Passive Income: I invested $5 a day for 1 year and made…

if you save just $5 a day by skipping your daily Starbucks cutting back on pricey Uber Eats or resisting the tempation to buy new fortnite skins and instead invested it with an average annual return of 10% in 45 years you'd have nearly $1. 6 million I've shared this idea before and while many people are amazed at how saving a small amount every day can grow into a fortune there's always three common hate comments I get the first is I don't want to save I want to enjoy my money while I'm young the second I don't want to be a millionaire when I'm old and gray like you I want it now and the third what kind of investment actually gives me these returns over the long term after hearing these doubts time and time again I thought why not put it to the test once and for all that's why I'm kicking off a year-long challenge to show you that investing $5 a day doesn't have to feel like a sacrifice and can lead to real measurable returns first I'll walk ref through exactly how I'm setting up my investments then we'll fast forward to reveal my results one year later yes by the time you're watching this video a whole year will have passed so hopefully everything went to plan before we start remember I'm not a financial advisor I'm just sharing the knowledge that has allowed me to become a millionaire investor right so step one is to find a platform for this this investing challenge I've got a few non-negotiables when it comes to what I'm looking for in a platform and if you ever want to do something like this yourself these are the things you'll want to keep in mind too let's break them down the first thing of course is low fees because you don't want your potential profits eaten up by unnecessary charges the next thing is a beginner friendly interface although I'm confident with complicated investing terms I know most beginners that want to try out this challenge will be put off if it looks too confusing so we need something that's simple to understand security is such an important one what's the point of investing if my money isn't safe so I need a platform that is fully protected by the financial services compensation scheme this compensates you for up to £85,000 in the UK in case something happens to the platform however bear in mind this protection doesn't protect you from investment losses we also need a platform that accepts pretty low minimum deposits because this is of course a $5 a day challenge next we need some kind of automatic investing feature as there's no way I'm going to be remembering to invest $5 every single day without automating it you might be better at remembering than me but my Boomer brain is getting pretty old finally we'll need access to fractional shares this will allow us to invest in high price stocks without needing to Fork out hundreds of dollars to buy an entire share up front for example apple is as of August 2023 trading at around $178 per share which clearly doesn't work with our $5 a day budget but with fractional shares we can invest any amount we want no matter how small there are other features you might prioritize however these things are my non-negotiables now if you're doing this challenge too feel free to use whatever platform has these features I've used a lot of investing Platforms in my lifetime and one of my favorites is tradeing 212 as it ticks all of these boxes so that's the platform I'm going to be using for this challenge right let's move on to step two which is to open and fund an account when it comes to this step there's one key decision that many people Overlook a decision that can make or break your long-term results and if you're taking on the $5 a day challenge like I am this Choice becomes even more critical this is because the type of account you choose will determine how much of your profits you actually end up keeping let me explain there are two main types of accounts we need to consider for now let's call them account a and account B now let's imagine we've got $2,000 to invest we'll split it equally between both boxes so $11,000 goes into account a and $1,000 goes into account B at first everything looks the same both accounts have the same amount of money invested but here's where things start to change when you use account a your profits aren't entirely yours to keep and that's because of the dreaded Taxman first he takes a slice of your dividend earnings Dividends are like a reward companies give their shareholders now not all companies pay them but many do how much the tax man takes depends on your income tax bracket so the more you earn the bigger the slice he takes next he takes even more for capital gains tax this happens when you sell an investment for more than you paid for it in the UK capital gains tax is typically 10 to 20% in the US long-term capital gains tax rates range from not to 20% based on your income level now what about the money in account B well this account has special protections that stop the tax man from reaching in and taking your profits everything you make here is yours to keep that's because account B is known as a tax advantaged account meanwhile account a is just a general investing account in my humble opinion you shouldn't even be looking at General investing account until you fully taken advantage of everything a tax advantage account has to offer so how do you do that well it depends on where you live in the UK our tax advantaged accounts are called stocks and shares Isis and in the US they're known as rth IRAs both of these special accounts come with Incredible tax benefits but there are a few things to keep in mind in the UK you can contribute up to £2,000 per year into an Isa in the US rough IRA contributions are capped at $6,500 each year or $7,500 if you're over 50 for most people these limits are plenty allowing you to build your future while still covering living expenses the iser allows you to withdraw money at any time taxfree which makes it very flexible so while a general investment account isn't necessarily a bad option it often falls short when it comes to maximizing your money of course if a tax advantage account isn't available where you live you'll have no other choice but to use option A a general investing account I'm going to use option b a stocks and shares Isa because when we pull the money out of this box at the end of the year we want to keep as much as possible as I mentioned earlier I use trading 22 all the time and already have an account but for this challenge I wanted to show you the process of starting fresh that's why I've asked my son Curtis to step in and take on the challenge using his account if you also want to set up an account and join in with a challenge just head over to their website or download their app from the App Store the setup process is pretty straightforward the only part you might need a bit of clarification on is choosing the right account type you'll be met with four options like this at the top is the general investment account we spoke about earlier underneath is a cfd account for shortterm trading which we don't need to worry about at the bottom is the cash Isa and right here is the stocks Isa this is the account odd open if I were you now assuming you've set up your account head over to this tab and select use promo code and enter t i lb r y Tilbury and you'll get a free fractional share worth up to 10000 when you fund your account now I know this sounds too good to be true but they're offering this because I reached out to them to see if they'd be interested in sponsoring this portion of the video and they agreed so next let's fund the account click this button here you'll see a few options including instant bank transfer normal bank transfer card or Google pay if you're using the iPhone app I believe You' also have the option of Apple pay as well I'm going to go with instant bank transfer and deposit £35 from my son's bank account as that will cover us enough to invest £5 a day for the next s days now you don't need to deposit for an entire week heading one go this is just the way I'm choosing to do it and yes I know the title says $5 a day but I'm in the UK so I'm putting £5 in which is actually just a little bit more the most common mistake I see people make when investing is assuming that once they put some money into an account like this their money will automatically start to grow let me make one thing very clear this box only protects your money from tax it doesn't actually invest it for you that's why step three is to pick some Investments this is all about deciding what actually goes into the box so we could fill it with individual stocks like Amazon meta Apple Tesla and Nvidia but to be honest while these are great companies putting all your money into a handful of individual stocks can be really risky if one of these companies doesn't perform well it could drag down your entire portfolio that's because your money is tied up in just a few companies and that increases your risk that's why for this challenge I'm using a different strategy and you might have guessed it already it's called Index Fund investing this will give us exposure to loads of different companies without all the stress of picking individual stocks and praying for a winner index funds can hold shares from hundreds sometimes even thousands of different companies at once this makes it easy to invest in a whole bunch of companies all at the same time making your portfolio more Diversified now here's the best part what makes this even more powerful is that it's is going right inside my tax advantaged account so not only do I get the benefits of diversification and low cost but I also get to avoid paying taxes on dividends or capital gains while it grows this is perfect for my $5 per day challenge of course it's important to remember that stocks can go up as well as down and your capital is always at risk when invest in however if you choose to invest in an index fund like the S&P 500 which tracks the performance of the top publicly traded companies in the United States it's worth noting that historically no one has lost money when they've bought and held for over 20 years past performance isn't a guarantee of future results but long-term investing in Diversified funds like this can help reduce risk compared to individual stocks let's head over to trading 212 and set this up to the left you can see this option to create a pie once you click it it gives you some different options like copying model pies looking at other people's pies in the community and creating your own custom p a piie is just a fancy way of showing you how your Investments are divided between different stocks for example if you had $100 and split it equally between four individual stocks your pie would have four equal slices of 25% each we're going to go with the custom pie option and click add instruments I'm going to search for a simple Vanguard S&P 500 Index Fund as you can see there are a couple of different options one has ACC and brackets and that stands for accumulation meaning that all your Dividends are reinvested back into your Investments the other option looks the same but has D in brackets at the end which is short for distribution this second option means that you're given the dividends rather than being automatically reinvested into your account so for me I want this challenge to be as easy as possible so I'll be choosing the accumulation one now I'm going to click add to piie all right so we've got our account set up and decided what to invest in But Here Comes the tedious part invest in a Fiverr every single day honestly I think a lot of the hate towards this challenge comes from people Imagining the effort it takes to do this every day but the truth is it really doesn't have to be that hard that's why step four is to set up Auto investing now this feature isn't just great for the $5 challenge it's essential for any investor no matter how much you're putting in this is because it takes your emotions out of investing and leverages the power of dollar cost averaging let me explain the reality of the stock market is that it's completely unpredictable it doesn't just move in One Direction sometimes the market will be going up other days it will be moving sideways and then there are times it'll be going down when the market is down down your money actually buys more shares because prices are lower for example my $5 stretches further let me pick up more shares at a discount and when the market is up my $5 buys fewer shares because prices are higher the idea is that over time these ups and downs balance each other out which is the magic of dollar cost averaging it's been such a reliable and stressfree strategy for me because it takes the pressure off trying to time the market perfectly for this challenge I'll be using this exact strategy by investing the same amount every single day and if you don't want to do it daily you can invest monthly and still see the same results it's entirely up to you let's go back to tradeing 212 and click next this then gives us the option to either choose to invest manually or use the autoinvest feature we're of course going to select autoinvest and then click next now we have these three sliders we can play around with the first one is our initial deposit this is the money we're going to be investing right away so I'm going to set this to £5 next we have the investment frequency as you can see you can do this every two months monthly every two weeks weekly but we're going to select the daily option and press update and then we're going to change this to £52 finally let's set the years to one and as you can see there's a COR value projection graph at the top which shows us what we can expect to make in a year based on historical data £ 1. 97 th000 may not seem super impressive when we're going to be putting in 1.

8k but if you move that slider all the way to 40 years look how compound interest takes over this value projection says our little5 p a day investment could be worth 5. 52 million from an investment of only £73,000 of course this is all estimated and if I were you I'd take this with a grain of sorts no one knows what the market is going to do long term however playing around with these compound interest value projections is very motivational so let's bring it back to one year and click next now we get the chance to name our investment so I'm going to call it coffee a day and then click next now it's time to fund the pie so let's click this and as we've already funded the trading 212 account we can choose the free funds option this isn't free money it just takes cash from your balance on trading 212 so as long as we top this account up every now and again then the daily investment should go through then I just need to press confirm and boom that's all set up so a year from now hope I'm still alive I'll catch up with [Music] you right it's time to check out the results I know I'm about 5 months late on this that's how good the auto invest feature is you just forget is investing in the background but trust me the results are worth the wait they're really interesting I started this challenge back in August 2023 and after the first month I was up £237 which was a 1. 5% return not bad but then September came along and things didn't go quite so well I was actually sitting at a loss of 79 P which was a minus 0.

5% return this right here is why so many people give up on investing in the first two months I had almost nothing to show for my consistency it's no wonder people decide to pull their money out when they don't see immediate results but I was determined to stick with my dollar cost averaging strategy and I'm so glad I did because things really started to turn around fast forward 6 months and I was up 8370 which is an £1 18. 2% return not too shabby and then by 12 months I'd made £1 16134 in profit with an 18. 1% return that's where the auto investing feature stopped but I've continued tracking the growth since then now let's jump to today this is where it gets a little bit crazy in total I've invested £155 but my investment is now sitting at £ 1,972 that means I've made a profit of £467 and3 which we can convert to Dollars and that works out at $576 59 which is a staggering 43.