**TDFA 2.1 | Investing - Investing Basics. Why invest? — Transcript & Summary | SozAI** Source: https://sozai.app/transcript/tdfa-investing-basics-why-invest/ Introduction to investing basics, explaining why investing is essential to grow capital and combat inflation, with insights on trading and investing synergy. ## Key Takeaways - Investing is essential to grow capital and protect against inflation. - Trading skills complement investing by enhancing market understanding and self-knowledge. - Early-stage investments provide greater growth potential. - Diversifying and adjusting portfolios based on market trends improves performance. - Long-term compounding is a powerful wealth-building tool. ## What the video covers - Distinction between trading and investing, highlighting their complementary nature and benefits. - Trading provides valuable skills and self-awareness that benefit investors, especially in short-term market activities. - Investing is crucial for capital growth and maintaining purchasing power against inflation. - Relying solely on work income is insufficient due to stagnant salaries and rising inflation. - Early-stage investing offers higher potential for growth by investing in companies with future prospects. - Investors become partial owners of companies, gaining rights and potential influence. - Compounding growth over time significantly increases investment value. - Examples like blockchain in 2016-2017 and the current AI boom illustrate the importance of recognizing market opportunities early. - Portfolio allocation should reflect market trends and potential growth sectors to outperform benchmarks. - The video encourages a balanced approach to trading and investing for better market participation. ## Chapters 1. 00:00 Introduction and Trading vs Investing 2. 01:12 Value of Trading Skills for Investors 3. 02:23 Investing Basics: Why Invest? 4. 04:34 Personal Investing Experience and Early-Stage Investing 5. 05:50 Economic Realities: Inflation and Income Challenges 6. 06:51 Investor Rights and Company Ownership 7. 08:56 Compounding and Long-Term Growth 8. 13:11 Market Examples and Portfolio Strategy 9. 15:16 Summary and Financial Wisdom Answers ## Questions about this video What is the difference between trading and investing according to the video? Trading involves short-term buying and selling to capitalize on market movements, while investing focuses on long-term capital growth by owning shares in companies. Both skills complement each other and improve overall market participation. Why is investing important in the current economic environment? Investing is important because inflation reduces the purchasing power of money, and salaries often do not keep pace with inflation. Investing helps grow capital and maintain purchasing power over time. How can early-stage investing benefit investors? Early-stage investing allows investors to spot opportunities in companies with high growth potential, which can lead to significant capital appreciation and outperforming market benchmarks. ## Full Transcript — Download SRT & Markdown 00:02 Speaker A Okay, cool. You've made it to week two, and this week is all about investing. Before we dive in, I just want to briefly go back to last week where I mentioned that there is a difference between trading and investing. 00:17 Speaker A and you may end up being more of an investor with some trading skills or you may you know do it the other way around and end up more of a Trader with some investing skills it's entirely up to you 00:29 Speaker A You may end up being more of an investor with some trading skills, or you may, you know, do it the other way around and end up more of a trader with some investing skills. It's entirely up to you. 00:43 Speaker A is called trading digital and financial assets and um I mentioned one of the reasons why that is but also another reason why trading is so so cool and so awesome is that it is a gateway to getting to know 00:55 Speaker A It's a free game. The remarks I made are not to scare anyone. I just want to give a realistic view of what it is like to go in each of these directions, and again, I mentioned, okay, this program 01:12 Speaker A session uh Don't Be Afraid like the trading aspect is going to provide uh insane value also for the uh for the investor and as I said it's a very good way of getting to know yourself so especially like short-term activity 01:25 Speaker A is called Trading Digital and Financial Assets, and I mentioned one of the reasons why that is. But also, another reason why trading is so, so cool and so awesome is that it is a gateway to getting to know 01:38 Speaker A um and yeah the two just really go hand in hand and if you master both or if you become really good at both you just become like like a very good uh Market participant and you will be able to 01:47 Speaker A yourself. I will dive into that more in week four and five, where we talk about trading psychology, for example. But just know that, so, you know, if I scared you last by closing off last 02:00 Speaker A two investing um so we'll come back to trading at a later stage and obviously we'll be doing the trading competition so we need to give you guys the skills to actually uh to actually trade but for now let's 02:13 Speaker A session, don't be afraid. The trading aspect is going to provide insane value also for the investor. And as I said, it's a very good way of getting to know yourself, so especially like short-term activity, 02:29 Speaker A others may not yet see that so this was true again to repeat uh for example 2016 2017 blockchain um and it has been true for the people that recognize the AI boom that is sort of currently going on early right where 02:42 Speaker A buying and selling, buying and selling, trying to, you know, see how the market works, etc., is going to help you become a better investor. So with that said, I just wanted to, you know, keep all the traders on board as well. 02:55 Speaker A absolutely skyrocketed right so if you are in a position where you recognize those opportunities obviously if you switch your portfolio in such a way that you own more Nvidia than uh I don't know beyond meat for example which 03:10 Speaker A And yeah, the two just really go hand in hand. And if you master both or if you become really good at both, you just become like a very good market participant, and you will be able to 03:23 Speaker A number two investing and this this chapter is called investing basic so why invest so I mentioned that a little bit already but it is good to every now and then repeat a few things so I've actually made a few slides before the 03:37 Speaker A outperform the S&P. You will be able to outperform the majority of market participants, and that's kind of like where we want to get you to on this journey. Okay, cool, enough said. Let's go to 03:47 Speaker A um so reasons to invest first of all the growth of your capital and I'm going to just drop some hard truths that are going on or that that are just truths right now we are in an environment where 04:00 Speaker A week number two, investing. So we'll come back to trading at a later stage, and obviously, we'll be doing the trading competition, so we need to give you guys the skills to actually trade. But for now, let's 04:19 Speaker A the harsh truth and the sad State of Affairs right now is that we generally will not achieve this by uh work alone because if you look at the inflation right now the salaries that we get simply do not increase 04:34 Speaker A start with investing. As I said, personally for me, my portfolio performance, the vast majority of that, the success of that came from investing, and preferably early-stage investing where you have the ability to invest in something and spot an opportunity where 04:48 Speaker A increase by that amount in order to sort of keep that same uh same purchasing power right I hope that that is clear generally this doesn't happen it's very unlikely that or at least in the like the regular positions the regular worker the worker 05:03 Speaker A others may not yet see that. So this was true, again to repeat, for example, 2016, 2017 blockchain, and it has been true for the people that recognized the AI boom that is sort of currently going on early, right, where 05:17 Speaker A time I go to the supermarket I get less and less products for my Euro and that's just really annoying you just see your purchasing power you know uh going down the drain so you're able to buy less house you buy less car you buy less 05:31 Speaker A like a stock, like the whole stock market is sort of still in a negative sentiment, but there is this AI stock. Well, it's not an AI stock, but, you know, they do a lot with AI, Nvidia. It 05:50 Speaker A our Capital to work rather than just uh relying on our jobs and I'm really sorry that this is you know this is the way it apparently currently is I wish we had some kind of a different system but for 06:01 Speaker A absolutely skyrocketed, right? So if you are in a position where you recognize those opportunities, obviously, if you switch your portfolio in such a way that you own more Nvidia than, I don't know, Beyond Meat, for example, which 06:11 Speaker A thing exists it's just just see it as like this is where we are now what am I going to do about it that's it you know you don't need to label anything anyway I'm digesting I'm what is that I'm 06:22 Speaker A has been a terribly performing stock, then you are sort of, you know, outperforming the benchmark or at least the likelihood increases that you do so. Okay, anyway, so those are some perspectives. Where are we now? Week 06:37 Speaker A going back to last week a little bit the reason why your Capital should grow when you invest or at least when you invest properly is that you invest in companies preferably early stage like the earlier stage you are the more potential growth 06:51 Speaker A number two, investing, and this chapter is called Investing Basics. So why invest? I mentioned that a little bit already, but it is good to every now and then repeat a few things. So I've actually made a few slides before the 07:04 Speaker A again in the back of my mind is a good example they don't supply products to the whole planet at least not yet but you know they are pretty close to providing products to a large large part of the population relatively large part 07:14 Speaker A slides get too empty and I don't need them at all anymore. I do want to keep the slides in, you know, as teachers do, or lecture—let me say lecture, I don't like to call myself a teacher. 07:26 Speaker A actually or late 90s mid 90s I think uh you know so it's like depending on where you are you are investing for the reason that a company sees potential future growth at least you know that's how you can put your Capital to work those are 07:40 Speaker A So reasons to invest. First of all, the growth of your capital. And I'm going to just drop some hard truths that are going on or that are just truths right now. We are in an environment where 07:52 Speaker A in return hopefully you get some shares which give you the right to actually you know uh you become a co-owner of the company and you can actually voice your your preferences if you own enough stocks that is and um in that way if the 08:07 Speaker A we are dealing with high inflation, and basically, we have two metrics. If we have high inflation, it simply means that the purchasing power of our currency, of our money that we actually hold, is decreasing over time. We want to kind of combat that now. 08:18 Speaker A value and that way your money grows right so this is very different from doing nothing and I hope that that is clear that if you just depend on salary and saving you have this inflation metric you know circling above your head 08:30 Speaker A The harsh truth and the sad state of affairs right now is that we generally will not achieve this by work alone because if you look at the inflation right now, the salaries that we get simply do not increase 08:45 Speaker A retirement fund or that sort of stuff it's it's still it works it's good but as soon as inflation starts to pick up those numbers that you get there may not be good enough and it may be a good idea 08:56 Speaker A as fast as inflation sort of like is increasing, or at least it doesn't increase to a level as high as inflation. It means that if inflation is like six, seven, eight percent per year, at the very minimum, your salaries also should 09:08 Speaker A investing is an effective way to have your money work for you and build wealth one of the side effects of that is that of course like if you do this periodically like say like I don't know five or ten percent of your salary each 09:19 Speaker A increase by that amount in order to sort of keep that same purchasing power, right? I hope that that is clear. Generally, this doesn't happen. It's very unlikely that, or at least in the regular positions, the regular worker out there doesn't get this consecutive increase on a year-to-year basis. Generally, that's just simply not true, and that's why inflation can be a problem. 09:34 Speaker A would like you to get to a point where you question this like is that still going to be true in the next five years and where is the s p still going to grow or is the aex or whatever index you're 09:44 Speaker A And it is so at the moment. I don't know if you guys notice it, but every time I go to the supermarket, I get less and less products for my euro, and that's just really annoying. You just see your purchasing power going down the drain, so you're able to buy less house, you buy less car, you buy less coffee, you buy less supermarket stuff. It's just devaluing. 09:55 Speaker A investment decisions based on the information that we have right now so reasons to invest a few more just to this is from one of the sources I'll get back to that in a second but the real actual purchasing power with three 10:08 Speaker A So that is already one reason to get in our chairs, digest and devour all this content, and actually try to take our finances into our own hands where we put 10:19 Speaker A number and inflation the real inflation as we notice it in the day by day is probably higher than the number the uh the CPI the Consumer Price inflation probably higher than that number but that's a different discussion altogether 10:31 Speaker A our capital to work rather than just relying on our jobs. And I'm really sorry that this is, you know, this is the way it apparently currently is. I wish we had some kind of a different system, but for 10:46 Speaker A that is your outlook with three percent inflation and then after 20 years you basically lost 45 of your purchasing power I don't think I can give a like a clearer example of why we should at the very least be paying some attention to 11:01 Speaker A now, we need to sort of, like, you know, be aware of the system. Or I also don't like the word system, by the way. I think that's always scary, like the system, you know. I don't think such a 11:14 Speaker A now with this course investing this is I think very clearly one of the reasons why compounding you need to understand how compounding works that if you have a starting amount of capital and let's say you make a return of five percent uh 11:28 Speaker A thing exists. Just see it as like this is where we are now. What am I going to do about it? That's it. You don't need to label anything. Anyway, I'm digesting, I'm—what is that? I'm 11:41 Speaker A case your principal um you know yes let's say you start with a hundred dollars and you make five percent a year the first year you have 105 dollars but then the second year you make five percent on 105 of course that 11:55 Speaker A diversifying, whatever you want to call it. So yeah, that is the state of affairs right now, and one way to sort of combat that is to put your money to work, to actually start investing. 12:05 Speaker A extrapolate that into the future for like 30 years which uh is what compounding is all about then you will see that this stuff grows exponentially that's enough said about compounding I would say it's in the in the source but 12:19 Speaker A Now, what do we do when we invest? It's going back to last week a little bit. The reason why your capital should grow when you invest, or at least when you invest properly, is that you invest in companies, preferably early stage. Like the earlier stage you are, the more potential growth 12:30 Speaker A this is how the the billionaires billionaire investors become billionaires right they they keep on compounding stay invested and over time you know five percent on a billion dollars is all of a sudden you know way more than obviously you started with 12:43 Speaker A there is in the future. Just think about, for example, you know, a company that supplies its product to the entire planet. Like how much growth is still left? But if you had that same company 20 years ago, and I'm thinking of Amazon 12:58 Speaker A Eckman I think he's a billionaire yeah he's a billionaire and he's had some masterful trades over the years and uh this is just about the very Basics about finance and investing what it's like to invest in a lemonade stand in this 13:11 Speaker A again in the back of my mind as a good example, they don't supply products to the whole planet, at least not yet, but, you know, they are pretty close to providing products to a large, large part of the population, relatively large part 13:24 Speaker A it is 10 years ago 10 years old um but you know it's uh it's just a great example it's Timeless so it doesn't matter if it's 11 years old if it's Timeless right okay another great one Ray dalio uh also 13:37 Speaker A of the population. How much growth is there still left, and how much growth was there 20 years ago when they were still a small company? Or I don't even know if it was 20 years ago, you know, at the beginning. Yes, it was 13:50 Speaker A looking at money we're looking at the financial system uh and we're also looking at economics we we're trying to get the whole picture complete here Wonder wonderful video also nine years old 36 million views it is timeless it's 14:03 Speaker A actually, or late 90s, mid 90s, I think. So it's like depending on where you are, you are investing for the reason that a company sees potential future growth. At least, you know, that's how you can put your capital to work. Those are 14:16 Speaker A Harvard Professor because why not um and this is just a good perspective um on how to and why to work with your money how to do it wisely uh but also your your own like career prospects why you should be looking at your finances 14:32 Speaker A the basics of investing. You see a company that is tackling some challenge somewhere, or it builds a product that everybody desires. You see an opportunity for the business to grow. You give them some of your money. 14:48 Speaker A got the screenshots from the goal of investing is to grow your money over time I think with just these reasons it's already clear enough like hey at the very least I should be paying attention and I hope uh that that you will be paying 15:01 Speaker A In return, hopefully, you get some shares which give you the right to actually, you know, you become a co-owner of the company, and you can actually voice your preferences if you own enough stocks, that is. And in that way, if the 15:16 Speaker A of our time in my personal opinion and I know many people agree with me I think he has a million followers on Twitter right now he is the founder of Angel list which is basically a place where Angel Investors meet people seeking 15:30 Speaker A company grows and they keep on supplying more products or services to a larger and larger piece of the population of this planet, then the co— 15:43 Speaker A investing when a person still walking around with an idea and is looking for like a hundred thousand dollars or something to get started that's where folks like him come in we have other people Peter Thiel for example is a 15:53 Speaker A great example um and you will get to know all these people so I think I mentioned this in the beginning we are going to introduce you to people that are just the greatest thinkers and hopefully in that sort of 16:02 Speaker A indirect way we provide value so that you get to know these people and you can start to understand how they think and why not you know copy at least part of their behavior and and their thinking but of course in the end we want to 16:14 Speaker A think for ourselves so it is Advanced and it's about um it says yeah how to get rich but it's very much about like the work ethic why you shouldn't you know uh sell your time cheaply why you should have your money 16:27 Speaker A work for you also when you're sleeping Etc right it's just and it goes all the way back to um that basically the sad situation is that if we only work and safe the chances are that out that inflation is 16:38 Speaker A really going to have a nasty effect on our on our on our balance okay [Music] um that's it for the sources I think I'm still on schedule to keep this video a bit shorter than uh the ones before some 16:54 Speaker A personal perspective um again I think I close with that last time as well so yeah for me uh investing in trading go hand in hand the the majority of the returns have come from investing and preferably as early stage 17:09 Speaker A as possible right so that's why later we also have like uh VC investing we highlighted that because those guys really you know uh that's where like the the 10 20 50 100 1000 X's actual turns uh generally tend 17:24 Speaker A to be but it's a different game than trading uh and it's one that should be mastered completely on its own um and yeah we just want to make you aware of that that exists uh and that are that people are you know playing 17:35 Speaker A this game with great success um I will probably have more perspectives and more experiences to share I think for now this serves as a good introduction for this week um the sources are going to get more and more interesting I would say and we you 17:49 Speaker A know we we shape this framework for you guys and go deeper deeper and deeper into the world of investing and trading I hope you're still excited as you know as I am see you in the next video uh and 18:00 Speaker A good luck Topics: investing basics trading vs investing capital growth inflation early-stage investing portfolio management compounding market opportunities AI boom financial education --- This is the markdown twin of https://sozai.app/transcript/tdfa-investing-basics-why-invest/ — the same content, without the markup. 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