An Intro to Stock Market Investing For Beginners | David Eaves | Skillshare

An Intro to Stock Market Investing For Beginners

David Eaves, YouTube, Trading/ Investing, etc.

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7 Lessons (12m)
    • 1. Intro To The Course

      0:26
    • 2. What is the Stock Market?

      1:09
    • 3. What is a Broker and Why You Need One

      1:58
    • 4. What Are Stocks

      1:44
    • 5. Why Companies Go Public

      1:47
    • 6. What are ETFs and Index Funds

      2:00
    • 7. BONUS CONTENT: High Frequency Trading

      2:58
21 students are watching this class

About This Class

The stock market can be one of the easiest ways to build wealth and is very important when it comes to long term wealth planning, in this course I wanted to clear up, answer and explain common questions and thoughts about the stock market. 

This 15 minutes class will cover:

- How the stock market and the exchanges that make it up work

- What brokers are why you'll need one 

- What stocks, ETFs, and index funds are

- Why companies go public

- BONUS CONTENT: High-Frequency Trading and how it can affect the average investor

If you have any questions feel free to message me on instagram @davideavesofficial 

If your interested in more content from me, my YouTube channel covers similar content in a more broad approach. https://www.youtube.com/channel/UCv6FSVDrGAGblUHbkhAtNfQ?view_as=subscriber\

Transcripts

1. Intro To The Course: welcome everyone to my intro to stock market investing. Course you guys don't know who I am. My name is David Eves. I have a YouTube channel with about 10,000 subscribers where every week I make videos on personal finance, credit cards, investing and things like that. So in this course, we're gonna be going over what the stock market is, how it works. Stocks E T F s what a broker is, why you need a broker and a few other things. So if you guys do to start to enroll in the course, and with all that being said, I will catch you guys in the first lesson. 2. What is the Stock Market?: So in the first lesson, we're gonna talk about what the stock market is, and it's actually pretty simple. It's a market made up of multiple exchanges, where people go to buy and sell stock and other securities within companies or based around companies, and pretty much every developed country has one. But for the purpose of this video, we're gonna be focusing on the United States. So there is no one stock market per se. But there is quite a few exchanges that all kind of make up the term stock market. The two largest of these exchanges are the New York Stock Exchange and the NASDAQ. If you guys ever really watched the news, you've probably heard of these. But there are also dozens of smaller exchanges. But for the most part due to technology, you're not really gonna notice the difference between the New York Stock Exchange, the NASDAQ or you know any of those other smaller exchanges in these exchanges, their actual physical places within a lot of times, New York or other large cities throughout the country. But obviously, if you're a regular person and you want to go buy stock, you can't just walk onto the floor of the New York Stock Exchange and start purchasing shares right pretty much all of these exchanges. They're going to require you to be a member, which cost a large amount of money as well as there's a lot of regulation around being a member and how these firms are regulated. And that's exactly why you'll need a broker, and that's what we're gonna be talking about in the next lesson. 3. What is a Broker and Why You Need One: So what is a broker? If you watch sporting events like the NFL or sometimes MBA, you guys will probably have seen ads from one of my favorite brokers, and that is TD Ameritrade. Now. You also probably in and out from E trade. I know they also sponsor a lot of NFL events, but TD Ameritrade is really my favorite broker. However, there are tons of other options out there like we Bull, Robin Hood, Charles Schwab and so on. But in order to be a broker, they have to actually become a member of each exchange. But in order to become a member, they have to pay large membership fee as well as deal with all the regulation around stock exchanges. But they do all of this that way. They can provide services to customers in the form of buying and selling shares and really holding money for those customers. Up until recently, pretty much every broker charge their customers a fee in order to send shares to the market or buy shares from the market. However, over the last 20 to 30 years, commissions have become a much smaller percentage of brokers. Actual earnings in the case of Charles Schwab commissions counted for less than 10% of their actual revenue. Most of the revenue came from the UN invested cash that their customers had in their account that they would basically earn interest on. And they usually paid out very, very, very little interest to the investor, thereby netting the difference. And that's really what spawned Robin Hood there. Free brokerage. That doesn't charge you any fees to buy and sell stock, but they do make interest on your UN invested cash. And just recently, in late 2000 and 19 most of the large brokers like TD Ameritrade, Charles Schwab, E Trade Interactive Brokers all of these companies actually reduced their commissions to $0 in order to compete with Robin Hood. So now, as of recently, free has pretty much become the standard across the stock market. It doesn't really cost anything in order to buy and sell shares, and the brokers pretty much make most of their money from the UN invested cash that you have sitting in your account. However, there is another way they make money and we'll go over that in the bonus section of this course at the end But the real take away here is that brokers are the direct link to the stock market. And if you're an individual investor, you're gonna need a broker of some kind in order to buy and sell shares on the stock marke . 4. What Are Stocks: So now let's talk about what stocks are as well A Z T ETFs and index funds. So this should be somewhat self explanatory. But a stock is basically a share of a company. So if a company had 100 shares total and you owned one share, you would have 1% ownership in that company. Now, obviously, in the case of public companies, it's not that simple just because they might have hundreds of millions of outstanding shares. In the case of Apple, I believe they have around 300 million outstanding shares. That basically means if you buy one share of Apple, you will have won 300 million of Apple. But in the case of some smaller companies, that might only have a few 1,000,000 shares. And if you were to buy, say, 1000 shares, you might have 0.1% of that company. And when he owned shares of a company. If the company goes up in value based on what the market actually sees than your shares will go up in value, that could also go down in value. If the company performs badly, and if the company were to declare a dividend per share than you would be entitled to that dividend based on a per share amounts. So if you want to share afford at $10 per share and they declared a 30 cent dividend, say you own 10 shares, you would get $3 worth of dividends from Ford Motor Company. However, I do want to clear something up here about dividends. A lot of people have this idea that they could just go by Ford the day before the dividend , collect the dividend and then sell the shares the next day, basically collecting the dividend and not really taking on any risk. That doesn't really work because when the dividend is declared that money is taken from Ford's accounts. So four was valued at $10 per share and they declared a 30 cent dividend. Then the next day Ford is gonna open up at $9.70 so 30 cents less to account for that defend. So you would basically just take a 30 cent loss on your equity and collect the 30 cent dividend so you really don't get anywhere. It's exact same position you were in before 5. Why Companies Go Public: But at this point, you might be wondering, Why do companies go public? And it really depends. It's different for every single company. But when we're talking about startups like maybe Tesla or Facebook or one of these companies, if we look at a lot of the hot tech stocks, like maybe Snapchat, they went public recently about 2 to 3 years ago. The reason they went public is they needed a few $1,000,000,000 to continue operating their business since they were operating at a loss. And it's very hard to get billions of dollars from the private market. The private market is basically where you go pitch, you know, John on investing in your company or John's Hedge Fund or Johns Private Equity Fund. Eventually, when you get too big, like Snapchat or uber or Facebook, the private market doesn't really have enough money to give you, at which point you can take the company public and collect money from outside investors. I e. Me, you, John, your neighbor. You know, everyday people who decide to invest in this company because they see value another reason companies go public. In the case of maybe Macy's. Maybe they've always made money. They were making money when they went public back in the day. But the reason they went public was so that John the founder, maybe he wants to sell 20% of his Macy steak. He could actually just go to the public market and sell those shares right there, rather than having to find someone who would be willing to take 20% of his steaks that don't violate any kind of company agreements or anything like that. So eventually, when a company makes a lot of money, it eventually becomes necessary for the founders in the investors to pull their money back out of the company. And going public allows them to do that when you are operating at such a large scale, like maybe Macy's or Walmart er, one of these huge companies. So the main take away here is that companies generally will go public in order to give an exit strategy for investors or to raise money form or investors. That way, they can continue to operate in the case of Snapchat or Facebook or one of these companies 6. What are ETFs and Index Funds: Now I get this question quite a bit. What's an E T F? What's an index fund? What? What are these things? So une TF is an exchange traded fund? What that basically means is it's a fund made up of a lot of shares of a lot of different companies that all trade together. So you buy one share of this and you'll have a small piece of a rise in a small piece of Walmart, a small piece of 18 tee, a small piece of waste management and so on for whatever positions are held within that E t f generally e T F two designed to spread risk across a specific section of the market. So sometimes you might find a health care e t f. This is going to invest in, you know, maybe the 10 largest healthcare companies. But they're all gonna be healthcare company, so you're highly exposed to healthcare itself. But you're also diversified when it comes to the actual amount of health care companies that you own. Or maybe they're a tech e t f where they're gonna hold Facebook, Google, Amazon, Microsoft and so on. You know, these are gonna be highly exposed to technology. But you can actually buy one share of this CTF and you're gonna get exposure to all of these different companies on index fund, on the other hand, is pretty much the exact same thing as an E T f. Except for it's gonna track an index. So something like the S and P 500 of the Russell 2000 or the Dow Jones these air funds that are going to track those because the actual S and P 500 you can't directly invest in it's just an index. It just tracks the prices of these companies you know you can actually buy in S and P 500 chair. In order to do that, you would need to buy an index fund for the S and P 500 like maybe sp y or bang guards. Vo these air what you would actually invest in if you wanted to have exposure to the S and P 500 as a whole or the Dow Jones as a whole. But you can't directly just go by the Dow or just go by the S and P. You have to buy an E T f like S P Y or something like that that basically tracks the S and P 500. Exactly. But you're not directly investing in it because it is just a benchmark or, you know, just a tracker. Really, it's not an actual asset. Where's the TFC are an actual asset? 7. BONUS CONTENT: High Frequency Trading: now for some bonus content. I want to talk a little bit about high frequency trading and what it is to earlier when I said Robin Hood and TD Ameritrade and all these brokers have gone to a commission free business plan. And I said that the main way that they make money now is pretty much just from collecting interest on your UN invested caf. That is true. But there's also another way that these brokers make a lot of money, and it actually affects the individual investor whether they know it or not in the way they do that, it's called high frequency trading. High frequency trading firms are firms that are basically ran by mathematicians that set up computer programs on a lot of stuff like that that actually automatically trades for them. They generally will, making it one sent in a matter of three seconds on a 1,000,000 shares or something that you do a lot of trading very, very, very quickly and scalp. You know, tiny percentages off of each one, and the way they get those tiny percentages is when you send an order through Robin Hood or TD Ameritrade. Most of the time, those orders are actually going to be sent to their high frequency trading partners who actually pay them a fee in order to get that order flow. But they're going to send that order to them and their computers. They're going to decide if they want to buy it. If they do, then their computers will buy it and boom, If they don't want to buy, then they will send it to the actual direct market. Now the problem with this is it actually takes a second for you know, your actual order to go to the high frequency trading firm and for their computer to either rejected or purchases. So if they reject it, then it has to go back to the actual exchange, at which point it takes more time while you know, on the actual exchange, trades could have been going through it the price that you set. But now they're not because the market has fell a little bit and all of a sudden you lose a little money because they decided to take a little detour to the high frequency trading firm. So that's a big caveat of Wall Street and something to really keep in mind. Robin Hood is actually the broker that since the most orders to high frequency trading firms, however, now that we have more and more companies going to $0 commissions, I think you're going to see more of these Larger companies like TD Ameritrade and Charles Schwab actually do more business with these high frequency trading firms, at which point it will hurt their actual customers a little bit. That being said, you are getting completely free commission trading rather than paying $567 per trade toe overall. I think it's a good deal the have. But at the end of the day, you do have to consider that, you know these companies are going to send your order there, and that might cause you to lose money here and there. I appreciate everyone checking out this course. If you guys have any questions, feel free to message me on Instagram at David Eves. Official. If you guys want to check out my YouTube channel, I will leave these link in the description and for the class project. I really like you guys to download some kind of simulated trading app like TD. Ameritrade has their paper money platform. I will leave a link in the description for that. And then we will actually has their own simulated trading platform as well. So if you guys download these platforms, you can actually get an idea of how the market works and actually go in and trade with fake money, but really get some experience in the market. So, you know, just a suggestion. You don't have to do it, But that's what I'm saying. The class assignment is so anyway, I hope you guys did enjoy and I will catch you guys later.