Every Investor Struggles With This (Even You) 😩

So, guys, in this video, I'm going to be answering some of the really great investing questions that I've been getting from all of you lately. Starting with this first one here. This says, "I struggle to find the right balance between investing my extra money and spending it on things I enjoy. What's your advice?" Yeah, so if it's any consolation, this is something that I struggle with quite a bit as well, and I think all investors do to some degree. Part of the reason is that once you understand the power of compounding, you stop thinking about a dollar as just being a dollar. Instead, you think about what that dollar could become if you invested it and let it grow over time. That naturally makes it harder to spend your money because everything you buy feels like you're giving up hundreds or even thousands of dollars in future wealth. I also think a lot of investors struggle with this because investing becomes the thing that they enjoy spending money on. You know, while most people would rather have a root canal than set aside money for their future, for many of us, investing is a hobby. We get excited about buying another cash-flowing asset in the same way someone else gets excited about buying a new Apple Watch or a new pair of shoes or something like that. Ultimately, though, I think that's a good problem to have. At least this puts more money in your pocket instead of draining money from your pocket. I mean, saving money is the only way you're going to reach financial freedom in the first place. And I also think that from a budgeting standpoint, investing as a hobby keeps you grounded, and it makes it much less likely that you'll overspend on things that don't really matter or end up in massive debt, which are both things that plague a lot of people. With all of that said, though, at the same time, I also think it's important to enjoy your money outside of your portfolio. You know, if there's something that you genuinely want and it fits within your budget, then sometimes I think you just have to force yourself to buy it. I think that sometimes that's the only way that you can get over that guilt of not investing that money. At the end of the day, you have to remember that we only have one shot at this life, and there's really more to it than building the largest portfolio possible. So, I think as long as your investments are taken care of and you're still living within your means, anything outside of that is pretty much fair game. At the end of the day, I think it's all about balance. [music] But anyway, now jumping over to question number two. This one here asks, "If you were starting out with $1,000, what would be your best advice to get the ball rolling?" This is a great question and I think that if you're new to investing, you know, whether you're starting with $100 or $1,000 or even $10,000, the best place to start for a brand new investor is just by investing in ETFs. I've talked about this to death here on the channel, so I apologize if I'm repeating myself and if you've heard this before, but I think it makes a lot of sense to build a diversified foundation for yourself and take a more hands-off approach in the beginning. Then, as you find your groove and become more comfortable with what you're doing, you can always add in some individual companies if that's something you're even interested in doing, which you might not be and that's fine. With that said, too, I think one of the most important things to understand as you're just getting started in your investing journey is that no matter whether you're investing in individual companies or ETFs or combination of the two, the thing that's going to drive the most progress at first is going to be your contributions. It's going to be the money that you actually put into your portfolio, not your returns. And that's not to say that share price appreciation and dividends don't matter because they certainly do and every little bit helps, but when your portfolio is still relatively small, the compound effect isn't yet powerful enough to move the needle in a substantial way. So, really the fastest way to grow your portfolio is by adding as much money to it as you can. And to put that into perspective just a little bit, a 1% gain on a $1,000 portfolio is $10. And that's great. $10 is nice, but it's not going to get you very close to that first $100,000. On the other hand, a 1% gain on a $100,000 is $1,000. That's going to get you a lot closer to the next 100K than the 1% gain on your $1,000 portfolio, that $10. Hopefully, that makes sense. That's why Charlie Munger was pounding the table saying that the first $100,000 is so difficult, but so important to reach. Getting to that point takes a lot of consistency. It takes a lot of sweat equity and hard work, but once you do get to that point, the compounding effect starts to become a lot more impactful and I've been able to experience that first hand in my portfolio. I started investing back in 2020 and it took me about 5 years to reach my first $100,000 in the portfolio, but now, only a year after that, I'm almost halfway to the next $100,000. So, the rate of growth has really taken off. I've actually been blown away by how fast it's grown. But anyway, because your contributions are really the thing that's going to move the needle early on, that's another reason why I think it's best to just start with ETFs. Spending time trying to find the perfect investment isn't going to make much of a difference for your portfolio when it's still small. So, really you're much better off trying to find ways to shovel as much money into your portfolio as possible because in the early years, that's what's going to get the ball rolling. Anyway, guys, now moving on to question number three. This one asks, as a dividend investor, does the price of a stock really matter? I have some debt I'd like to pay off before I really start investing more aggressively, but watching stocks continue to climb gives me anxiety. Yeah, so this is a pretty hotly debated topic in the dividend investing community and like most things in investing, I think there's two sides to the story. On one hand, if you're buying a stock solely to collect the dividend and you never plan on selling your shares, then you could argue that the share price doesn't matter all that much. I mean, after all, a company pays the same dividend per share whether you bought the stock at $50 or $100. I think that sounds reasonable in theory, but the reality is that life is unpredictable, you know, you might plan on being a lifelong buy and hold investor and you might plan on living solely off your dividends in retirement, but plans can change. Maybe an unexpected expense comes along as they tend to do and you need access to cash or maybe your expenses in retirement end up being higher than you thought, which requires you to sell a few shares here and there to supplement your dividend income. This is one of the reasons that capital appreciation or share price appreciation is important as well, even for dividend investors. Although your primary goal might be to live off your dividends, you still want your investments to grow in value over time. You know, you don't want to invest your hard-earned dollars and see that money start dwindling away. I mean, the whole idea behind investing is to have your money work for you, not against you. That's why valuation still matters. Being mindful of the price at which you buy these stocks not only helps you lock in a higher starting dividend yield, which is important, but it also increases the odds that you'll actually make a profit on your investment, which is definitely going to come in handy if you ever need to tap into that money. Now, that doesn't mean you need to obsess over trying to perfectly time your purchases. You know, if you wait for the lowest possible price, there's a chance that you don't even invest at all. I mean, nobody's able to really consistently perfectly time the bottom. Instead, I think the happy medium is to just dollar cost average into the positions you want to own. Over time, you'll gradually build out your positions while naturally smoothing out your cost basis by buying through both the highs and the lows. Also, regarding feeling anxious while you see stocks continuing to go up as you pay down your debt, I totally get it, but try not to beat yourself up over it. There will always be opportunities in the market, and I think you'll feel a lot better, you know, without that debt on your shoulders. thing is, once you are able to start investing more aggressively, you're still going to have so many great compounding years ahead of you. There's still so much time. So, like I said, try not to beat yourself up. Anyway, guys, now moving on to question number four. This one asks, "When you have multiple companies in your portfolio, how do you decide which one you'll invest in on a given day?" This is a great question, and for me, it comes down to two things: valuation and position sizing. In other words, I ask myself, "Which company looks like a good value today, and which one do I actually want to build a bigger position in?" As an example of that, right now I'm focused on adding to my position in Rollins, which as a lot of you know, is the newest holding in my portfolio. I think it's at a great price right now, and because I haven't owned it for very long, I have plenty of room to add more shares without the position becoming too concentrated in my portfolio. Now, the tricky part about this is that even though I'm happy to continue stacking up shares of Rollins, there are also a handful of other stocks in my portfolio that look attractive at the same time. Right now, companies like Procter & Gamble, VICI Properties, Watsco, and Zoetis all look like solid buying opportunities, and I'd love to build bigger positions in all of those as well. But, since I only have so much capital to invest every week, I can't, unfortunately, buy everything all at once. So, for me, it's best to just prioritize on only buying one, maybe two different stocks at a time. And for me right now, that's Rollins. I want to prioritize that one. I'll probably continue stacking up shares of Rollins over the next few months. And then once it reaches the position size that I'm looking for, you know, maybe somewhere around 5 to 6% of the portfolio, I'll reevaluate things, you know, see what's looking like a good buy in the portfolio at that time and repeat the process. With that said, on the other hand, if you want to hear about a handful of stocks that I'm most definitely not buying and suggest you do the same, then check out this next video right over here. In this one, you'll learn about three dividend stocks that are showing some pretty big red flags that make me think they could be next to cut their dividends. So, click right over here to learn about those, and I'll see you in the next one.