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Lauren: Hi, I'm Lauren from The Financial Diet and today's video is going to cover 8 embarrassingly basic questions and answers about investing, so let's jump right in. Question number 1, What is investing in a nutshell? Now that's a great question because people feel like they should already know what investing is simply because they hear the term thrown around so often. So it's a pretty simple concept which means that you just set aside a specific amount of money to work for you. So it's committing money to something with the expectation that that investment will gain you a return. And that return can come in the form of an increase in additional income or both. And when it comes to personal finance things that people typically invest in are stocks, bonds, and funds. 

Question 2, Is it important to set financial goals for myself before I start investing? So yes, it's a great idea to have financial goals in place for yourself before you start investing and it's also a great idea to just have a general overview of what your finances look like. And because financial goals and investing strategies are different for everyone and determined on a case by case basis no two will look that same. And a few great questions to help yourself set financial goals are things like What am I saving for?, How long do I have to save for?, What kind of risk can I tolerate? things like that.

Which brings us to question 3, Can I invest if I have debt? So yes of course you can invest if you have debt, but it's really important to look at your finances and determine where it's best for your money to be going. And we'll include some helpful links in the description below that'll help you understand how to make that decision for yourself by considering a number of factors. Question 4, what is the difference between a stock and a share? So a stock is a general term that describes the ownership of certificates in any company. A share describes ownership of a particular company, so that's just the difference between those two. A share is more specific because it's applying to something in particular.

Question 5, What is a dividend? So you might hear that term thrown around pretty often, but all it refers to is the payment that a company makes to it's shareholders. So rather than invest all of the money that a business makes, a company might make the choice to return some of that cash to it's shareholders and that's a dividend. So investors are then free to reinvest that money back into the company by buying more shares, they can invest in something totally different, or they can see it has a source of supplementary income. 

Question 6, What is an ETF? So an ETF is an exchange traded fund and it typically tracks a stock or bond index or the value of a commodity. Now ETFs typically come with lower fees because of their passive investment strategy. Now stick with me, when we say passive investment strategy all we mean is that the ETFs are set up to mirror a stock or a bond index, so unlike a traditional mutual fund you don't have any professional money managers around telling you what stocks and bonds to invest in. Now ETFs are a less active investing strategy, but that doesn't mean they are any worse. In fact some evidence shows that passive investing strategies actually beat active ones over the long term. 

Question 7, Am I taxed on the money that I make in the stock market? So short answer, yes you're taxed any time you receive a dividend, any time you sell an investment for a gain, or any time you collect interest for a bond payment. So this is why when you are saving for retirement a lot of financial planners will tell you to put your money in tax deferred accounts like 401ks and IRAs, which grow tax free until you retire. But it's really important to note that you can't take money out of these retirement accounts until you reach a certain age, unless you want to pay a penalty. So that said, this is why it's a great idea to set up a separate brokerage account for savings you might need before you retire. Something like buying a house or going back to school. And you can read up in more detail about that in the articles linked in the description below.

Question 8, Do I physically have to go somewhere to invest? So in fact you can invest from the comfort of your own home sitting on your couch eating cereal in your underwear if you want. There are a ton of online brokerage accounts for you to choose from and each of them have different fees, different minimum balances, etc. Now what's great about a lot of these online brokerage accounts is that they're typically self service, which means they are going to be a lot cheaper than having to hire a financial planner or an investment advisor for yourself. So that's just one of the many ways that investing can become more accessible to you. I hope that this video was helpful for you and that it inspired you to maybe learn a little bit more about investing for yourself. So thanks for watching and don't forget to hit the subscribe button and go to thefinancialdiet.com for more. Bye!