The stock market is hitting a record. Believe it, it took him ten years to save a lot of $ 100,000, and he had the opportunity to save a lot of himself over 20 years and triple his money in just 5 months. I'm not even exaggerating! the same Tesla stock that used to cost $ 500 6 months ago is now worth more than $ 1,500.
So if you are an investor, skip this video because we will cover the fundamentals of the stock market. What exactly can an action be? How does the stock market work? how to buy a share? But before we get started, please confirm to offer this video with a thumbs up, and if you want to learn more about the stock market, you will join our investor community on Patreon.
Stock Market for Absolute Beginners Here may be a simple thank you for understanding the stock market. Suppose it occurs to you to sell things online. For the sake of simplicity, for example, he chooses to call his website amazon.com. It's a simple, artistic name that accidentally crossed your mind. to make things easier, for example, start selling books.
Theoretically, you will start selling everything on your website, from electronics to kitchen equipment, but you would like capital to rent an area and build your infrastructure. If you can't do this, your competitor might be able to take advantage of it, and it may crash you. But do not worry. Here can be a brilliant idea. You will sell part of your business and use that cash to expand your business.
Let's say you will convince an investor to buy 100,000 shares for $ 10 million. Congratulations! You now have the cash to expand your business, the investor of which gets a ten percent stake in your valuable business. you are doing very well, your business is growing rapidly, but you would like to expand even more.
Since you have made a reputation for yourself, there are many people in the country or perhaps around the world who want to buy a small part of your company. But you can't just sell parts of your business from your office. you would like to list your company in a place called - the stock exchange. it is a market for companies where people come to buy and sell small pieces of businesses called stocks like the New York Stock Market or the Nasdaq.
Since you own 90 percent of your company, for example, you list 200,000 shares for sale on the market and earn millions to expand. Of course, we've oversimplified everything here, but that's a general idea. But most of the shares inside the stock market are not sold directly by companies, but by the people who bought them when the company first listed its shares, which is known as IPO (initial public offering).
If you go to the stock market to buy apple stocks, you will almost certainly not buy them directly from Apple, but from someone else who owns a bunch of them and needs to sell them, maybe they bought them last year, and therefore, the price has doubled since then and now you want to sell them for a profit. Broker: the intermediary you would like. Unfortunately, you can't get into your car, drive to the stock market, find an Apple Store, and buy some Apple stock.
This is not how it works. He would like the man in the center who has a relationship with the stock market — they are known as brokers — may be a private company or a company, or perhaps his local bank. It is like land. So if you want to buy Apple, Amazon, or any stock on the stock market, you would like to find a broker. Typically, they should urge buyers to go out of their way to help you buy or sell stocks by charging you a small commission. It can be a fast, fixed amount per trade or a fast, fixed percentage of the entire trade.
Most banks nowadays also provide this service, but recently there have been tons of innovation during this industry. In 2013, two guys from California launched an app called Robinhood, a brokerage that made it possible to buy and sell stocks from the comfort of your smartphone. the simplest part is that it is completely free.
How do you make money on the stock market? Now, as you recognize what exactly a stock can be and how to buy one. you are probably wondering why you should buy stocks? I mean, why would you give the money you've earned in blood and sweat to those multi-million dollar corporations that make so much money that they're going to buy entire countries?
Well, for example, hypothetically, Company A produces and sells cars and has a total number of 1000 shares, where each share costs $ 100. therefore, the total value of the entire company is $ 100,000. If, for example, next year Company A builds another factory, hires more people, and eventually sells more cars, the total value of the company will increase, for example, to $ 130,000.
But since the company consists of 1000 shares each costing $ 100, individually each share will increase by $ 30, since the company as a whole increased by 30 percent. So if you bought a share of the company last year for $ 100, today it could be worth $ 130, you will sell it and make a profit of $ 30. In other words, once you invest in the stock market, you are buying parts of companies, which are called stocks, and as these companies grow, the value of their shares.
But you wonder if by buying a stock I become the owner of a particular part of the company, shouldn't they share the profits the company makes with me? Yes, they do! they are known as dividends. Apple, for example, paid a dividend of more than $ 3 per share last year. why stock prices change.
Theoretically yes! One of the businesses that grew really fast in the last decade was Apple, as iPhone sales increased year after year. In 2014, an apple share used to cost around $ 100. Six years later, as the company continued to expand and invade more products and increase its sales, the stock price rose to 379 at the time of this writing. In other words, your $ 100 invested in Apple would be worth $ 379. once you buy a stock, it doesn't make a big difference. But, for example, you have invested $ 100,000, your investment would be worth $ 379K, you have tripled your investment a lot in just six years.
Not everything is sun and rainbow. Because these stocks are traded on the general public market, the amount of things that influence the value of the stock is too great, and sometimes the value of the stock does not represent the important value of the company. for example hypothetically. For the sake of simplicity, let's call it Tesla.
The company could create quite a stir because its CEO can be a marketing genius. Tons of people can get excited and start buying Tesla stock, and according to the laws of economics, when demand exceeds availability, the value increases. the value could double or triple in a matter of a couple of months, but its real value did not double or triple. The demand increased artificially. In the past six months, Tesla shares have risen from around $ 500 to $ 1,500.
It does not represent the value of the company, which suggests that it is overvalued, which suggests that sooner or later the value will fall to its true value.
As an investor, you want to buy stocks in companies that represent their true value or stocks that are undervalued because both will increase in the future. Of course, that is not an easy job. You have companies analyzed, you read their financial statements, you evaluate their business models and you make rational decisions backed by facts and numbers, which is what we teach here on this channel.
However, if you want to know where I invest my money, follow me on Patreon, you will be the first to understand.
Reviewed by Muneeb Awan
on
April 12, 2021
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