so you want to invest in a stock market but you're new intimidated by all these fancy words or maybe you heard it's risky and you don't want to lose all your money no worries we're tackling all this and more in the ultimate guide on how to invest for beginners this is the beginner friendly video I wish I had before I started working on Wall Street and we're gonna do this by breaking this into a few key topics and the first one is telling you what investing is not I still remember the first time I bought Apple stock years ago my palms are sweaty knees weak arms were heavy maybe even a bit of vomit on my sweater already everyone was talking about how much money they made from investing and I was blinded by all these stories but understand this investing is not a get rich quick scheme it is a safe and smart way to grow your money but investing isn't just about making money it's also about not losing it take this 100 bill for example next year although this will still be a hundred dollar bill how much you can actually buy with it or its effective value will be less because of inflation a five percent inflation rate makes your 100 effectively be worth ninety five dollars in one year and just eighty five dollars in three years so unless you like cutting up five percent of your money every single year investing in stocks is one of the best ways to make sure this doesn't happen the easiest way to understand how the stock market actually works is with lemons also make sure you get my free investing starter kit it has all the tools and strategies you need to start investing link down below so let's say you own a lemonade stand in your neighborhood called Super Lemon drink it's doing really well because your secret recipe is Limes instead of lemons you're confident that you can grow your super lemon drink business but you just need more money to expand so you go out and ask all your friends for money they give you what you need and you use it to build a second lemonade stand and hire someone to watch over it but your friends are fake they're expecting something in return for the money they gave you so in exchange you give them some ownership or stock of your lemonade business and since you and your friends now own shares of the stock y'all are shareholders of Super Lemon drink a stock refers to the business that you're investing in or have ownership in a share is more specific and refers to the smallest amount of stock that you can own to keep things simple let's say you split ownership of Super Lemon drink into a hundred shares at ten dollars per share that means if I owned a hundred shares of the business I own a hundred percent of it if your friend Johnny buys 15 shares for a hundred and fifty dollars he owns 15 of the business Sally buys five shares for fifty dollars so she owns five percent of the business although they both own Super Lemon drink stock they have different levels of ownership but how does a Stock's price increase let's say your lemonade business is doing really well people are hyped about it and strangers want to buy its stock because they believe it's a great business opportunity even though your secret recipe is just using limes instead of lemons but whatever so the strangers will go up to your shareholders your friends who own shares of your business and the strangers will offer to buy their shares from them since now there's demand for Super Lemon drink stock your friends can ask the strangers for more money than what they originally paid for the stock so although Johnny bought each share at ten dollars these strangers said that they're willing to pay 25 for a share and now Johnny has the option to sell each share for 25 if he doesn't sell he has 15 in unrealized gains meaning he hypothetically gained 15 in wealth because someone is willing to buy the shares at twenty five dollars but the fifteen dollars is not considered wheel yet until the transaction actually happens if he does sell it his 15 gain becomes realized or real because he gets cash in exchange for his shares 150 gain not bad but there's actually another exciting way where Johnny doesn't have to sell his shares and still get cash from his Super Lemon drink stock let's say super lemon drink is making a ton of profits and you the main owner wants to reward your friends the shareholders for believing in the company so you take some of the profits that you made and you give them to your shareholders in proportion to how many shares they own since Johnny owns more shares than Sally he'd get more money and this money gift is called a dividend if you want to grow your wealth in the stock market I'll show you how to buy and sell a stock step by step later in the video but first you need to know the two main types of stock Investments that you can own and the second one is my favorite first individual stocks think of this m m as an individual company a stock that you can buy and own which is great but super risky and it's not because it's yellow apparently no one likes yellow M M's let's say you only have a thousand dollars and you just buy one stock of company a worth a thousand dollars so in total you have a thousand dollars invested in your Investment Portfolio if company A's stock price drops by 25 and goes from one thousand dollars to 750 your entire Investment Portfolio immediately goes down by two hundred and fifty dollars twenty five percent of the money you invested not good and if you don't love risk and being volatile with your money then this is a better approach instead of buying one stock worth a thousand dollars you could get 10 stocks worth a hundred dollars each and your total Investment Portfolio will still be a thousand dollars but this way you'll be exposed to much less risk even if companies a stock price drops by 25 so for you from a hundred dollars to seventy five dollars your total portfolio only goes from 1 000 to 975. so just 2. 5 percent drop of your total portfolio diversifying or spreading out your Investments is a great way to reduce risk but the biggest problem is researching buying and managing 10 different stocks at the same time is a lot of work which is why my favorite way to start investing is with this a fund think of a fund like this jar of M Ms just like before each m m represents an individual stock which means that this jar or fund holds a bunch of different stocks so instead of buying a different stock one by one you could just buy one fund and you automatically get access to all these M M's I'll even tell you later on which funds are my personal favorite there are three main types of funds that you can buy and the third one is an absolute Game Changer First Mutual Funds mutual funds have an actual person called a fund manager who actively picks which M Ms or stocks and Investments belong in the fund insisters someone actively managing it mutual funds will charge you higher fees for holding it depending on the mutual fund there might also be minimum investment amounts that you need before you can actually own the mutual fund plus they're only traded once at the end of the trading day so even if you try to buy a mutual fund at 11 A.
M Eastern your trade doesn't actually execute until the market closes second ETFs or exchange traded funds ETFs or exchange traded funds are mostly passively managed meaning there's not an active fund manager that goes out and selects the stocks so fees are generally lower than mutual funds ETFs also require a lower minimum investment amount to start and unlike mutual funds where you can't actually buy it until end of the day ETFs can be bought and sold whenever now my absolute favorite funds are index funds index funds are passively managed with lower fees because these funds just invest in whatever the associated index tracks in indexes like the S P 500 NASDAQ Dow Jones it's basically a scoreboard that shows how a group of stocks are doing in the market as an example the NASDAQ 100 is an index or scoreboard that tracks the performance of a 100 Bay tech companies and so in index fund that tracks the NASDAQ 100 index would just invest in whatever the index is tracking but what determines what stocks get tracked in an index each index have a bunch of different criterias but some of NASDAQ 100s criterias include one the company should have an average minimum daily trading volume of 200 000 shares and two more than 50 percent of its shares needs to be owned by the public so this is the NASDAQ 100 index and these are some of the stocks that the index is tracking some examples include crowdstrike data dog and face energy or Honeywell Microsoft meta so if we check out QQQ which is an ETF that tracks the NASDAQ 100 we can actually see a breakdown of all its Holdings the top five Holdings include Microsoft Apple Amazon Nvidia as well as Google alphabet a so for Microsoft this means that 12. 51 of this ETF is tracking Microsoft and then for Apple it's 12. 21 Amazon is 6.
11 and so on and so on and if we look back over the past 38 years of this index which includes Market crashes and recessions and depressions the average annual return for this index was still between 15 to 17 percent which is pretty amazing the trick here is to find index funds with a great track record and I'll tell you my favorite funds in a bit but knowing all this stuff is completely useless if you don't have the right strategies which I'll be sharing three of the best investment strategies and I personally prefer the second and third one first technical analysis it's basically looking at a bunch of stock charts and lines to find specific patterns and trying to predict what will happen next the theory behind this is that history repeats itself but there have been many studies that prove the natural randomness of the stock market overshadows any patterns and predictions that could be made and your chance of accurately predicting a stock movement with technical analysis is basically non-existent but on the other hand technical analysis could just be a social thing if 10 percent of investors believe in it and together all make the same move that might be enough to impact the stock to go in certain direction becoming a self-fulfilling prophecy now here's one of two of my favorite investment strategies this is the easiest way to get into the stock market and it doesn't take much effort that passive funds strategy all you'll need to do is find a fund and again I'll share some of my favorites later and then just start doing this thing called dollar cost averaging or DCA and it sounds way more technical than it actually is DCA is just an investment strategy where you consistently buy X dollars worth of a stock during a fixed integral period for example you invest 200 in Microsoft every single month for five years if you're investing a fixed amount of money each time you buy you'll get more shares when the stock price is lower and less when the stock price is higher over time this tends to minimize the cost per share that you pay for a given stock for example let's say you're looking at your volatile stock and you have 300 in the first month it's at ten dollars per share then the second month it's five dollars and in the third month it's twenty dollars if you could tell the future and think you can time the market that you would buy all the shares in the second month but remember you can't tell the future and here's where dollar costs average income say you want to invest a hundred dollars a month at the end of it you bought 10 shares in the first month 20 shares in the second month and then five shares in the third month so now you got 35 shares for 300 for an average price per share of 8. 57 your price per share isn't the cheapest at five dollars per share assuming you can predict the future but it's also not the most expensive at twenty dollars per share by dollar cost averaging it helps ensure that you're not dumping all of your money in at a high price point and it's especially powerful during volatile times because it stops the psychological fear that makes you too scared to invest the second of my two favorite investment strategies involve identifying undervalued stocks for example a company stock who should be worth a hundred dollars per share in the stock market is only trading at eighty dollars right now and this strategy is called fundamental analysis which you can learn more about with my free investing starter kit get it with the link down below so let's apply fundamental analysis with Exxon Mobil the world's largest publicly traded oil and gas company in the third quarter of 2022 they reported 112. 07 billion dollars year-on-year Revenue beating its expectation by 9.
11 billion within the same year the company gave out a further 15 billion dollars in dividends to their shareholders all this information came during a recession and history shows oil and gas prices dropped drastically during your recession there were other aspects that affected their earnings but all of it looked quite positive for Exxon Mobil so a fundamental analysis approach to this is looking at the fact that the company itself was still doing really well the US also added more sanctions on Russia increasing oil prices and providing more reason to believe that Exxon Mobil was undervalued and it was over the next month and a half Exxon mobil's share price jumped by nearly 20 percent now finding undervalued stocks take time but there are Financial ratio shows and metrics that can help you do it much quicker one is the PE Ratio or price to earning ratio it measures a company's current stock price relative to its earnings per share or EPS in simple terms it's a way to evaluate how much investors are willing to pay for each dollar of a company's earnings so I'm on Apple's stock profile right now and if I go to analysis and I scroll down I can see that the current p e ratio is 27. 44 let's just say 27. this means that Apple stock price is trading 27 times its earnings per share in other words investors are willing to pay 27 for every one dollar of earnings generated by Apple now a higher than normal PE ratio May indicate that the stock may be overvalued and a lower than average p e ratio May indicate that the stock is undervalued so is Apple overvalued or undervalued the short answer is it's unclear because although data points like PE ratios are helpful they shouldn't be because considered in isolation and will need to be compared to other companies in the same industry so hypothetically if the average p ratio in Tech is 10 then sure Apple may be overvalued but again you'll still need more data points here's a list of other important data points and actually explain all of them in the free investing starter kit which you can get linked down below now here's how to buy and sell your first stock first you need an investment platform like Schwab or Robinhood I'm using MooMoo and no I'm not sponsored by them I actually really like them because they give you a lot of key information for free that other platforms normally charge you for it's also free to buy and sell stocks and has everything that you need plus if you sign up with my link down below you can get 15 free stocks each stock is valued up to two thousand dollars so technically you could get up to thirty thousand dollars if you sign up and meet the funding requirements and it takes just a few clicks if you're interested link below now you need to add money to your investment account so that you can use the money to buy stocks you can connect your bank directly in the app and make the transfer I already moved five thousand dollars into this new MooMoo account that I made for this video next you want to go up here to search for the stock that you're interested in or index or whatever and again I'll share my favorite Investments later on but for this purpose let's just say you're interested in Apple stock so you would simply type in apple and now we're on Apple stock profile all you really need to focus on here is going to be the stock price as well as this chart over here but actually the reason I like MooMoo so much is because if we go to the analysis tab it kind of has all this information already done for you you can look at stuff such as the p e ratio compared to the sector or industry average look at what is historical percentile is what institutions are actually holding this stock such as the Vanguard group or BlackRock and then also very quickly accessing what the analyst ratings are for this particular stock what their Target price and just a bunch of really neat information like the fundamental analysis on this side as well this this is all information that normally investment platforms will charge you for but again MooMoo is giving this away for free which is pretty neat okay so let's say I like what I see and I'm really interested and I actually want to buy Apple stock so what I do is I go click on trade and then I click on buy okay so now I'm on the Buy trade order screen and I know it looks really complicated but there's only a couple of things that you really need to focus on one is going to be the order type and within order type there's really only limit order in Market order that you have to know as a beginner a market order means that you want to buy the stock at its current price which is 160.
68 a limit order on the other hand is basically in order to buy at a specific price or better so for example let's say I don't know I do a limit order a hundred fifty dollars then my trade would only execute if Apple's stock price goes to 150 or lower but for this video we're just gonna do a market order and keep things simple so now that I'm this screen simply what I would do is go enter the quantity of shares I want to buy for Apple we can see the stock price up here it's like trading between 160. 70 something cents uh let's just say for example I want to buy two shares of Apple now what that shows is this total amount that I'm going to be potentially spending which is 321. 58 time and force just put day keeping simple then you want to click on buy um they're going to give you a reminder don't remind me again remember this is a new account that I started just for this video um so now confirm confirm and if you are following along congratulations to you for making your first investment and now if we go back to the account page we can see that we own two shares of Apple but now let's say that you want to sell the two shares of Apple essentially what you would do is you can click on Apple you click on trade again and then this time you click on sell instead of buy now same thing over here in the sense that there's a lot of information all you really need to focus on are the order types which is going to be a cell limit order or a sell Market order which is essentially the same thing that we described with the buy order for this case we're going to keep it simple again and we're just going to keep it at Market meaning we're going to be selling Apple at its market price you can see over here down here it's Max quantity to sell which is two so at most I can sell two shares of Apple because I only hold two shares of Apple so if I just put two then on the amount it shows that what it could potentially receive the Apple shares for after I sell them so simply I would click on sell and then you would confirm if you want to sell the two shares of apple and then the whole confirmation page happens again I'm not going to sell it for my purposes and I'm going to explain why a bit later but that's pretty much it if you're still nervous about buying your first stock remember you can get 15 free stocks potentially worth up to thirty thousand dollars now the big question is when is the best time to start investing and yes there is a best time I know this because I worked on Wall Street and have been in the finance space for many many years and here's the secret the absolute best time to start investing was yesterday the next best time is today but only if you can check off these four boxes one did you pay off all your super high interest debt if your debt's interest rate is greater than 10 I'd prioritize the debt first two do you plan to invest for the long term with money that you don't need for the next three to five years three do you have a safety net and an emergency fund in case you do need money and four do you understand your financial goals look I know what you really want deep down inside I know you're someone who's eager to make your money work for you but you're not really sure where to begin and you're worried that you'll make a mistake and lose all of it I know you want to feel empowered and knowledgeable so that you can transform your wealth I know these things because I wanted those things too and I can tell you that without a doubt you're in the right place but here's the truth you won't ever be able to achieve your financial dreams if you just save your money on average saving accounts give you point zero six percent interest rate and at that level if you put fifteen thousand dollars in your savings account and you still contributed five hundred dollars every single month it would take you a hundred and fifty Seven Years the 157 to reach one million dollars and this is where investing comes into significantly speed up this process What If instead of only gaining point zero six percent a year imagine if you gained ten percent a year which is the average annualized return of the S P 500 since its Inception then it would only take you 26 years to reach a million dollars the power of investing significantly shortened your journey to becoming a millionaire from 157 years to just 26 years I know investing can seem intimidating and feel like you need a lot of money to make money but that's not true it all depends if you're thinking this or this these two things are so important that it will guide the direction of your investing Journey for years to come first thinking about investing short term short-term investing is any investing time frame under three years if you're new to the stock market I would personally avoid short-term investing because there's a lot more risk and volatility and more taxes data shows that 90 of people who take on day trading or super short-term investing lose money some studies even say only one percent of day Traders are profitable long-term investing investing anywhere over three to five years is way better it's less stressful and easier to start with long-term investing generally comes with fewer risk less volatility and less taxes look the truth is there really is no bad time to invest if you plan to invest long term let's check out the NASDAQ 100 again let's say you bought the QQQ ETF at its peak for just under 52 dollars in October 2007.
then the 2008 financial crisis hits and the ETF plummeted down to 26. and it sucks yeah but remember you're thinking long term you haven't actually lost anything yet because you didn't sell your stock if you just kept holding in your money invested then in October 2010 you would have made your money back by September 2012 the ETF jumped to over 70 a share and in 2021 it was over 403 dollars a share that's nearly an 800 game and that's the beauty of long-term investing a study by Asos investment research observed a 10-year period from November 2005 through October 2015. and after running the data through several simulations they concluded that if you missed the 10 best Market Days over the specified 10-year period you would stand to lose on average 66 66 of the gains that you would have captured by just staying in the market this means that when the market moves up it moves up quickly so whenever you're scared to invest and your money is just on the sidelines you risk missing some of the best days the market has to offer so the thing you need to realize is that you cannot time the market and the best strategy is to just stay invested and not panic and I get it look the media will always have some scary the world is ending headlines that the market is going to crash blah blah blah but here's a trade secret most successful investors and professionals on Wall Street in the finance industry they don't bind to this kind of fear they know that the stock market will go up in the long term regardless of the ups and downs in the short term despite all the crashes all the recessions all the crises the stock market goes up in the long term so focus on the long-term not the short term but why invest in funds why not just invest in individual stocks that did really well in the past no doubt you've heard about how much money people made by investing in Tesla and apple right and sure you can but the past doesn't always represent what will happen in the future take Nokia for example in 2010 they were the leading phone brand in the mobile market with a 37.
58 market share by 2020 10 years later their market share dropped to less than 10 percent in that same time frame your stock price plummeted by almost 70 percent now I don't say this to discourage you from investing but rather make sure you don't just blindly follow the hype as a beginner on the other hand the fastest and easiest way to start testing is with funds here's a list of my favorite funds across sectors but they might not be right for you make sure to follow these four steps to determine which fun you should go with and the fourth step is undoubtedly super important first set an expectation on how much risk you're willing to take some index funds are riskier than others depending on how concentrated they are by sector second look at the companies they're invested in do you like them or not third look at the Historical performance and compare it to simpler funds in the industry is there a better option and fourth look at the funds expense ratio the expense ratio is a percentage of its assets that the fund charges as a fee for managing the fund for example if an index fund has an expense ratio of 0. 2 percent it means that the fund charges 0.
