Investing 101

When I started my career in finance, one of my first big assignments was delivering a 45minute investing 101 talk to employees at a local tech company. I got good feedback on the talk and I was invited to keep coming back every month, which I did for years. In many ways, those talks early in my career were a precursor to this YouTube channel. I'm going to cover that same investing 101 information in this video. I'm Ben Felix, chief investment officer at PWL Capital, and I'm going to teach you investing 101. I'm going to cover why investing matters, what stocks and bonds are, what a sensible approach to investing looks like, and what tools you should consider using to implement these ideas. At the most basic level, investing is important because inflation is a real thing. Inflation means that stuff gets more expensive, measured in dollars over time. Central banks in countries like Canada and the United States target low but stable inflation rates for reasons beyond the scope of this video. The important thing to understand is that inflation should be expected. Meaning that dollars held under your proverbial mattress should be expected to lose purchasing power over time. The same number of dollars will be able to buy less stuff in the distant future than they buy today. This isn't a grand conspiracy and the solution is actually pretty simple. Don't hold dollars that you plan to use in the distant future under your mattress. That is at a baseline why investing is important. rather than under your mattress. Investing your dollars into assets with positive expected returns can generally offset the effects of inflation and then some. Stable investments like treasury bills and high interest savings accounts should generally be sufficient to keep pace with inflation. Not always, but generally. And investing in riskier assets with higher expected returns can help you on your way to becoming financially independent. Financial independence means that over your working life, you save a portion of your income, converting your human capital, your ability to earn income by working into financial capital, the ownership of financial assets, eventually reaching a state where you do not need to work for money, financial independence. Let's look at a couple simple examples to see why investing matters. If you're 30 today, saving 10% of your income and expect to earn a 7% rate of return on your investments, you could retire at 65 and replace 60% of your pre-tax income from your savings until age 95. That's not including government pension benefits like CPP and OAS in Canada or Social Security in the US. If instead of earning a 7% expected return, you earn 2%,