This article shows you how to invest in the stock market so,
what we're gonna do here we're gonna break this down into a number of parts here within this video so you can skip around if you would like to but we're gonna try to make this as in-depth as possible a full all-inclusive showing you how to invest into the stock market obviously right now we're in some turbulent times in the markets and so people are interested in investing so what I'm going to do here is I'm gonna break this down into a couple of different sections first of all we're gonna talk about a lot of common questions that people have of how to actually start investing what brokerage firms should you use how much money should you start with what are some of the initial techniques that you can use to find stocks or what type of investors should you be then later in the video retching and talk about stock market research we're going to talk about qualitative versus quantitative research we're going to talk about looking at different income statements balance sheets cash flow statements we're gonna really try to go as in-depth as possible.
so we try to make as many blogs as possible on this channel so if you want to read more like this the only thing that we ask is that you share and drop a comment if you find value in this text. so, without any further ado let's get started here but I first want to kind of run over a couple things that we are going to discuss here,
- First of all we're talking about the different types of investing alright there's different types of investors you can do investments that are rather short-term versus investing that is rather long-term
Then we're going to talk about how to actually buy stocks brokerage firms that you can use ones that I would probably avoid some some things you want to avoid in that area then we're talk about passive versus active investing what type of investor would you like to be there's some people who have a lot of time on their hands and they want to really learn the ins and outs of the markets and the financial markets whereas some other people just want to do it passively they want to take some of the money from their job from their work maybe put it into the 401k but they want to make sure that they're doing it correctly.
- Then we're gonna talk about stocks versus mutual funds versus bonds versus ETFs and index funds you probably hear a lot of this jargon being thrown around we're gonna kind of dissect that to hopefully get a better understanding of it and then we're going to talk about how much money should you start with should you go all-in should you put as much money as you possibly can into the markets now we're gonna talk about diversification a little bit well to touch on an idea of something known as dollar cost averaging as well something that some people like to do then in the latter half of the article.
what we are going to discuss is quantitative versus qualitative strategies for understanding stocks looking at them from both sides there we're also going to discuss about where to gather your information from Form 10-k 10-q s talking about websites that we can use to find a good amount of information and then as I said we're going to look at some of the financial statements as well to actually start to understand how to value a stock how do we value a stock and decide whether it's a good deal or a bad deal now one of the biggest ideas of investing is that we try to preach here is to try to limit as much risk as possible while increasing the potential reward that is the goal of investing sometimes people get a little bit confused about that and I want to just give a little bit of a forewarning here before we actually start talking about some big things here and that is to curb your ego now I don't want that to come off in the wrong way but the one thing that I would like to bring across here is to make sure that when you are investing especially if you were just beginning investing make sure that you are making investments based off of actual logic rather than emotional investments Types of investments:so, let's actually start by talking about the different types of investments so there's different strategies for investing maybe you've heard of some of these known as technical analysis and then there's others such as fundamental analysis and then there are other strategies as well something that people like to do which is sort of passive index investing where they dump money in through dollar cost averaging those are really the three primary strategies for investing and then
There's also another one that we'll touch on briefly which is more so behavioral finance going off of the news going off of trying to understand people's emotions and making investments from that perspective now on this channel and what I do and what the majority of investors on Wall Street and throughout America throughout the world do is they use some type of fundamental analysis and this is through long-term investing where you are trying to find companies that their current valuation the current stock price is lower than what it should be at the moment and so there's a number of ways to do this but first let's actually just discuss a couple of others before that and one of those is technical analysis and this is actually something that you probably will hear when you look at somebody who maybe is a day trader or swing traders or very quick traders people who get into a stock and get out of the stock and based off of technicals based off of the actual stock charts.
See the advertisements for it how do I actually buy a stock well touch on this very briefly because I think some people already kind of know how to do this or to be honest you could just go onto the App Store and type in investing app and you can find one on there but there's a couple that I really like but there's also a lot that you probably have already heard of before like TD Ameritrade Charles Schwab and fidelity Vanguard those are the more traditional ones and then we see a lot of newer ones in the past few years like the Robin Hood app m1 finance which is one of my favorites I just like working with them and then there's others as
well like Weibo and I've seen a number of others popping up as well I saw something like public popping up so there's a lot of different apps that are available I'll leave some links to some of those down below if you're interested in signing up.
If you wanted to invest into Amazon stock and looking at Amazon stock here it's almost two thousand dollars per share so traditionally if you wanted to buy one share of Amazon stock you would need to actually have almost two thousand dollars to buy that you wouldn't be able buy half of a piece of one Amazon share right well now you can do that with something like m1 finance this is this is not a big advertisement for them it's just something that I actually do like about them but also there's a very low amount of money required to actually start investing you can start accounts with $100 or less for most of these different brokerage firms now let's actually talk about stocks and what a stock specifically is just briefly because I I know for some people that's been kind of a concern of what actually is a stock how how does it function the most basic way to put this in a couple of sentences. Here is that a stock is essentially just a piece of a company that you own so when I bought my very first stock my very first share of a company 2009 it was Cedar Fair.
Invitations to share holder meetings: If you buy one share currently the price of Cedar Fair is $18 and 34 cents per share so if you buy one share that means that you own a tiny sliver of this company you actually own a piece of this company it's not that you're speculating on it you actually own a piece and so what can happen here and depending on the type of company you can actually get invited to shareholder meetings. you can actually actually get invited to the shareholder meetings especially if you own a lot of shares of a company for example if you own one share you're not gonna really have much say in a company but some people who own 10 20 30 % of a company can actually vote on certain things that the company does they can vote on who's going to be on the board so it's really really interesting how this can work but yes you own a piece of the company unlike bonds or bonds you're going to be essentially loaning money to companies and then they're gonna give you that money back with a little bit of money.
How to buy stocks: How to actually buy stocks open up a brokerage account like I said and when Finance is one of favorites it's super easy once you sign up you can sign up for an individual brokerage account or you're probably gonna see a ton of different options when you're signing up where you might see you're gonna have an IRA potentially you're gonna join accounts custodial accounts if you're under the age of 18 in America then it's going to be difficult to invest in the stock market you can still do it you're just going to need to get your parents help with that it's technically going to be a called a custodial account so it's under their name but your name is attached to it as well and so I'm not sure on the entire legality of whether or not you legally if you're under 18 are allowed to control that money but it has your name on it.
Passive verses Active investing: so let's talk about passive versus active investing here which one is going to be the best option obviously this depends on you as a person and how much time you have on your hands so I'll tell you this that for the first few years of investing journey spent a lot of time looking into individual companies investing into individual stocks not only read a lot of books which is something that I suggest people ask what's the best way to learn how to invest two ways one reading books but also the other way to learn is through experience it's through making mistakes and then learning from those mistakes but as I was saying there's two ways to really go through investing here into the stock market you can be a passive investor or an active investor active investors from the way that we do this from our approach is to I would say roughly about at least once a week at a minimum you're looking over each one of the stocks that you own you're looking at the news from those companies making sure that everything is going smoothly if there's any red flags were able to recognize those red flags at least on a weekly basis so you're still putting in some hours for that I would argue that people might put in anywhere from five to ten to maybe 15 hours per week of actually reading about companies learning about companies and making sure that the investments that they have or future investments that they're looking into are in good condition now if you don't have that time on your hands because I know a lot of people are struggling to find time in their day well if you don't have time on your hands for that you could take an active or a passive approach to investing as well now one approach is not necessarily better than the others but from a passive approach a lot of people do something called dollar cost averaging and they do this
into mutual funds and ETFs maybe hear people talking about investing into index funds through dollar cost averaging this is a strategy that many people use as well it's certainly been tested especially.
we will talk about that passive investing strategy what we're really focusing on more so today is a little bit more active investing talking about investing into individual companies and finding good deals within the markets so let's talk about short-term versus long-term investing as well something that we need to very much clear up what type of investors should you be in terms of how long you're investing and so make one thing very clear is that the way that we invest in the way that most people who have succeeded very much on Wall Street or in the stock market invest for a long period of time what we mean by this is that if you are buying a stock and then hoping to sell it in a few days based off of fundamental analysis that's not really what we focus on what we want to do is we want to buy a stock that can reap rewards for a very long period of time for decades to come.
Funds stocks versus mutual funds ETFs: now let's talk about stocks versus funds stocks versus mutual funds ETFs. so, as we mentioned earlier in the article a stock or a share of a company you're going to own a piece of one company but with ETFs exchange traded funds or mutual funds or maybe you hear index funds as well what these are are going to be essentially a basket of stocks that people can invest into. so, say that you didn't want to put all of your money into Walmart stock because you want to diversify you don't want all of your money going into one company because what if Walmart has problems next year and their stock price goes down to much lower than what it was today and you can end up losing a lot of money and so what some people like to do
is they like to invest into ETFs mutual funds index funds they're all relatively the same for the purposes of this article we're just going to say that ETFs and mutual funds they're relatively the same in the sense that they're going to represent an overall basket of stocks so think about something like mu vo o is an index fund which is run by Vanguard . so Vanguard is a financial institution you can open up an account with them I think they're a really good company so it is essentially just a brokerage firm that you can use here. These are actually indexes that essentially kind of show us how the markets are doing overall. so for example the Dow Jones Industrial Average represents 30 companies in the United States then we have something like the S&P 500 which represents 500 companies in the United States this is probably arguably the best indicator for how well the US markets are doing the stock market in the United States and overall kind of the economy as well and then there's another index that we see quite often in America which is known as the Nasdaq which is much more focused on tech stocks but then throughout the world as well most countries or most regions in the world are going to have some type of index that you can see how well that's doing so in Shanghai there's an index in Tokyo there's an index in your up there's some index funds and so each one of these is going to be an overall basket of stocks sometimes maybe 30 or 40 stocks and other times it can be a thousand stocks have some investments in two mutual funds or ETFs that have over a thousand stocks you're pretty well diversified and so what this means is that let's say one out of these 500 companies goes bankrupt they have no money left and they go under and their stock price goes to zero well if you buy an index fund if you have money into an index fund well if that one company had 500 went bankrupt the other 499 should hopefully kind of carry the weight for that and you wouldn't really feel that much of an effect from that but on the flip side if you say one of those 500 companies turns into the next Amazon the next Apple the next Netflix and it absolutely booms and the stock price goes from $1 to $1,000 well you're not gonna see much of an effect from that as well because the other 499 stocks might be sort of weighing it down so you can see kind of how that has both positives and negatives to it with index funds and ETFs and mutual funds so hopefully we can clear that up for you what we actually talk about in the rest of this video is actually focusing more so on individual stocks because I know a lot of people want to invest into just a couple of companies maybe they want to invest into 10 20 30 companies and they want to choose them themselves rather than just kind of blindly putting money into index funds or ETFs and mutual funds.
Quantitative versus Qualitative research: okay so let's actually talk about stock research here first of all let's discuss quantitative versus qualitative research now I suggest to take out a pen take out a piece of paper I hope you already did this but there's two really strategies for looking at companies one of them is qualitative research so this is something along the lines of looking at a company's culture looking at the model of the company looking at their vision and even the leadership of a company for example this is very important because if you are just looking at the financials and the fundamentals and you're looking at the numbers but you're not looking at who's the CEO is the CEO Pappa john because that might be a problem so you want to make sure that you are looking at a number of things throughout the culture of a company making sure that there's no issues within that some potential problems I'll give you an example here looking at Facebook like Facebook a lot of people are a little bit wary about Facebook because of some of the things that they've done in the past we saw the cam bridge analytical scandal so qualitative research is very important but I would argue that most people probably spend about 20% of their effort on qualitative research and then 80% of their effort on quantitative which is a reasonable amount to go for so most of the time that spend when look at investments is actually focused on the financial numbers rather than that qualitative things like looking at Facebook and Mark Zuckerberg and looking at they're prone to maybe more scandals in the future those are all things that you do want to take into consideration but quantitative the quantitative approach is much more focused on looking at the actual hard facts and the numbers from this now what do you actually get information from when you invest into a stock there's a couple ways you can do this one of them is through just the brokerage firm that you have so if you're using Vanguard or using fidelity a lot of these companies a lot of these brokerage firms that you can sign up for actually have their own research platforms within that so if you want to buy some stocks or look at their earning reports then you can do most of that through one of your brokerage firms that you have through your account it
should be pretty straight forward from that but what I think is one of the best ways in terms of gathering information to learn about a company let's say that you're really interested in investing into Walmart stock you think about investing into it you're not quite sure so you want to learn more about it you want to learn .How does this company's financial statements look and so one thing that you can do is to go to that company's Investor Relations report so a lot of this is going to be on their Investor Relations page the best way to find this is just through a simple
Google search or most companies if you go to their website and the way down to the bottom you'll be able to actually just find their Investor Relations page so let me scroll so just click on investors and this will take to their investor relations page which at this point you're gonna see a couple of things on most companies websites especially if they are on the major stock exchanges around the world they're going to be regulated and sent in the terms of what types of information they have to actually release to the public so it's really cool about this is that if you're investing in two stocks that are on the major stock exchanges then you're going to actually have a lot of information available to you so one thing that we see is something called a Form 10-k this is going to be their annual report looking at the past year talking about the numbers from the past year and then talking about their projections for the future so for example what they believe is going to happen throughout 2020 they laid that out usually we're gonna see this happen right around the turn of the calendar year although it might depend for some companies so what I would suggest doing is downloading what we call the Form 10-k this is probably going to be roughly about a hundred pages most companies it might be over a hundred pages for that company's 10k within here I want you to be a little bit careful. start to learn about different ratios and financial metrics that you can use to essentially value a company or see if this company is volatile if it is a company that is likely undervalued or overvalued there's going to be some different indicators and ratios that we can use one of them known as the price to earnings ratio this is the p/e ratio there's something called earnings per share we can look at return on equity ,return on assets and then there's also other ones as well if we go to something like Yahoo Finance here you're gonna see
If the market cap of a company is a trillion dollars which is only a couple of companies who have hit that mark that is going to be well first of all quite large but that is the overall valuation of the company so we take the number of shares multiplied by the stock price and that is going to give the market cap for a company look at some other ones something like beta this is going to essentially sort of indicate whether this company is a volatile stock or if it's not very volatile so the beta of 1 is going to be average and then if you see a beta below 1 that's going to mean that it's less volatile than most other stocks so looking at Walmart here the beta here on Yahoo Finance as of today it says that is 0.4 3 this means that Walmart stock is less volatile and volatile means that it's less likely to have massive jumps up or massive jumps down so if the market for example comes crashing down Walmart stock is probably less likely to come crashing down as hard but also if the market starts to really boom Walmart stock might be less likely to really see some massive growth as well so it's more stable versus if the beta here for Walmart or for a company was 2 3 4 if it was a lot higher then that could indicate that this stock is probably jumping around a lot more a higher beta is not necessarily a bad thing it just means that there's going to be more volatility in it and then there's other things as well looking at the earnings date that is generally we're gonna see companies release earnings reports every quarter so four times per year.
Dividend paid :The company they'll choose sometimes to actually pay out dividends to their shareholders so for example here with Walmart you're going to see a dividend of $2 in 16 cents so what this means here is that Walmart's dividend of $2 and 16 sense they might be splitting this up over four different quarters so you might expect to get 1/4 or 25% of $2 and 16 cents every three months from Walmart and you can actually just get this in cash as a cent as a check although most likely most companies are just going to deposit it into your account and it's essentially it's sort of like a thank-you from a company for investing into that company now that's that's probably a terrible way to put it but it is just a piece a small amount of money that they are giving back to their shareholders for owning that stock so instead of reinvesting it they're just giving back to their shareholders some stocks you're gonna see how pivot ends that are very high. sometimes they pay monthly dividends by the end of the year that that company is going to be paying you I just want to give you a little bit of forewarning on this be very careful with dividends I sort of just sort of view them as a cherry on top I don't really invest for dividends for the purpose of dividends the one thing that I want you to be careful with is one mistake that I made when I first started investing where I would look at stocks I was looking at companies and I would say this one company has a 15 percent dividend or 20 percent dividend and would invest into it based off of that not realizing that some of these companies dividends were not sustainable amounts of money that that they were paying out and so I would end up losing money because was investing into stocks that had 20% dividend but they couldn't sustain that dividend they couldn't pay out 20 percent per year because they weren't making that much money and so they ended up going bankrupt some of those companies and it was a terrible fiasco so just be very careful with that view it as a cherry on top not really a primary reason for investing a lot of companies that are what we're gonna say are well established blue chip stocks companies that have been around for a long time like to pay dividends so a lot of these older companies like like Ford General Motors Walmart here a lot of these less volatile kind of well-established companies.
It's important to start with a sort of small amount of money now this is something that I like to advise people on once again I'm not a financial advisor but I would suggest starting with a small amount of money in the stock market and then building it up over a long period of time because as I said some of the best place to learn is through reading books but the other best way to learn is through your mistakes people make mistakes and it's very rare to see somebody jump into the stock market start to absolutely crush it and not make any mistakes people slip up at some point they have a lack in judgment they don't see this one thing within a company that they should have realized and suddenly they end up losing a lot of money so the biggest tip that I can have for you is start with a small amount of money something that you can't afford to lose so if you are living paycheck to paycheck and you have no money whatsoever then maybe just start with fifty dollars or a hundred dollars in the stock market and then over time over the months over the years you can start to put more money in it we get your feet wet and then start to jump in and bigger and bigger later on down the road once you start to really learn as much as possible so yes what I would suggest doing start today if you'd like to start today start investing into some stocks today but start with a very small amount of money I'll leave some links to those brokerage firms down below.
If you found any value in this I would HIGHLY appreciate if you share this blog. So thank you for reading investor your own risk remember that you and only you are responsible for the investment decisions that you make thank you everybody have a wonderful day and keep reading upcoming Blogs.
its very informative
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