not sitting in

a bank account somewhere because banks

don't pay any interest and a company

like Apple wouldn't just wouldn't do

that so often in the business news when

you hear about companies

holding onto cash they're actually

parking it into cash equivalents like

the money market and that's something

you can do - there's no reason to be

sitting on tens of thousands of dollars

or even thousands of dollars of cash

when it's earning nothing in the bank

account

so this is where cash equivalents come

in one way you can invest in cash is by

purchasing shares in the money market

fund like FDL x x and vm f XX you could

also purchase CDs otherwise known as

certificates of deposit either either

through your bank or in your brokerage

account or you could just find a savings

account that earns decent interests and

park your money there I have heard of

some savings accounts that pay up to 2%

which isn't too bad I do want to point

out that cash and cash equivalents are

not an asset class for long-term

investing even though they pay a little

bit of interest cash loses its

purchasing power over time due to

inflation so it's a very very bad idea

to keep all your money in cash or cash

equivalents it's really just meant to be

a place to park your savings but it's

not gonna provide you the kind of growth

you get from stocks and real estate

which leads me to the next asset class

on the list real estate real estate is

property it can be residential office

commercial industrial there's two ways

to make money investing in real estate

kind of like stocks when property values

go up you can sell them at a profit and

you can also collect rental income as

long as you own the property real estate

is a lot like stocks in that sense it

gives you a combination of growth and

income and people who like real estate

like it because it's something tangible

that you can just touch and see and it's

a pretty simple asset class to

understand

paper assets like stocks and bonds are a

bit harder to wrap your head around

another benefit of real estate is that

it's the only asset class where banks

will lend you money to buy it you can

always get a mortgage to buy a property

but very few banks are gonna lend you

money to invest in stocks as long as a

cash flow from the property pays the

monthly mortgage you can use less of

your own money and still enjoy the

benefits of owning the property this is

called leverage and if used wisely can

generate a high return on your money

so in general real estate is the only

asset class where you can use leverage

to juice up your returns of course the

catch is that real estate is the most

capital intensive of all the asset

classes and buying any piece of real