Brief Summary
This video explains how to start investing safely and effectively, even with a small initial capital of IDR 16,000. It covers the importance of investing to combat inflation and grow wealth through compounding. The video recommends Exchange Traded Funds (ETFs) as a safe investment option for beginners, highlighting their diversification and low-risk nature. It also discusses the right time to start investing, emphasizing the benefits of starting early and staying invested for the long term.
- Investing is crucial to outpace inflation and grow wealth.
- ETFs are recommended for beginners due to their diversification and lower risk.
- Starting early and staying invested long-term is key to maximizing returns.
Why Should You Invest?
Investing is important because it helps your money grow faster than inflation, maintaining and increasing its value over time. Inflation reduces the purchasing power of money, making it essential to invest so that your money grows at a higher rate than the increase in prices. There are two primary ways to grow your money: by owning shares in successful companies like Apple, where the value of your shares increases with the company's success, and through compounding, where your earnings generate further earnings over time. Consistent investing and patience allow even small amounts to grow significantly due to the snowball effect of compounding.
Where and How to Start Investing
For beginners, investing in Exchange Traded Funds (ETFs) is recommended over individual stocks due to the lower risk involved. ETFs are like packages of stocks, such as the S&P 500 ETF (ETFY), which includes the 500 largest companies in America. Investing in ETFs provides instant diversification, reducing the risk associated with investing in a single company. ETFs are also a hands-off approach, requiring less monitoring and analysis compared to individual stocks. Even Warren Buffett suggests investing in share packages for beginners. Before starting to invest, it's important to pay off high-interest debt and have an emergency fund of 3-6 months' worth of expenses.
When is the Right Time to Start?
The best time to start investing was 20 years ago, but the next best time is today, even with a small amount like IDR 16,000. A simulation comparing Budi, who started investing early with less money, and Ani, who started later with more money, shows that starting early results in significantly higher returns due to the power of compounding. It's crucial to hold investments for the long term (5-15 years or more) to ride out market fluctuations and benefit from overall growth. Panic selling during market downturns is a common mistake that leads to losses.
Which ETF Investments are Good to Consider?
Three examples of ETFs to consider are:
- SDY: Contains the 500 largest companies in America, offering stable growth at a low cost of 0.2% per year, with an average profit of 12.2% per year.
- KTF QQQ: Focuses on fast-growing technology companies, offering higher potential returns but with slightly more risk, with a fee of 0.5% per year and an annual increase of 17% over the past 10 years.
- ETFPYM: A dividend ETF filled with companies that consistently distribute dividends, providing regular income with a very low fee of 0.064%.
The video also demonstrates how to buy shares using a broker like Ajaib broker, emphasizing the importance of holding the investments long term rather than buying and selling quickly.
Turning 16,000 into Billions of Rupiah
Investing in ETFs like the S&P 500 has a near 0% risk when held for the long term (over 20 years), based on historical data. By investing just IDR 16,000 per day (IDR 480,000 per month) with an average return of 17% per year, one can accumulate R billion in 21 years, over 4 billion in 30 years, and 19 billion in 40 years. This illustrates that consistent, long-term investing, even with small amounts, can lead to significant wealth accumulation over time.
