How To Invest For Beginners (European Investor)

I learned investing on Wall Street 17 years ago. I co-founded a European investment company which today has 140 000 clients. My personal investment portfolio is over a million euros and here's how I would start investing if I had to start over again with just 100 euros. So you've got some money sitting in your bank account and you would like to start investing. Maybe you've read that if you invested 5 000 euros in Nvidia 10 years ago, today that would be worth one and a half million. Or you've heard about ETFs, the passive investment which allows beginning investors to beat seasoned experts while spending just a few hours per year. But you've probably got many questions. What are the best investments to choose? Which platform or investment app can you trust? And do you have to pay taxes on your investments? When you google how to start investing all you find is advice for Americans or sketchy videos about getting rich quick. If that sounds familiar then you're in the right place. I've put together a simple practical step-by-step guide to new investors living in Europe. We're going to cover how to choose the best investments, how to make investing automatic so it takes just a few hours per year and I'll even do a live demonstration of how I invest my own money. And to start let me show you how to select reliable investments so you can avoid dangerous gambles that could cost you money. When you're just starting out it's kind of confusing because everybody gives you different advice. Your aunt says buy real estate, maybe your cousin says buy bitcoin, someone else says look at peer-to-peer platforms or stocks or bonds or options or forex or day trading. So what is a reasonable investment that's going to make you money and what is just a dangerous bet? I actually had the same exact problem. So I grew up in eastern Europe, my parents were teachers, we had no money, nobody knew anything about investing. Then I moved to America, I got a job on Wall Street, I got my first bonus $10,000 and I wanted to start investing. But my degree was in physics, I got hired because I could do math, I didn't know anything about stocks and bonds and all this stuff. But I had one unfair advantage. I was surrounded by successful millionaire investors and one of them, my mentor, he asked me, Tom if you're gonna fly in an airplane do you want the airplane to have one engine or two engines? I said, well obviously I want two engines. If one breaks I'm not gonna crash, right? And he said the same exact thing holds true when you're choosing investments. There are a lot of investments out there which have only one profit engine. You buy it and you hope for the price to go up. If it does, everything is wonderful. But if it goes down, well you're screwed. That's the only way you can make money. This kind of investing is called speculation because you're just guessing about what the price is gonna do. Instead of that, what you want is a twin engine investment. So one profit engine is the price going up and the second profit engine is cash flow from the investment, okay? The best investments give you cash, they give you income, they create wealth. If the price goes up you're happy but if it goes down that's fine as well because you still have some money coming in. It's a simple analogy but when you look at the data it actually separates out the best investments. So you have a lot of popular single engine investments like gold or silver or currencies or whatever where if the price goes up you make money, if it goes down you lose. And what the data shows you is that most of these investments are poor bets over the long run. For example, gold has had a fantastic 20 years, okay? But before that it had a terrible 20 years and long term the price of gold has barely beaten inflation. By contrast, if you look at the two most profitable investments over the past centuries they are both twin engine investments and these two investments are real estate and stock investing. In the case of real estate, you buy an apartment, you rent it out, you can make a profit if the price goes up and you also have rental income. In the case of stock investing, you buy part of a company. If the price of the stock goes up it's fantastic but you also get dividends, you get part of the profit that the company makes. So as a beginning investor I would first look at real estate or stocks. But these two investments are not created equal and there is one issue which can really screw up your lifestyle if you don't think about it ahead of time. So growing up I had a cousin whose family owned some real estate. They had this big apartment building and I just loved going on sleepovers because I mean it was a huge building, we could explore it, it was fun. But every single time that I visited I heard my cousin's mom complaining how like somebody's toilet broke, a window was broken, the roof needed to be replaced, some tenant got drunk and trashed the apartment, somebody else refused to pay and they had to go to court. I quickly realized that real estate is not passive income. It's a lot of work, it's a lot of stress. For most people, I mean you're probably busy at your job, maybe you have kids, you don't have time for managing real estate, you want a passive investment. So is stock investing the answer? Well kind of but it's not that simple. Now of course if you buy some Tesla stock then Elon Musk is not going to call you up in the middle of the night and say look we had a pipe burst at the factory, come and fix it. It is passive in that sense, okay. A company is managed by management, it's got employees, nobody's going to ask you to do any work. But the real challenge is picking the right stocks to buy because sure the stock market as a whole has been incredibly powerful. It has created trillions and trillions and trillions of wealth for investors. But something that most people don't realize is that stock market profits are actually concentrated in just a few winning stocks. There was an interesting piece of research from Arizona State University. It said that over the past 90 years there were something like 26 000 different stocks in the U.S. market. Out of those 26 000 stocks just 83 stocks gave you half the profit. So talk about finding a needle in a haystack. It is extremely difficult to find the winning stocks. For example let's take a look at this. So here's a list of the S&P 500 components. So the S&P 500, right, it's a list of the 500 biggest companies in America. And you probably know the biggest names like Apple, Microsoft, Nvidia, Amazon. But there's a problem with just buying these big successful stocks. And the problem is everybody knows about them, right? So there's a big chance that you are late to the party. The stocks are already expensive. To be really successful at stock investing you would have to go far down this list and guess which companies will succeed in the future. And here we have hundreds of different stocks. Like do you know what Raymond James Financial does for example? Or Cardinal Health or Ansys Inc or Lenar Corporation? Probably not, okay? So what do you do? I mean if you're a busy professional, you don't have any background in finance, you want to invest in stocks, like what's the solution? I mean 50 years ago there was no solution. If you wanted to have success in investing you had to be a professional or you had to pay really huge fees to bankers who knew what they were doing, right? But as of 50 years ago there is actually a solution which makes stock investing really easy for regular people. Warren Buffett actually said, if you follow this strategy a know-nothing investor can outperform most investment professionals. It's been recommended by Nobel Prize winners like Paul Samuelson and Eugene Fama. And I discovered it in a book and the book was written by the innovator of this strategy, by John C. Bogle. It's called The Little Book of Common Sense Investing. 70 years ago this book had just come out and I was super excited to read it because in it I discovered the index fund, okay? So Jack Bogle's insight was that instead of trying to find the needle in the haystack, you could just buy the whole haystack. Instead of trying to find the best stocks out of the thousands in the market, which is extremely difficult, you can just buy a little bit of every stock in the market. Now when you first hear it, it seems kind of crazy. Like there's thousands of professional investors who spend all their lives going to the office and reading financial reports and looking for best stocks to buy. And then Jack Bogle says, well, forget all that. Just buy all the stocks. But actually, when you think about it, when you look at the data, it's incredibly smart. So let's go back to the S&P 500, all right? So we've got 500 different stocks to choose from. If you look at the track record of professionals, they suck at it, okay? There's a famous piece of research called the SPIVA from Standard & Poor's. So let's open it up and look at the data. So what it says here is that over the past 10 years, 85% of professionally managed investment funds underperformed the S&P 500, okay? So there's a whole bunch of professionals out there who were going through this list, looking for the best stocks to buy. They made their choices. And over 10 years, they got worse results than if somebody just bought all the stocks on the list. And this is not an exception over the past 10 years. I mean, it's been true every single decade since index funds were created. Now, the most popular kind of index fund that's available in Europe, it's called an ETF, an exchange-traded fund. I'm not going to get into the technical details. I have other videos about that. But the difference between an ETF and an index fund is basically like iPhone and Android, okay? You have a different user experience, but the profits, the results, they're basically the same. So for this video, ETFs and index funds is the same thing. So when you buy an index fund, you actually outperform the vast majority of professional investors who sell their services, which leads us naturally to the next question, how much money am I going to make? Because, I mean, presumably, if you are going to beat most professional investors, it will be a nice result, right? Well, when you look at global index funds, so these are index funds investing in stocks all over the world, the long-term average has been like 9% per year. And with new investors, I get two reactions. Some people think that's a lot. Other people think it's too little. Myself, 17 years ago, I had $10,000 saved. So 9% of that, that was $900. And I thought, like, is it really worth investing if 9% is all I get? I actually asked this of a senior banker that I knew at UBS where I worked. And, well, normally, I don't tell people this, but he said, Tom, you're an idiot. Didn't you study math in school? Didn't you learn about what Einstein called the eighth wonder of the world, compound interest? So if you invest $10,000 and you get 9% per year, in a year, you will have $10,900. It doesn't seem like a lot. But then you're going to make a profit of 9% based on $10,900. So your profit for the next year is going to be bigger. And you will end up with $11,881. And every year, the profit is going to get bigger and bigger. And in the beginning, it accelerates slowly, and then it really speeds up. That's compound interest. 20 years down the line, suddenly, you have $56,000 in your account. So to me, it was hugely helpful to understand the power of compound interest early on. And I warmly recommend use compound interest to your advantage. Start investing as early as possible, and give it time so that it can grow your wealth. But there is one big problem with all this that we've been ignoring, one big elephant in the room. And of course, it's risk. Now, fortunately, index funds and ETFs protect us to some extent, because an ETF will buy hundreds of different stocks. Now, some companies can always go bankrupt, but the market as a whole will never go bankrupt. But we all know that the market goes down sometimes. There was the big .com crash in the early 2000s. There was the big financial crisis when the stock market fell by 50%. There was the big COVID crash in 2020. From time to time, the market just collapses. And if you've got your money invested in a stock ETF at that moment, you will see losses in your account. Well, I don't have a crystal ball. I can't predict exactly what's going to happen in the market in the next few months or years. But I can share something I learned from a really, really painful mistake in my own investment career. Back in 2007, I had a new job on Wall Street, and I was super excited to start investing. But that's exactly when the big financial crisis started. Every other week, there was a new article in the press about how my bank, UBS, was going to fire 2000, or 3000, or 5000 people. So I thought, I'm going to lose my job. And then the market was just crashing, and crashing, and crashing. So I was kind of proud that I had not started investing. I felt smart about it. But one day, I was talking to a really experienced investor at UBS, who kind of cut me down to size. So he told me, listen, man, I've been in the market for 30 years. I've seen seven of these crises. And every time, a lot of people get scared. They say, I'm not going to invest. And they wait for the market to recover. And then the market recovers. It goes back up. But people are still scared. They keep waiting. And the market keeps going up, and they keep waiting. And then eventually, they see everybody else making a ton of money. So they say, I'm going to jump in now. But by that point, it's time for the next crisis, and they don't make any real money. So that was really wise advice. It made a lot of sense. So of course, I listened to this experienced investor, and I started investing, right? Well, no. That's the biggest mistake I ever made. I was too scared. I did not invest during the financial crisis. It was an opportunity to buy stocks when they were really cheap, and I missed it. But I learned from that. And ever since then, I've never tried to time the market again. There's a reason that Nobel Prize winner Robert C Merton says, market timing is a fool's errand. People who keep waiting for the perfect moment to invest, they often wait forever, because it never feels like a perfect moment. It always feels risky. Whereas if you simply start investing, and you keep investing, you will almost certainly do great. Okay, so hopefully now you're excited about investing in stocks using index funds, right? But how do you actually do it? Where do you find these funds if you live in Europe? The problem is that the big popular ETFs that everybody recommends online, like SPY, or VOO, or QQQ, well, those are American ETFs. And you actually can't buy them here in Europe. So instead of that, what you need to buy is ETFs which are based here in Europe. And to find those ETFs, you want to go to a website called JustETF.com. Okay, I actually have a full guide to JustETF.com in my channel. So hit subscribe, watch some other videos. Here, let me just show you quickly. So this is a database with thousands of different index funds, thousands of different ETFs that you can buy here in Europe. When you click on equity here, that gives you stock funds. Okay, so ETFs which invest in stocks. And just to do a quick demonstration, I'm going to find the biggest fund in Europe. So I'm going to click on And that's the iShares Core S&P 500 USITS ETF USD accumulating. Now, don't get scared by the complicated name. It's just an ETF, so a type of index fund that buys every single stock in the S&P 500. So this fund invests in the American market. It's the European equivalent to SPY or VOO. Of course, choosing the best ETF for your goals, for your situation, for the tax rules in your country, it can get a little bit tricky. This is something I talk a lot about in my videos. But right now, I'm just going to do a demonstration. So this is not a recommendation for you. It's just a demonstration of how this works. We're going to buy this iShares Core S&P 500 ETF. Okay, so I'm going to copy the name, and I'm going to go to a brokerage website. Now, I'm an investment trainer. I've got like 13 different brokerage accounts. This is not my main account. This is Trading212. I use it for demonstrations because it's really simple, so it's easy for beginners to understand. What's a brokerage? Well, I mean, basically, it's like a supermarket for investments. Now, of course, you want it to be a licensed supermarket so that your money is safe, but that's the basic idea. There are many different brokerages, many different supermarkets out there. Now, every brokerage has a different user interface. So for example, Trading212, when you log in, it shows you top winners, stocks that are going up, top losers, stocks that are going down, the most traded stocks. You can ignore that if you're buying ETFs and just go to the search bar. So let me paste in the name of the ETF we're looking for. Okay, and we get a few hits. And this actually shows you why investing from Europe can be a little bit tricky, and sometimes you need to learn a little bit because I can buy different versions of the fund, like the accumulating and distributing version. I can buy it in different currencies, on different stock exchanges. For this demonstration, let me just use this one, the German stock exchange Zetra. So let's click on this. Now, let's click buy. Now, you might be a little concerned. This says that the price of the ETF is 611 euros. And I said that I'm going to show you how to start from 100 euros. Well, the good news is that many brokerages these days allow you to buy what are called fractional shares. So I don't have to buy a full share, I can just buy part of it. So I'm going to put in 100 euros here, and I'm going to hit review order. And basically, I'm buying around 0.16 shares of this ETF for a total value of 100 euros. In this case, there is no fee that I'm paying. Okay, everything looks good. I click send by order, it says order placed. And instantly, it says I bought 0.1635588 shares at 611 euros per share. And it's that simple. So think for a moment what just happened. In just a few moments, with a few clicks, I invested my money in hundreds of the biggest companies in the world. 50 years ago, the richest person in the world couldn't do this. And today, anybody can. So if you came into this video knowing nothing about investing, you are now ahead of 90% of amateur investors, because you know the most important principles. Just start investing, invest in stocks using index funds and ETFs, and just keep buying every month. The only real challenge is how do you get started? Because here in Europe, every country has different tax rules, different investments, different regulations. So picking the best ETF or index fund and choosing a brokerage that you can trust and dealing with taxes, it can be a little bit tricky. So how do you solve this? Well, I've got an in-depth video on this topic that's in the comments.