Hello our money-making, and money-loving friends. Today we will be staring a young bright start who teaches Personal Finance, Productivity and Minimalism. He is also an investor himself and always giving great investment advice.
He is Nate O’Brien, and here is what he says about himself:
For as long as I can remember, I’ve had a passion for personal finance, productivity, and personal development. In 2017, I started one of my first YouTube channels from my college dorm room at Penn State University. The goal was to teach as many people as possible about the inner workings of personal finance while keeping the content 100% free.
Nowadays his channel subscribers are over 1 million and he is producing invaluable content. And here are Nate’s advice for best investments in 2021 and beyond.
(Disclaimer: all the advice are just opinion and are not meant to be taken as a professional advice. Be careful, you may lose money when investing!)
Nate O’Brien:
Hi everyone! Today, I'm going to share five investments that I'm holding for life and maybe you want to consider as well. A quick disclaimer: I’m just a random guy on the Internet so just use the info for entertainment purpose.
Let's start with some of the things that we take into consideration here when I think about investments that I might want to hold for 20 or 30 or 40 years. One of them is the potential longevity of certain industries or companies. What you're going to find is that these five different types of investments it's probably going to be comprised mostly of different types of funds like exchange traded funds or mutual funds. It's not so much speculative penny stocks or companies that I think are going to go to the moon tomorrow or something, it's more about companies that I see a lot of long-term growth potential with.
I. Investing in healthcare
The first one that I've invested into, that I'm probably going hold for a long time is the Vanguard healthcare ETF (VHT) and there's a couple of reasons why I like investing into the healthcare industry. Some of these are obvious, like the fact that healthcare is always going to be something important to most people but also - thinking about different types of industries - the healthcare industry has the best chance of surviving for a long time. In terms of priorities for most of the people healthcare is certainly up there. I like investing into healthcare companies more than energy companies because I feel like there's less of the possibility of becoming totally decentralized in health care industry.
As a contrasting example, if I'm investing into an energy industry ETF or an energy fund that owns a lot of different types of energy stocks, I don't really know where this is going in the future. I don't know how oil and gas companies are going to be looking in 20 or 30 years, but also it could be something that I could see being totally decentralized, where people just have their own solar panels, and there's no massive energy companies that are sort of making money of it.
That’s why I think that the healthcare industry has a lot of growth potential for it but also when we consider the aging population not just of America, but in most of the world - most of the world is getting older – and those are all healthcare consumers.
Also, if we look at one of the largest demographics it's baby boomers in America. Turns out baby boomers have some money and when they get older, they also have a lot of money they're going to be spending on health care. They're going to be opening their wallets and making sure that they are in good health which is going to cost money whether it's physical therapy or different types of medicine. There's a lot of money in health care overall and I can see that trend continuing in the future.
Another reason why I like the healthcare industry and invested in something like this Vanguard healthcare ETF is because it does offer a decent amount of stability. Looking over the last year
And thinking about what happened with the recession and the economy, healthcare was still very prioritized on our list among everything else.
Some of the companies within the Vanguard healthcare fund are
Johnson & Johnson, Pfizer, and Merck. Companies who made vaccines for COVID-19 but also several different biotech companies. We have over 400 companies that are within this ETF. An ETF is an exchange traded fund, it's basically just a big basket of stocks.
Let’s look at different criteria within this healthcare ETF, one of them being that the expense ratio is 0.1% so it's one tenth of one percent. This is what I would consider to be a very low expense ratio. You always want to take these into consideration when you are looking at different types of funds or investments that you are getting into. With the one tenth of a percent expense ratio – it means that if you had one thousand dollars in this fund over the course of a year you would probably be paying about one dollar to Vanguard as their fee to manage the fund for you.
Also looking at overall performance over the past 10 years or so and we can see that it's done well since 2004. Just remember that past performance does not mean future performance just make sure you don't see something and think it went up 20 so it's going to go up 20 next year too. That's not how the stock market works, but overall, I think the Vanguard healthcare ETF has lot of stability.
II. Real estate investment
The second one that I wanted to discuss is investing into real estate. Look, I don't really want to be a landlord, I figured this out for myself. I don't want to be somebody who owns properties, I don't want to have to deal with tenants, but also, I don't want to have to deal with property managers if I buy a property and then somebody else is running it and taking care of it. There are still things that come up that I have to deal with, so I though how to get into real estate without actually having to own a physical property and this is when I looked into something like the Vanguard real estate ETF (VNQ).
Real estate is very much a tangible asset. And something I really worry about a lot in the economy, especially in today's world is inflation. There is always a possibility to have hyperinflation. Think about the fact that more than 22 percent of US dollars were printed in 2020. What's happening right now in the economy is the government is saying ‘hey let's make more stimulus packages it's going to get us more approval’ right it doesn't matter
The problem is that those money are just pulled out of thin air. There is no balance of the budget, e.g. ‘to get the 1.9 trillion dollars, maybe we should cut defense spending or cut different types of spending’. The government is just making more money out of thin air and
If you are holding cash in US dollar in 10 years that's going to be worth a hell of a lot less.
That’s why I love investing in real estate or have some exposure to real estate. Real estate will
probably keep up with inflation (that’s not certain fact), historically it had, because we're not making any more land and there's a lot more people coming onto this Earth every day.
There are a couple of different ways you can invest in real estate. For me, as I mentioned, I just like to go for the Vanguard real estate ETF, but maybe you want to buy physical properties yourself and be a landlord. I have lots of friends who do that, and it is especially good if you have some time on your hands too, and maybe you have a job but you're looking for something extra to do on the side.
You could also get into specific REITs, and REITs are Real estate investment trusts, and you could get into specific REITs that focus more so on specific areas. You might want to buy a REIT for a company that is specifically focused on maybe apartments in Texas or apartments in California or New York apartments. You can invest into those specific companies as well if you think those are going to boom or do well long term.
One thing that I will caution you on is about the future with office buildings and even with retail. I try to focus on some type of residential real estate, people always need a roof over their head, they always need a place to sleep and so. For me that provides some level of stability
The Vanguard real estate ETF hold several different types of real estate, so they own residential they have a lot of different other properties too, and the expense ratio on is 0.1% – 0.2% so also what I would consider to be a very low expense ratio. The fees on it are low and as usual you can buy this on Robinhood or anywhere else.
III. Invest in the most successful US companies
The next I would like to share with you, and it is a great way to get a lot of exposure to the thousand largest companies in America that are publicly traded is the Schwab 1000 fund (SNXFX). It is probably my favorite one and I think this is probably the largest one that I own. It contains the 1000 largest US companies, and you can check that it covers approximately 90% or more of the total US stock market cap so I feel safe being in something like this. Sure, there are times when this fund goes down, if you look at it back in March ’20, it went down just like the rest of the stock market did. It is something that of course I'm holding for a very long period.
Let's just check their top 10 holdings within this fund. It's Apple, Microsoft, Amazon, Facebook, Tesla, Alphabet (which is essentially Google and all their holdings), Berkshire Hathaway, Johnson & Johnson, and then J.P. Morgan Chase so they do own, or more precisely they are kind of having hands in a lot of different types of companies throughout America, and this gives us an overall just kind of broad way to invest into American companies.
IV. Invest in markets outside of US
But let's say that maybe you don't have too much of a bullish feeling about American companies, and maybe you think that America is on the downfall, and there's not a lot of growth left in America, or maybe you don't want to be so exposed to American companies.
So lately I've been shifting outside of American investments and looking for some ones in emerging markets in different parts of the world and that's why the one that I'm going to share with you is what is known as the Vanguard emerging market ETF (VWO). It is going to hold a lot of companies from different areas in the world like China, Brazil, Taiwan, and South Africa. So, a ton of different areas. This is what would be known as an international or global ETF and the expense ratio on it is also 0.1%. Again, very low, that’s what I like about Vanguard funds as you probably already noticed.
Let's check some of the different holdings that this ETF owns. You might notice some of these companies and you might recognize them especially looking at their top 10 holdings here like Alibaba, and maybe you recognize jd.com or Neo which is the popular stock that a lot of people have been investing into so just looking at these you can see probably a good amount of these are based in China, but there are ones from other countries here as well.
The fund is comprised of 5048 different companies, it's one of the largest most diversified ETFs that I've seen out there. Most other ETFs that I'm investing into might have 400 or 500 companies, but this one has over 5 000 which is a lot. And it is both good and bad. The good thing about a fund that holds 5 000 different companies is that maybe there's some companies within there that can really boom and really take off and be the next Amazon, and the bad is there's also going to be kind of not-so-good companies in there as well.
It gives us a lot of exposure, and it gives us some level of stability. Historically thougt these
emerging markets haven’t been performing as well as some different US ETFs that I've checked in the past 10 or 15 years. Nonetheless I still think that there's a lot of room for growth for the next couple of decades, especially in areas where maybe their GDP per capita is still 1/3 of America’s and they still have a lot of room to run to catch up to the GDP per capita in some of those countries. So maybe their growth rate will be a lot faster. Look at a place like india for example, where their growth rate seems to be a lot faster with their GDP growth.
V. Investing in bonds
And the last one I want to mention here it's going to be brief because it's not my favorite but maybe for people who want to be a lot more risk-averse and they're worried about maybe valuations of certain companies we have something like the Vanguard total bond market ETF (BND).
As you can see, I'm kind of a fan of Vanguard funds, I don't buy them through Vanguard though. And this one isn't my favorite, but I still wanted to include it on this list because like I mentioned not everybody wants to be exposed so much to stocks and maybe they want something that's seen as traditionally safer than the stock market. And those are bonds.
Bonds have not been a favorite for most investors in the past couple of years and this is because yields on these bonds have been low, sometimes these yields can be below 1% so it's not that attractive, especially when I factor in the fact that they also have the risk of defaulting on those loans.
Is it even worth that 1% when you average it out, especially when you get some of these different bond market ETFs fail and they can't pay, then you end up losing money? You won’t get your money back. For example, that’s what happened with Puerto Rico back years ago, when they defaulted on a lot of loans.
Don't just think that bonds are totally safe and are like deposits. It's one of the biggest misconceptions.
People mostly believe that bonds are guaranteed money, that it's safer than stocks. And it's not always safer and it depends on who's issuing the bond. If it’s apple or a highly reputable company that’s a good indicator but it also could be a company that's a small cap company with bad reputation. Those are risky because if they're issuing a bond the yield usually would be higher, but also riskier.
The Vanguard total bond market ETF is comprised mostly actually of government bonds, so this is probably just what I would mention is like a kind of a safe bet if you want to just park some money in there but you're not going to really see a lot of growth there.
it's kind of almost fixed like you're getting 2% percent yield, and in the worst-case scenario you may end up losing a lot of that money so I included it only for people who might really want to play it safe with minimum return on investment.
Well, thanks for reading all those thoughts and advice, I appreciate your time and if you found any value make sure you share the article and drop a comment below.
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