hey guys so welcome to the channel so this is going to be a full on how to invest in stocks for beginners course it's going to be a completely free course pretty long but if you guys want to learn everything there is about investing and you want a really good grasp on how to analyze a stock how to set up a brokerage account as well as my tips and techniques for making the most amount of money you can while investing then this is the video for you so let's go over some of the things we're going to go over in this really in-depth course so the first thing we're going over is what the stock market is we're also going to talk about what exactly are stocks and how they actually make people money right when you buy and you sell them how you actually make money doing that we'll also go into the different types of stocks that you can buy because it's not so simple there are many different types of stocks you can buy and it's definitely something really important that you should know before you start investing we'll also go over the easiest way to open up a brokerage account so we'll be going through a couple of my favorite platforms to use and how you can actually get some free stocks doing that as well we'll go into the different types of accounts that you can use to
buy and invest in stocks a lot of people think there's only one type of stock
account that you can use to buy stocks but that's not true there are so many
different types so we'll go over those we'll go into timing the market if it's
a good thing to do if it's a bad thing to do best ways to do stock research
you guys people have different ways of analyzing stocks and determining what
stocks they want to buy and there really isn't a completely right way to do it
but i will go into a couple different types of ways that you can do your own
stock research and that brings us to key terms these are terms that you
definitely should know before investing and they will help you actually
evaluate different companies and be able to compare different companies with
one another we're going to the two top ways to make money with stocks and then
we'll also go into dealing with all the taxes that come with investing right
anytime you buy something and sell it and realize a gain or even when you
realize a loss there are tax implications and you will want to know these
things before you start investing we'll also go into value versus momentum
investing and we'll also talk about warren buffett's principles of investing
warren buffett is one of the most prolific investors of our time and it's
really insightful to go over what his principles are when looking for
companies to buy and sell we'll talk about how long you should hold stocks for
it really depends on you and what your whole situation is we'll go over the
importance of investing early this is super important you'll see as i show you
examples why it makes so much sense to invest as early as you can so if you
guys haven't started investing and you're watching this video right now that
is why i really recommend watch this video all the way through get a good
grasp on investing and then open up your brokerage account today of course
we'll also talk about how much money you should invest this really depends on
your whole financial situation but there are some rules that you can follow
that allow you to invest a good chunk of your money but not all of your money
and that helps you diversify your holdings and not have all your eggs in one
basket of course we'll also talk about how you can do your own due diligence
before investing in stocks this is very important anytime you listen to
someone say buy the stock buy that stock you have to do your own research
before actually buying it because it's your money and you need to ultimately
make the final decision of whether or not you want to buy a stock so i know
that's a lot but these are some of the things we'll cover in this video and
yeah i'm really excited to present all this information it's completely free
it doesn't cost any money i know there are a lot of paid courses out there for
investing but to be honest like a lot of the things you're going to be
learning you can do them on your own and you can just learn them from this
video right here so just a little background about myself i am a real estate
broker and i am also a serial entrepreneur running different businesses in all
different sorts of industries i have seven years of investing experience and
i'm also an active investing personal finance youtuber so basically i've been
making a lot of content about different companies my recommendations for some
of the top stocks you can buy and overall i'm just a really big believer in
learning about the fundamentals of investing when you buy and hold stock for
the long term it's such a great way to build wealth i think it's something
that everyone in the whole world should do and yeah i've seen a lot of people
get really rich from investing so that's just why i really want to emphasize
how important investing is to anyone so let's first talk about why you should
invest in stock market asap right there's a lot of potential to make money in
the stock market now since the 1800s we've seen that the average return on
your investment happens to be around seven percent per year and you guys this
is not guaranteed this is just based on the past so it doesn't guarantee that
this is going to happen in the future but you know looking at these types of
returns that's pretty good that's a lot better than having your money sit in a
bank account and not really getting any interest now personally i do believe
that long-term investing is a lot safer it's not 100 safe but it certainly is
more safe than day trading than swing trading and all that stuff and when
you're investing your money you're basically letting your money work for you
right you can go off and work your nine to five job or whatever job you have
and make money doing that you're trading your time for money but when you
invest you're actually just letting the fact that you have money make money
for you it's a pretty cool thing and that's why i would consider it pretty
passive income another reason why you should invest as soon as possible is
because you want to hedge against inflation right each year inflation tends to
run about between two to three percent and that means that your money is
losing value over time so if you want your money to make money you're gonna
need it to grow faster than inflation so like i mentioned before versus having
your money in a savings account which is probably not making much money for
you at all investing your money instead if it gets that average return of
seven percent which we have seen historically that is going to really grow
your money we'll talk about compound interest and compound growth later on but
it's going to grow a lot faster than if you just sit on your money in a bank
account stocks aren't the only way that you can make money right there's also
real estate that you can invest in and there are tons of other assets that you
can invest your money in and actually generate money so if you guys take a
look at the screen on the slide this is the s p 500 for the last about 40
years and you can see the growth on that green line it's been going up pretty
consistently we do have some big corrections every once in a while but yeah
you can see that obviously it's grown a lot and that's just pretty much the
whole point of investing you're putting your money to work and it's growing
for you long term so now what are the reasons for people to invest why do
people actually want to invest well obviously you want to make more money but
the number one reason is for retirement and we see that a lot of people they
don't save enough money for retirement and then when they retire they start to
run out of money and they run into a lot of problems so the top reasons that
people say that they invest is 64 say it's for retirement 56 states for living
comfortably 53 for feeling financially secure and then 44 for maximizing their
wealth however almost half of people say that they don't save enough money
they don't invest enough money and something that they want to do more of 39
expect to be forced to work beyond retirement age and that's something you
really don't want to do and crazily enough 12 of people don't contribute to
any retirement fund at all which when i hear that it's just i get scared for
them and i just want everyone to be financially secure and especially when
they are older and it's a little bit harder to work so what is the stock
market the stock market is a marketplace where buyers and sellers can trade
shares in companies so this is regulated by the sec and this is in the united
states and the sec stands for the securities and exchange commission right
their whole job is to protect the public promote fairness and maintain
efficient markets the companies that are traded in the stock market are all
publicly traded companies these are companies that outside retail investors
can go ahead and buy shares of and when this happens the owners of that
company are diluting their personal equity in exchange for capital so instead
of raising money through venture capital funds and all that stuff they can
actually go to retail investors so that's like me and you people who can buy
shares on their computer or on their phone and they can raise money that way
that's the whole point of the stock market now let me tell you guys about what
an ipo is this stands for initial public offering and basically what happens
here is an investment bank underwrites the ipo and they buy up a ton of the
shares so they're taking the risk and then they're selling those shares on the
market for a fee and that's basically based on the percentage of share price
so when you have a private company that is not yet publicly traded and they
want to actually be listed on the stock exchanges that's when they're going to
do this ipo and right now there are 13 different exchanges in the u.s some of
the big ones are the new york stock exchange nyse and the nasdaq and that is
heavily tech focused so like i said the stock market allows individual
investors like me and you to buy and sell in a regulated environment and it's
basically like an auction let's go over what the definition of a stock is so
basically a stock is a piece of a company no it sounds a little bit weird but
it's basically your share of ownership in a corporation a type of currency
that is backed by that company you have units of stock and those are called
shares and these corporations are going to issue stock to raise funds to
operate their business so let's say you have company a they have 20 shares
available for their company and you own four of those 20 shares that means
that you're going to have 20 ownership in this company and that means that
you're gonna have 20 of the profits now it doesn't necessarily mean that
you're going to get paid out 20 of the profits some companies are more
dividend focused companies and they will pay out a big share of their profits
but for most companies they're going to rather than paying those profits out
to their investors they're going to reinvest it into the business basically
you're making money because the company does well and then the share price
goes up and the share price is really based on the earnings the performance as
well as the sentiment in the market so now let's talk about the different
types of stock that there are available the first is common stock this is the
most common type of stock there is and basically you're having ownership in a
company and a right to vote it also allows you access to dividends being paid
out dividends and these are variable these are not guaranteed some years you
might get a dividend if the company is performing well some years if the
market is crashing or if that company is just not doing well they might
suspend that dividend the common stock is what most of you guys are going to
be buying in the stock market i only own common stock and i don't have any
preferred stock which is what we're going to talk about next so for preferred
stock these types of shares don't give you any voting rights they give you a
more stable dividend and you actually have a bit of priority so if there is a
bankruptcy you're going to get paid at first in that case and it's harder to
lose or gain value so these types of shares are not as volatile as common
stock so like i said common stock that is what you and i will be trading and
there are 600 000 or more publicly traded companies in the world right now we
can also categorize stocks based on how big the company is so you have small
cap companies you have mid cap companies and you have large cap companies for
small cap companies i'd say that the market value is normally under 2 billion
dollars for mid cap companies these are those medium-sized companies the
market cap will generally be between two to ten billion dollars and then for
large cap companies that is when the market cap is going to be 10 billion or
more you can also categorize stocks based on the sector that they're in so you
have tech stocks you have energy stocks you have auto stocks you have medical
stocks all that stuff right you can also categorize them by location so where
in the world that company is based from and also you can categorize uh
different stocks as either growth companies or value companies and you don't
have to just buy shares of individual companies you can actually purchase
shares of etfs and that's basically going to be tracking these indexes where
you're basically buying a small portion of a bunch of different companies and
very similar thing with mutual funds it's just like a more diversified holding
where you buy one share of something and then that is basically like investing
in a ton of different companies so really when people are saying to diversify
in your stocks that means you're diversifying across different sectors from
different locations and also buying growth as well as value stocks now let's
talk about risk tolerance and for investing there's always going to be a small
level of risk involved so you have your most safe way of i guess holding your
money and that's in cash that's not going to grow that's going to actually
lose value with inflation then you have bonds bonds are probably the safest
way that you can actually sort of invest your money and get a small return
then you have index funds so like i said these are tracking indexes and you're
investing in a whole bunch of different companies and that's why the risk is a
bit less than buying individual stocks which is our next one this is a bit
riskier because if a company goes out of business then you can lose all your
money i say that real estate is a bit more risky than stocks generally it
really depends on how you trade stocks but for long term investing in stocks
that is generally going to be quite a bit safer than the real estate uh there
are a lot of things that can go wrong in real estate um and yeah that's why
i'd say real estate is a bit more risky than stocks in general and then even
riskier than real estate i'd say is trading in cryptocurrencies um we've seen
cryptocurrencies really boom in the last year but it is still very risky it's
still very volatile and yeah there are different subcategories of each of
these that are more or less risky than others but i'd say this is the general
risk profile of each of these types of investments so just for fun i kind of
want to take you guys through one of my favorite etfs this is the vanguard s p
500 etf called vo i own a lot of this etf and when you're buying this stock
you're basically buying into the s p 500 you're investing into the top 500
companies in the us so for most people that invest in stocks i'd say that if
you want to be safe if you want to just do long-term investing then vo is a
really great choice because you're investing like i said in those 500 or so
companies and it's basically like investing in the us economy as a whole with
the s p 500 these companies are historically seen to grow more than you know
like a total stock market index because instead of investing in let's say over
3 000 different companies this index is only on the top 500 companies but yeah
i just want to show you guys one of these companies that i'm heavily invested
in and definitely one to consider if you are investing as well so let's talk
about the different types of brokerage accounts right like i said there's not
only one type of account that you can invest your money in there's quite a few
we'll start with the taxable account this is the most standard account it's
the one that most people are going to be starting off with and with this
account you're going to be paying taxes on any of the gains you make with your
stocks so let's say you buy stock for 10 you sell it for two dollars you're
gonna have a two dollar taxable gain and you will have to pay taxes on that
with a standard taxable account you can purchase stocks you can purchase
mutual funds etfs pretty much anything and within the standard account you can
have a cash account and also a margin account the cash account is basically
letting you buy investments with money that you deposit into the account so
you can take five thousand dollars put it into that cash account and then use
that cash to purchase different stocks with the margin account this lets you
actually borrow money from your broker to buy investments this is a lot
riskier it's something that is more advanced so i'm not going to be talking
about too much in this video but just know that you do have that option when
trading with a standard taxable account and there are no limits to how much
money you can actually put into a standard taxable account so yeah a lot of
people are going to be trading with this type of account you also have
retirement accounts and these are something that a lot of people do but a lot
of people also don't do and it really boggles my mind because these are tax
advantaged so you have the roth ira you have the traditional ira you have the
sep the solo 401 k the 401 k and a lot more with these types of accounts
you're actually only paying tax one time so you're paying basically half the
amount of taxes as a standard taxable account i know it's a little bit
confusing but the money you put into your standard taxable account it's money
that you're paying that you have paid taxes on already and then you have to
pay taxes again on any of that profit with a retirement account you're only
paying taxes once so for example with a 401k this is a retirement account that
a lot of people have the money that they put into that account they aren't
paying taxes on it they're actually reducing their taxable income for that
year and hence not paying taxes however with that traditional 401k when you do
take out the money later on you will be taxed on any profits on the reverse
side you have things like the roth ira this is money that you put in post tax
so you're not actually reducing your taxable income but when you go to take
out the profits later on you're not going to be paying any taxes there are
some contribution limits to these types of accounts so you can't put unlimited
funds into them and there are definitely some withdrawal rules which make
these a little bit more complicated but for most people they're going to have
both a standard taxable account as well as a type of retirement account and we
won't go to too much of these in detail but you also have your health savings
account you have your 529 savings plan you have your custodial brokerage
account if you're under the age of 18 but still want to invest and you have
robo advisors and we'll talk more about those later on but that's also another
great way to invest your money so let's get into how you can actually start
opening up your first standard brokerage account and this is going to allow
you to buy and sell stocks now there are tons of different brokerage platforms
that you can use out there for example there's robinhood there's weeble
there's td ameritrade fidelity charles schwab and many more now i will say
that for beginners i will typically recommend using an app-based brokerage
because these are extremely easy to use they have great interfaces and it
allows you to you know just bust out your phone and trade whenever you want so
really gets over that hump of you know having training being somewhat hard and
complicated and makes it a lot easier which will increase your chances of
investing more money and hence making more money now with robinhood and weeble
you can actually get some free stocks if you open up an account so i will put
a link to those in the description below and if you do use those links you
will be helping support the channel so thank you so much in advance so when
you are opening up a standard brokerage account through let's say robinhood or
rebel there is no minimum account balance so you can literally just open up
your account put in one dollar and start trading with that they're super easy
to open but i will say that you have to be 18 or older to open up an account
with these now the alternative to opening up one of those standard brokerage
accounts through robinhood or weibull or whatever is to open up a roboadvisor
account this basically allows you to passively invest without having to buy or
sell individual stocks so one great option for this you guys is wealthfront
they're a fantastic company and really one of the most popular robo advisors
out there so yeah for wealthfront it's a great option for beginners since you
know you have the phds the really smart people at wealthfront doing all the
work for you you can actually get five thousand dollars managed for free when
you open up an account using my link in the description below there is a 500
account minimum so you will have to invest at least five hundred dollars and
super easy to set up takes under five minutes to do so and like the other
accounts you do need to be 18 or older so now going back to the standard
brokerage account um if you guys do want to start opening up an account today
i'll just show you guys sort of what the application process is like first you
want to go to the links in the description below and then click on them and
set up an account and get your free stocks basically what they're going to be
asking you is to submit an application and this is only going to take a few
minutes so they'll be asking for a lot of personal information so things like
your social security number your address your name your date of birth and some
other things they'll have you set up a username and password so you'll want to
make sure that that is super secure you might want to turn on two-factor
authentication or something like that and then they'll be verifying your
identity using the information that you give them after that you'll wait for
your application to be approved and then once that is approved it should be
pretty quick um you can actually start to fund your account put money into it
and then you can start trading right away so i'm actually going to take you
guys through robin hood and just show you the whole platform so you get a good
feel of what this platform is like so i've opened up robinhood right here this
is my main dashboard it's going to show you how much money you have invested
so right now i have about 69 000 in this account it's going to show you sort
of like uh what the value of your account has been throughout the day and you
can kind of scroll through like that so it's pretty cool you can also change
this so it's showing you the last week last month last three months and so on
right it's also going to have your buying power right here so this is the cash
that is in your account but is not yet actively invested into different stocks
right so right now i have about five thousand dollars that i can use to
actually purchase stocks down here it's going to be all your stocks that you
have your whole portfolio in this account so you can see i have microsoft
netflix disney tesla a bunch more and if you want to actually click on one of
them i can click on microsoft right here i can show you guys the one week
value the one month value last three months it's going to show you your
position your average cost so that means that my average cost for microsoft
was 203 dollars and 84 cents on the market value the portfolio diversity and
then your total return now i can go out of this and i want to actually show
you guys this main screen right here the browse screen so this is pretty cool
in robin hood because you can actually look at a bunch of these popular lists
of stocks so let's say i want to look at a hundred most popular right it's
going to show me a hundred of the most popular stocks on robinhood that people
are buying through this app and yeah just a cool way to see them you can sort
by symbol by price and by the percent change i could also maybe look at crypto
so if you didn't know you can buy crypto currencies on here as well this is
the list that they have and yeah just a bunch of other lists here and they
also have news articles so if you want to stay up to date with sort of the
whole news the whole market you can just come here and look at all these
articles from a bunch of different publishers and you can see the top movers
for the day so you can see this company was up 60 percent crazy this company's
down 46 also completely crazy and yeah just a great place to sort of get your
news on what's happening in the economy and in the stock market so let's say
you want to buy stock right let's say i want to buy a share of let's say
microsoft right this is always a great company to buy so i'm going to come to
the microsoft screen right here i'm going to click trade and i'm going to
click buy right here you can see that i could also click sell if i want to
sell some of my shares that shows me i have about five thousand dollars
available and it's going to ask me the number of shares i want to buy it's
going to tell me the current market price and it's going to tell me the
estimated cost now if you guys go up here you can actually see that you can
make market orders um you can actually do a bunch of different other types of
orders such as the limit order trailing stop order all the stuff these are a
little bit more complicated so right now i'm just going to show you guys what
it looks like for a market order let's say i want to buy one share like that
i'm going to click review and then i'm just going to swipe up to buy that now
i'm not actually going to buy that right now so i'm going to go back but let
me show you guys how to do a limit order and this is a really great way to set
a maximum price you want to buy microsoft for so let's say i don't want to pay
more than let's say 230 dollars right so i'm gonna set that 230 dollars i'm
gonna click continue and i'm gonna select um what the trading hours are so
we'll just use market hours continue i'm gonna say that this order is good for
today only until 1 pm continue and then basically what's going to happen is
it's only going to purchase microsoft if the price hits 230 or lower if it
doesn't then my order is not going to execute and i won't buy the shares so
this is a bit slower to buy um we'll talk more about this later on but that's
pretty much how you set a limit order in robinhood so that gives you a glimpse
of what robinhood is like i'm also going to take you guys through weeble this
is another great stock trading app so this is my weibull account i can go here
and this is basically my main dashboard it's going to have my account value
here at the top it's going to and i'm going to be able to change to see the
last month last three months and so on right so my current market value is
about 58 000 i have a cash balance of 666 dollars so that means that i have
666 dollars i can use to buy stocks right now and i can come down here and
these are some of my positions in this account so this is where i have some of
my more risky stock picks so let's say i want to click on rocket companies
right cool so this is rocket companies it shows me my profit and loss for this
company so right now i've made about 280 from from these shares um i have a
market value of 4 300 so i have that much of rocket stock and also shows me my
past orders so i bought 190 shares at 21.50 a share on january 29 2021. now if
i want to buy more of this i can go down here and click buy so right now it's
set as standard as a limit order so i can set what i want my limit price to be
using this i can set the quantity using this and time and force extended hours
all that stuff if i want to do a market order a little bit easier i can just
go that here you'll see i don't need to set a limit price or anything like
that and i'll just select how many shares i want to buy and i can click the
buy button same thing if i want to sell i can do a market sell or i can do a
limit sell as well weeble also has a watch list where you can put different
companies that you're actually watching and they also have a few cool places
where you can see some of the top gainers some of the top losers for today
some of the most active stocks um best performing industries they have crypto
as well so you can trade cryptocurrencies on here you can also go to explore
and it's basically going to have a bunch of these cool things here that you
can check out i don't look at this too much but yeah the community tab is also
very cool they have news here they always have competitions with paper trading
and stuff like that they also have news so very similar to robin hood you can
check out a bunch of uh news about the stock market and the economy here and
yeah it's a great platform so yeah if you guys are interested in either
robinhood or weeble i'll put those links down below so outside of using
robinhood and weeble let's talk about robo advisors because this is a really
great way for people to invest that a lot of people don't talk about i know i
just already mentioned it earlier but i want to give you guys some more
details on what robo advisors actually are and how they can help you make
money so basically rob advisors are passive investing platforms that help you
invest your money for you so it's very hands off you'll need to be constantly
checking your portfolio buying and selling and doing all that so it's very
automated and basically these robe advisors are using algorithms to help you
invest for you they're really inexpensive and they are algorithm-based
financial advisors that are perfect for people who don't want to spend their
time following the market so people that want to be extremely passive
investors and not active traders they'll generally require a lot less capital
to start than let's say using a human financial advisor and the annual fees
for web advisor are much less so they'll generally be between 0.25 to 0.5
percent per year versus 1 for a human financial advisor and wealthfront is my
top pick for road advisors it's the one that most people use so if you guys
are looking for a road advisor i highly recommend going with them i'll have
their link in the description below but basically with wealthfront you're
investing in low-cost etfs right this is a lot more diversified it's a lot
more safe and they're basically going to help you build a custom diversified
portfolio investments that cater to your needs and with wealthfront you can
actually open up a bunch of different accounts you can open up your standard
brokerage account that's taxable you can open up retirement accounts you can
open up education accounts all that stuff right so you have your roth
traditional rollover sap ira's trust 529 college savings plans and cash
accounts and right now i think their cash account is paying 0.35 apy which is
a lot better than most online banks so that's also another option now for
their annual fee they charge 0.25 percent uh and if you guys use my link below
you're gonna get your first five thousand dollars managed for free and yeah
it's just a really great way to invest and i'm actually gonna show you guys a
screen share of what their accounts look like on your phone so if you open up
wealthfront it's going to show you your main dashboard it's going to show your
net worth today and it's also going to show your net worth at retirement so
this is the projected net worth based on all your assets and all that stuff so
if you scroll down there it's going to show your cash accounts it's also going
to show your investment accounts and if we click on the personal investment
account right there it's going to show you how much money you have invested
with them right now you can see in this account 78 000 it's going to show you
your line of credit your tax loss harvesting your diversified portfolio so u.s
stocks foreign stocks all that stuff um so yeah if you click on u.s stocks
it's going to show your target allocation your market value and what things
are in it so vti s chb so now let's talk about the different types of trades
you have when investing in the stock market the first one is the market order
the second one is the limit order and the third is the stop order with the
market order sort of like i showed you guys on robin hood and weeble this is
when you're buying or selling at the best available price in the current
market so basically the current price as of right now it's the fastest way to
buy or sell and it's the most basic way to buy and sell stocks so essentially
you're buying at the current asking price or you're selling at the bid price
now on the other hand with a limit order this is when you're buying or selling
at a specified price that you get to choose so let's say you have a stock
where the current market price is let's say 18 if you were to do a market
order if you were to do a market buy then you'd be buying that stock at 18
right now if you do want to do a limit order to buy that stock you'd set a
limit order to let's say 15 this means that it's only going to execute and
purchase those shares at 15 so it'll need to drop to that price for it to
execute the risk with this is that it might not execute because the share
price might not drop from 18 to 15 you could however set a limit order for
let's and say 17.90 there's a pretty good chance that that is going to execute
because it might just drop down 10 cents and then it will execute that order
now if you set a sell limit let's say for 20 that means it's only going to
sell that stock uh not at 18 but at 20 so it has to rise to 20 and the risk
with this is that it might not execute as well right like it might not hit 20
it might actually keep dropping down and you would have come out ahead just
selling it at that current market price of 18 you also have your stop order
this is a bit more complicated but this is basically going to help you buy or
sell when the price moves past a specified price so now that we've talked
about the different types of orders let's talk about how you can research
stocks and there are definitely some very important metrics to understand
first of course is your price this is the cost to purchase one share of that
company but that price itself needs some context because you're not going to
know how many shares there are in total by just looking at the price what you
need to do is you need to know how many shares there are in total and what
you'll do is you'll multiply the price by the number of shares in total to get
the market cap the next thing you can look at is the 52-week low and high so
this is the lowest price that that company hit in the last 52 weeks and the
highest price that the company hit in the last 52 weeks so just gives you some
context as to where the share price is currently you also have your trading
volume so this is the quantity of shares that are traded during a given period
now when you have high volume this means that a lot of people are trading it
right now and what i recommend doing with this is you want to pair it with the
trend of that price so if the price is going up and lots of people are trading
then there is some upward momentum and you might be able to expect it to keep
going up for at least a little bit if there is a lot of trading volume and the
prices going down then that means that there is downward momentum and that
could mean that the price continues trending downward another key term is beta
and this is the stocks volatility in relation to the overall market so
basically a beta of under one means that the stock is less volatile than the
current market and the beta of over one means that it's more volatile and you
have the p e ratio which stands for price to earnings ratio what this is is
it's the price per share divided by the annual earnings per share and my
annual earnings per share i know it's a little bit confusing but that is the
total earnings divided by the total shares outstanding so let's go to an
example about the p e ratio right so let's say you have a company that hit a
hundred thousand dollars in earnings last year and it's valid at one million
dollars and it sells for one million dollars this means that the p e ratio is
10 because you take your 1 million divide by 100k and that gives you 10. what
this does is it allows you to compare this company with other companies based
on the price and how much money the business is earning so let's say you have
another company that hits 200 000 in earnings and sells for 1.5 million
dollars if you take 1.5 million divided by 200k that gives you a p e ratio of
7.5 so for these two companies even though one of them did more earnings you
can see that the p e ratio for that one is smaller which means that
technically based on the p ratio that 200k earning company is the better deal
the higher this pe ratio the more future growth is really baked into the price
so we've been seeing a lot of companies that have p ratios you know above 50
even above 100 even close to a thousand and this means that the valuation of
that company is just a lot higher than the annual earnings of that company i
say right now any pe ratio that's under 20 is considered pretty low and it
means that the company is valued pretty much where its book value is at
another really important metric to understand is the peg ratio this is the
price to earnings to growth ratio and to calculate this you're taking the p
ratio which we just talked about and you're dividing it by the growth rate of
its earnings for a time period this is going to help you value a stock while
factoring in any expected earnings growth and it's a more standardized way of
comparing companies with different growth projections now with the peg ratio
the lower the better so if you have a peg ratio of under one this means that
technically this company could be undervalued and if the peg ratio is over one
that means it's technically overvalued so an example of a peg ratio let's say
you have company one the current price per share is ten dollars and the
earnings per share this year is one dollar however the earnings per share one
year ago was 66 cents so with this if you do the calculations for the p e
ratio it comes out at 10. now we need to calculate the earnings growth rate
and what we do is we take the earnings per share this year so one dollar and
divided by the earnings per share last year which was 66 cents if you do that
and subtract one that gives you 0.52 aka 52 and then finally to calculate the
peg ratio we take the p eu ratio which we calculated which was 10 and you
divide that by 52 and you get 0.19 this is a very low peg ratio which means
that it could be undervalued another important metric to understand is the
dividend yield so this is how much a company pays out in dividends each year
compared to its stock price to calculate this you're going to take the annual
dividends per share and divide that by the share price and this is going to be
expressed as a percentage let's say for example you have a company and the
share price is let's say ten dollars right if the dividend yield for that
company is let's say five percent that means that that company is going to be
paying out 50 cents in dividends per year i'd say that any dividend above
three or four percent means it's a pretty high dividend stock any dividend
between let's say one and two percent means it's a mild dividend stock and
then there are a lot of companies out there that just do not pay dividends
another great metric to learn is the price to book ratio and what you do for
this is you take the stock price and you divide it by the book value per share
this helps tell us the market valuation of a company which is usually higher
versus its book value and the book value is found from the net assets of the
company so basically you're taking your assets minus your debt and that gives
you your book value if you have a price to book ratio of under one that is
considered good and if you have a price to book ratio of over one that
technically means that it could be overvalued another very important metric is
your profit margin and this is your profit per dollar of revenue expressed as
a percentage so let's say you have a company and they have a 20 profit margin
right this means that for each one dollar of sales that means they are getting
a net income of 20 cents another thing to know is your return on equity this
is the roe and it's basically calculating your return on net assets it's
pretty complicated to actually understand what goes into calculating this but
basically it measures the financial performance of company what you're going
to do is you're going to take the net income and you're going to divide it by
the shareholders equity a return equity of 15 and up is considered good but it
really does depend on the sector another very important metric that i always
look at is the current ratio and this is basically the current assets divided
by the current liabilities the current ratio is basically going to measure the
short term liquidity of a company and what i like to do when evaluating
companies is i like to see a current ratio that is above one this means that
they have more current assets than they have current liabilities and that
means that the company does have enough cash to pay off any debts in the short
term however if the current ratio is way too high let's say above 5 or 10 this
could mean that maybe they aren't using their assets efficiently so there
should be a good balance but if this number is under one this does mean that
they are in sort of a precarious situation where they have more liabilities
than they have short-term actual assets so now that we've gone through all
these different types of metrics i want to actually take you guys through a
stock and put these to use so i have pulled up apple stock one of the most
popular stocks out there with the highest market caps and i'm on yahoo finance
and if you come here this is going to show you the current stock price so what
it's trading at if you want to buy apple right now it'd be 123 and about 21
cents it's always changing because the market is still open right now come
down here and you can see the 52-week range so in the last 52 weeks it's been
as low as 53 dollars and 15 cents but as high as 145 dollars and nine cents so
that just gives you some context as to the current price right you can see the
volume right here uh and the average volume and then you have your market cap
so this is your current price multiplied by all the outstanding shares and
that's 2.069 trillion dollars so large cap company absolutely gigantic you
have your beta so 1.25 meaning it is a little bit more volatile than the
market you have a p e ratio of 33.43 so just based off that number it is a
little bit overvalued if you look at it through a pe ratio standpoint the
earnings per share is 3.69 so that means that for each share that you have
they are earning 3.69 cents per year the dividend yield is right here so it's
expressed as a percentage so 0.68 meaning this is a very small mile diving
stock and for each share that you have you're going to get 82 cents as a
dividend as of right now if you come here to the chart you can see in the last
year this is the price movement so obviously a lot of growth but a little bit
of a correction right there in recent months and if you come here to
statistics this is where you can see a bunch of the other evaluation measures
and metrics um market cap right here we talked about the peg ratio so this is
the five year expected peg ratio of 2.76 it is above one so technically it is
overvalued um you have your price to sales and price book ratios right here
price book ratio is 31.63 which is pretty high so you know it is overvalued
then we come down here to the profitability so you have your profit margin as
at 21.74 which is pretty good um you want to compare that to the industry so
this is in the tech industry so i'm not sure what the average is but you can
do that research if you want you have your return on equity which we talked
about the roe sitting at 82.09 so obviously very high very good um you have
your income statement stuff if you want to look into that you have your
balance sheet you can see that they have total cash of 76.83 billion dollars
and the current ratio which we did talk about is 1.16 so just above one so
that is a good sign but it's not too high meaning that they have just about 16
higher uh current assets as they have current liabilities and then something i
always like doing is coming back to the summary page and coming down here to
the financials to the analyst ratings as well as the as price targets so you
can see that for apple these are the financials for the last a few years here
we can see the analyst recommendations so right now they're writing it as a
two based on all the different analysts that they have in the system meaning
there's a buy according to the these analysts and you also have the price
target so right now the average and this price target is 152 uh and six cents
which is higher than the current price of 123.25 cents analysts aren't always
correct it's just good to see what other people are thinking and yeah it's
something i always look at when analyzing stocks so let's talk about timing
the market and the question should you do it or should you not basically i'm
going to define timing the market as trying to predict the stock market aka
predicting any gains predicting any crashes and using those predictions to
influence your buying or selling pattern now i will say that historically it
has been better to buy after a crash than to try and time a market high so
based on past historical data it's been seen that stocks tend to recover and
this is true for any good company that survives a crash or an economic
downturn if there is a large crash then that could be a good time to buy and
i'll say this don't sell during any of these small crashes because that is
called panic selling and that means you are going to be losing a lot of money
that you don't have to lose if you focus on the long term and hold as long as
you can this puts you in the most strong position for making money through
investing it's just overall a lot safer and yeah so my safe answer is if you
time the market it's going to be bad rather you want to spend more time in the
market and just elaborate honestly guys it's super hard to time the market
because you need to be right two different times right you need to guess the
top of the market to sell and you need to guess the bottom of the market to
actually reinvest your money doing both of these is extremely hard that's why
i say if the market crashes and it's a good company that could be a good time
to buy that's a lot easier to predict than trying to time both the high points
as well as the low points and if you look at the past historical data you
actually see that most gains are from these rally days right there are a few
really high performing days each year where the share prices go up a lot so
it's very easy to miss those days dollar cost averaging so this is basically a
technique of investing over time it's basically where you're gradually
investing into a company over time instead of investing all your money at once
so this is a great tool for new investors who want to limit their risk
exposure if a crash does occur right you're not putting all your money into
the market or into that company at one time rather you're going to put it in
slowly that way if somehow the market does crash then the price is going to be
a lot lower you can have a lot more buying power and it's going to mitigate
any risk of buying all at a higher price and seeing the market crash
historically since the market generally moves up it should technically be
better to buy all at once but in volatile markets dollar cost averaging can be
a great strategy right now there is a lot of volatility so that's why i always
recommend dollar cost averaging as a good technique now let's talk about
appreciation versus dividends and these are two ways for you to make money
through investing but it really is like comparing apples to oranges so the
first way you make money through stocks is through appreciation and this is
what happens when you see a rise in the share price just due to the company
performance and the market sentiment when a stock appreciates let's say you
buy at ten dollars it appreciates to twelve dollars that's when you see that
two dollar gain and if you sell it at that twelve dollars then you see that
capital gain through appreciation so appreciation is not guaranteed you know
it could go either up or it can go down but if it does go up that is when you
do make money through depreciation you can also make money through dividends
so these are paid out quarterly usually and it's a more recurring income this
happens when companies are paying out a portion of their profits to their
investors so they're basically rewarding you by paying you out a little
dividend what you can do with this dividend is you can actually reinvest it so
use that money that dividend money to actually buy more shares or you can pull
it out and just you know use it for your your daily life expenses now you
might be wondering how come i can't just buy a stock right before the x
dividend date right before that dividend is actually paid out and then sell
that stock right after when i come out ahead the problem of this is that the
stock price actually normally drops exactly by the dividend amount right after
so it's basically a wash you don't really come out ahead the great thing is
that a lot of stocks they'll appreciate in value and they will also pay out
dividends this is great because you can make money in both ways but i will say
that for uh companies that pay out dividends usually their appreciation is a
little bit slower and that's because instead of reinvesting all that money
back to the company they're paying out some of those profits to investors so
usually their growth is a little bit slower now one pro about investing in
stocks with no dividend is that you don't get taxed until you sell
appreciation is not taxed until you actually sell that stock however on the
other hand with dividends if you do get paid out a dividend no matter if you
reinvest that money or you just take it out for your life expenses this is
considered a taxable event and you will need to pay taxes each year for those
dividends also if you have companies that pay out super high dividends this
usually means that there is more risk because that dividend could easily go
away if the profits for that company aren't good that year and yeah i've seen
that normally these high dividend companies are usually in the
telecommunications sectors so let's also talk about the tax implications of
investing what actually happens when you sell a stock so when you sell a stock
or any capital asset you will get taxed if you sell it for more than you
actually paid for right that constitutes a capital gain so when you are
determining whether or not you want to sell a stock you really should consider
the tax implications you will owe some taxes if you made money on it there are
two types of capital gains that you need to be aware of there's long-term
capital gains and there's short-term capital gains now with long-term capital
gains this occurs when you sell a stock that you hold for one year or longer
so let's say i buy stock today and then i wait over one year to sell it that
is going to be a long-term capital gain and you're actually probably going to
be taxed lower on that than if you hold it for under one year the long-term
capital gains rates are 0 15 and 20 and it depends on your income level now
with short-term capital gains this occurs when you're selling before one year
and this is taxed as ordinary income so for a lot of high earning people out
there where your income taxes are super high that means that holding your
stock for 364 days versus holding your stock for let's say 366 days could
create huge implications in how much you're paying in taxes so yeah like i
said in general holding for over one year is going to result in less taxes
when you do sell and your brokerage will send you a tax document each year
with your capital gains or losses this applies to taxable accounts you guys
when you're talking about retirement accounts it's a bit different it's a lot
more complex but the main point is know that there are taxes when you do sell
for a profit let's go into a little bit more detail about long-term capital
gains i think this is extremely important and just really shows you why it's
important to hold for over one year so in 2021 the capital gains tax rate
thresholds are as follows it's zero percent if you make up to forty thousand
four hundred dollars as a single filer it's fifteen percent if you make
between forty thousand four hundred one dollars to four hundred forty five
thousand eight hundred fifty dollars and if you make over 455 850 then it's 20
i will say that there is a possible 3.8 additional tax on top of this uh for
net investment income for really high earners and that's going to include
earnings like taxable interest dividends gains passive rents annuities and
royalties but if you're not single and you're married or you're the head of a
household you can check out the rates for the other income levels now for
short term capital gains these are the tax brackets for single filers in 2021
it is a progressive tax system so let's say your taxable income is between
zero dollars and nine thousand nine hundred fifty dollars that means that your
marginal tax rate is going to be ten percent this goes all the way up to
thirty seven percent after you make over 523 and 600 so you can see if you're
a high earner and your marginal tax rate your tax bracket is very high then
selling stocks that you've held for under a year is going to massively
increase the amount of taxes you're paying versus if you could just pay those
long term capital gains instead and this actually does not include state taxes
so that's in addition to this so yeah you can see that there's huge savings
now this section we're going to be talking about retirement accounts and these
are so important these allow you to save so much money on taxes and most
importantly they allow you to save money and be prepared for retirement
everyone in the right mind should take advantage of tax advantaged retirement
accounts so let's talk about the roth ira this is an account that pretty much
everyone should start off with especially if you're not making that much money
right now and you expect to be making more money later on so yeah i highly
consider looking at the roth ira if you are eligible um basically with this
account you are paying taxes now and you're avoiding taxes on any future gains
so when you are in retirement when you're at least 59 and a half years old
this account allows you to pull out gains without paying those taxes and if
you compare this to a normal taxable account you can see that you're paying
half the amount of taxes because you're not being taxed twice now for most
people you're gonna be able to contribute up to six thousand dollars per year
there are other retirement accounts that you can research yourself but i
highly highly recommend looking at uh taking advantage of these tax advantaged
retirement accounts now let's talk about tax loss harvesting this is a
strategy that you can use to offset any capital gains that you make so with
tax loss harvesting the whole definition is you're basically selling shares at
a loss to offset a capital gains tax liability and usually this is done at the
end of the year so let's say you made a bunch of money selling your shares of
a company that did really well for the year right you made a lot of money with
that what you could do is you can sell some stocks that you actually lost
money on create a loss and then use that loss to offset any gains in that year
then after selling for a loss you can actually replace them with a similar
asset but i will say that there is this wash sale rule and it says that you
cannot repurchase a stock for 30 days if you claim the loss for tax purposes
so let's go through an example of tax loss harvesting let's say you've had
stock a for 67 days and you want to sell it your total gains so far are a
hundred thousand dollars right you've made a gain of 100 000 on the stock this
results in a hundred thousand dollars of short-term capital gains because you
sold within 67 days and not over one year so this would be taxed at 37 if you
are in the highest income bracket this means that you can have 37 thousand
dollars in taxes not including any applicable state taxes on the other hand
you have had stock b for 180 days and you are thinking about selling it right
you've actually lost 50 000 on this stock which is not good right but you can
actually use that fifty thousand dollars of short-term capital loss and offset
that hundred thousand dollars of short-term capital gains so if you take a
hundred thousand subtract fifty thousand this leaves you with fifty thousand
dollars of net short-term capital gains and that's going to come in at
eighteen thousand five hundred dollars in taxes that definitely is a whole lot
better than paying thirty seven thousand dollars in taxes so that is a
technique that you can use to reduce your taxable income now the same thing
applies for long-term capital gains i will say that has to match so you can
only offset long-term capital gains with long-term capital losses and it
really is a great strategy where you can realize tax savings when you want to
sell an asset for profit okay value versus momentum investing let's talk about
warren buffett's principles of investing right first one is leaders are
important he really cares about who the ceo is who the leadership board is
because they have a dramatic impact on the performance of that company his
second principle is he wants to invest with facts and not emotions stock
trading can be extremely emotional and when you trade with emotions a lot of
the time you're going to lose so that's why warren buffett likes to look at
the facts only and really not look at any of the emotions he also wants to
invest for the long term and generally he's not going to sell unless the
business changes fundamentally in a bad way so like i said earlier investing
in the long term probably a lot safer than investing for the short term
another thing that warren buffett says is that for most people for like 95 of
people an index fund is best most people are going to make more money just
investing in a traditional index fund such as vo like we talked about earlier
versus trying to pick out individual companies trying to time the market
buying when it's low trying to sell when it's high and all that stuff when you
buy an index fund and just hold it for a long long time that is how the
majority of people are going to come out ahead with investing another thing
that he really emphasizes is try and buy shares of companies that you are
knowledgeable about don't buy shares in companies that you literally know
nothing about you don't know their business model you don't know who's running
the company and yeah that comes down to the due diligence right you need to do
your own due diligence before investing in any company and you really need to
know that company before investing his last principle is when you see a great
opportunity take it so when something comes up in the market where there might
be a company that's undervalued or investors are for some reason just dumping
stock for no good apparent reason then that could be a good time to actually
hop on that opportunity and buy shares and we've seen this a lot in warren
buffett's career he'll actually hop on these opportunities as soon as he sees
them now let's also talk about value versus momentum investing right you have
on one hand value investors these people care about fundamental analysis they
care about all those metrics that we talked about like pe ratio price to book
ratio all that stuff and they are specifically looking for companies that they
think are undervalued compared to their intrinsic value that's why value
investors they'll try and buy companies that are undervalued hold long term or
until that company becomes overvalued and then they might sell off part of
their portion of shares or solve all their shares on the other hand you have
momentum and growth investors so these are traders that don't really care so
much about all the fundamentals of the company they don't care if a company
could be overvalued in a sense rather they are looking at the future potential
of that company so things like pe ratio pb ratio they don't matter as much
these investments they tend to be riskier and a little bit more volatile
because you know since they are overvalued in a sense there's much more room
for them to go up and down and these types of investors are generally going to
prefer investing in these emerging industries so right now it's going to be
like eevee it's going to be tech it's going to be all these sectors that while
they are overvalued they have seen a lot of high growth in the last year you
don't need to be only one of these you guys you can be a mix of them and for
most people i'd recommend not being one or the other if you're too much of a
value investor then you might be losing out on a lot of possible growth and if
you're a really big momentum slash growth investor then you could be missing
out on those really undervalued companies that will continue to grow for a
long time and you might actually buy some companies that are overvalued right
now and lose money in the short term now let's talk about the importance of
investing earlier i think this is extremely important and the number one
phenomenon that you need to be aware of is compound growth compound interest
right so let's say you have an initial investment of six thousand dollars and
then you decide to contribute 500 per month for 40 years given an estimated
interest rate of about 7 which is what we've seen historically you can see
that the growth of that money shoots up so much compared to if you just put
that money in a cash account or a savings account or something like that so
based on this graph right here the results are in in 40 years you will have 1
million 287 657 and 42 cents compare that to let's say if you put that money
in just a cash account you probably have what about 246 000 and all that
vertical growth is happening in the later years and what we want to do is we
want to shift that vertical growth as early as possible and that's what
investing early does so let's take a look at the impact of when you start
investing i found this from us news and i thought it was extremely uh
extremely eye opening so let's say you have someone jack invests 200 per month
starting at age 25 so he contributes a total of 96 thousand dollars then you
have jill who invests 200 per month starting at age 35 so 10 years after jack
right she contributes a total of 72 000 then you have joey who invests 200 per
month starting at age 45 so hold 20 years after jack he contributes a total of
48 thousand dollars if you look at the growth from when they start investing
to the age of 65 you can see how drastically different their portfolio values
are jack only invested 96 000 right but now his portfolio is valued at over
five hundred thousand dollars whereas joey on the other side of the spectrum
he invests forty eight thousand dollars so half of jack but he only has a
portfolio value of a hundred 000 you can see just how different that is and
that just really shows you how important it is to start investing early no
matter what age you are if you haven't started investing that's why i
recommend doing that right now because you want to shift that graph as far
left as possible and you want to take advantage of as much of that vertical
growth as possible so now how much money should you guys invest and these are
just my opinions um it really depends on your whole situation but i'd say that
you want to invest the money that you don't need to live that's why raising
your income you guys is so important and that's why the rich get richer right
they have their set base expenses for their life and then they have all this
extra money that they are going to invest into the markets into real estate
and to other investments however you don't want to invest in your money that
you actually need to live because of course we need to live so if you're young
and you have some excess cash what i recommend doing is open up an account
after watching this video and then just start investing to get the ball
rolling you don't need to put in that much money five dollars ten dollars a
hundred dollars a thousand dollars doesn't really matter the whole point with
this is you want to just get over that hump of investing and start investing
as early as you can this is going to increase your chances of putting more
money in the future months and just building up that big portfolio that you
want to retire off of however i will say that if you're young there are
probably some better things that you can invest in that are going to have a
much higher roi so these are things like your self-improvement building a
business and spending money on your education these things can pay off way
higher than investing in stocks but yeah it really depends on what your goals
are in life and where you currently are at so whatever you're doing i'd say
set a monthly goal of how much money to invest based on your income only you
know what's best for you so look through your finances think how much extra
money do i have each month and then invest a significant portion of that if it
were me and i were starting out i would prioritize index funds these are
things that you can buy just set on the side and not really worry about i
would much rather invest my time and effort into building up my
self-improvement building businesses and generating more income and of course
something i've been talking about for a long time is due diligence anytime
you're investing in a stock you absolutely need to do your own research right
so the securities act of 1933 made it so that brokerages have to disclose
specific information about securities before they can be sold to the public
this is like the first level of due diligence it's from the brokerage it means
that there are probably not going to be any phony companies out there on in
the stock market for you to buy and then the second level of due diligence
comes from your own research as a retail investor so this can be doing your
fundamental analysis evaluating the core attributes of that company and their
assets performance financials all that stuff it can also be a technical
analysis so you're looking at patterns and trends finding things that other
people aren't seeing i know i didn't really talk about this like diving into
these charts and graphs but that's also another way that you can actually do
your own due diligence and yeah when you have those multiple levels of due
diligence that's when you can make investing a lot more safer it's not 100
safe as with any type of investing but you want to be as safe as you can so my
golden rule is i like to try and invest one hour minimum for any company that
i do want to invest in if you want to buy individual companies it's really
important that you know what that company does you know the financials you
know their leadership you know their whole game plan and you're comfortable
with that if you want to invest in index funds or through a robo advisor
that's when you don't need to do too much research and it's a lot easier i'd
say different stocks are going to work for different people right what works
for you might not work for someone else and it really comes down to the risk
to reward your timeline as well as any opinions you have about that company or
that industry if you guys are looking for some more information about stocks
you can check out the intelligent investor by benjamin graham this is a great
book that most investors are going to start off with and you can also check
out the investing quick start guide this is another beginner's guide to
investing that i found really helpful they're really going to dive into the
fundamentals of investing and they're going to be more detailed than this
video because you're just going to have hundreds of pages of text so now what
are some actionable steps you can take right now first thing you guys go and
open up a stock brokerage account and get your free stocks so use my links
below if you want to support the channel i really appreciate that and then
what you want to do after that is fund your account put some money into it
doesn't matter how much it is you just want to get the ball rolling you want
to do your due diligence before investing in anything and then you want to buy
your first stock you can buy an etf you can buy an individual company or you
can just use a robe advisor like wealthfront and then the education doesn't
end there you want to continually learn about the stock market you want to
stay up to date on news and current events and that's all going to help you
out with your investing if you guys are interested in potentially using a robe
advisor you can get your first five thousand dollars managed for free when you
use my link below all you have to do is answer a few questions to determine
your risk score so you have to do zero research and then they're going to help
you set up your account and choose what types of stocks to invest in so yeah
thank you guys so much for watching this video i hope you guys got some value
out of it i know it's super long so if you stuck with me until the very end
then you are a trooper and i really hope that you are ready right now to start
investing i talked about how important it is to invest early so guys do that
right now and happy trading thank you so much for watching if you guys like
the video make sure to hit that like button and also subscribe to my channel
to see more videos just like this i make a ton of content about personal
finance investing in entrepreneurship thank you guys so much for your time and
i'll see you in the next video [Music] peace
source: https://www.youtube.com/watch?v=giGcuofIYis