Stock Market Investing Part 1 Introduction to the Stock Market | John Colley | Skillshare

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Stock Market Investing Part 1 Introduction to the Stock Market

teacher avatar John Colley, Digital Entrepreneurship jbdcolley.com

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Lessons in This Class

10 Lessons (29m)
    • 1. Stock Market Investing Part 1 Introduction to the Stock Market

      2:33
    • 2. Introduction to the Stock Market

      1:50
    • 3. What is the Stock Market?

      1:53
    • 4. What do we mean by Capital Markets?

      2:08
    • 5. What do we mean by the Equity Capital Market?

      5:38
    • 6. How does the Stock Market work?

      3:00
    • 7. What are the main Functions of the Stock Market?

      3:09
    • 8. Who are the main Stock Market Participants?

      3:23
    • 9. Introduction to the Stock Market Summary

      3:35
    • 10. Stock Market Investing Part 1 Introduction to the Stock Market Summary

      1:21
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About This Class

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This is the first part of a multi part course on Stock Market Investing.

The purpose of the course is to empower you to understand how to invest in the Stock Market for the long term.  This is not "get rich quick" nor will you find stock recommendations or advice on making money.  This is for students who are looking to understand the importance that long term investment can make to your wealth and your retirement.

I have been an investment Banker for over 30 years and started my career as a Stockbroker at Hoare Govett in the City of London in 1988.  This is the expertise and experience I am sharing with you.

In this course we are starting with the basics and introducing the Stock Market, its components and its players.

These are brief descriptions of the videos in this course.

Introduction to the Stock Market

I explain what we are going to cover in this introduction to the Stock Market.  These are topics:

  • What is the Stock Market
  • What we mean by Capital Markets
  • What we mean by Equity Capital Markets
  • How the Stock Market works
  • The main functions of the Stock Market
  • The main participants in the Stock Market

What is the Stock Market?

Next I will explain what is meant by a Stock Market and the difference between a Stock Market and a Stock Exchange.

What do we mean by Capital Markets?

The term "Capital Markets" is frequently used and we need to understand which markets it refers to.  Note as well that when referring to these markets we are speaking in conceptual terms rather than referring to a specific location as we would when speaking about the London Stock Exchange.

What do we mean by the Equity Capital Market?

The Equity Capital Markets refer to a range of different equity related financial instruments.  As an investor in common stocks or ordinary shares (the terms are interchangeable), you are unlikely to make investments in most of these instruments but you should understand what they are.  This is explained in this lecture.

How does the Stock Market Work?

It this lecture we explain how the Stock Market enables companies to raise capital from investors through an IPO in the Primary Market.  We also describe the Secondary Market where shares can be traded after the IPO has been completed.  Finally we explain the importance of the Stock Market as an information conduit between the listed companies and investors.

What are the main functions of the Stock Market?

In this lecture we walk through the main functions of a stock market in order to understand how these relate to all the participants in the market.  This sheds light on the complexity of the operations of the Stock Market and highlights that the functions go way beyond just facilitating stock transactions.

Who are the main Stock Market Participants?

This lecture explains the main roles of the principle market participants in the Stock Market.  Although this course is primarily focused on you, the Stock Market Investor, it is important that you understand who the other players are.

Introduction to the Stock Market - Summary

This lecture summarises what we have covered in our review of the Stock Market.  We will be focusing on Stocks and Shares in this course and it is important that you understand the market structure and functions of the Equity Stock Markets, particularly those for common stocks (ordinary shares).  

Remember that as an investor in stocks and shares you are buying a part ownership in large companies for a significant period of time. 

Coming Up Next: Stock Market Investing Part 2 Five Essential Stock Market Principles

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John Colley

Digital Entrepreneurship jbdcolley.com

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Transcripts

1. Stock Market Investing Part 1 Introduction to the Stock Market: Welcome to stock market investing Part 1, introduction to the stock market. Hello and welcome to Part 1 of my stock market investing course, introduction to the stock market. My name is John Kali and I am an investment banker with over 30 years experience. So it's my great pleasure to be sharing all this experience and knowledge with you. This series of stock market investing courses is designed to empower you to have the confidence to increase your wealth over the long term. Having the confidence to invest in stocks and shares. This is the first course in the series. And we're going to discover what the stock market is, the key components of the stock market and the key stock market participants. This course is aimed at beginners upwards. But even if you have some investing in knowledge, you will find helpful concepts, principles, and learning points that will make you a better investor. Please note, this is not a get rich quick course. This course will not contain any investment recommendations or stock tips. It is purely focused on the skills and knowledge you need to become an investor, not a speculator. At the end of this course, you will have a clear idea what we mean when we talk about the stock market. And you will have this foundation to take forward to the subsequent parts of the course. You must learn to walk before you try to run. And all of the parts of this course will be thorough and systematic. The course project is a short six question multiple choice test to see how much of the information in the course you have assimilated. The answers are in a PDF which you can download from the project section. I hope you find this and the subsequent parts of this course informative, engaging and easy to follow. I look forward to walking with you through the extensive knowledge base we're going to cover with the goal of helping make you a real investor. So let's get started. We have a lot to cover. So let's jump straight into the course and get started with it. Enroll in the course now. And I will see you in the next lecture. So welcome again to stop marking Investing Part 1, introduction to the stock market. There's a lot to cover in the various parts of this course. And I know you're going to absolutely love it. 2. Introduction to the Stock Market: In this introduction to the stock market, we're going to take a look at how the stock market works, who was involved in it, and get a better understanding of what the stock market is all about. We should all to learn to walk before we learn to run. And that's an essential premise when you're learning anything and bearing this in mind, any investor or prospective investor needs to understand the market in which he or she proposes to participate. Now, I joined whole cuvette, a London stockbroker in 1988 as a graduate trainee and spent several months working in every major department in the firm before finding my feet in the corporate finance department. Now not everybody can be fortunate enough to be taught how the stock market works from the inside by the market participants. And this is part of the experience that I want to share with you in my Stop mocking investing courses. With this in mind, I proposed to share with you what the stock market is. What we mean by capital markets, what we mean by equity capital markets, how the stock market works, the main functions of the stock market and the main participants in the stock market. At the end of this, you will better understand your position as a stock market investor and what you can expect from the market. It should also give you confidence that markets are well-organized, highly regulated, and designed to provide a fair and equal service to all participants. So that is the introduction to the stock market. And we're going to press ahead now and take a deeper dive into understanding the stock market in greater detail. 3. What is the Stock Market?: Let's take a look now and answer the question, what is the stock market? The stock market in its most general form, is an exchange where you can buy and sell shares in public companies. This is also where companies come to list their shares as part of a primary offering or initial public offering IPO. A stock exchange refers to the place where the trading takes place, such as the New York Stock Exchange, the London Stock Exchange. And the country may have central stock exchanges which comprise its national stock market. Because of their importance and financial complexity, stock markets and stock exchanges are carefully regulated by the Securities and Exchange Commission, otherwise known as the SEC, regulates the stock markets in the United States. The supply and demand for individual stocks sets the price in the market. And markets as a whole, move up and down as a result of the cumulative behavior of individual stock prices. Stump bucket movements are tracked by following the movement of key indices which comprise the leading stocks in that market, such as the Dow Jones Industrial Average or the S and P 500, or the Financial Times Stock Exchange 100, the footsie as it is known. As well as investing in individual stocks. You can also invest in mutual funds, which comprises of carefully selected stocks or which track the main market indices. So that's a quick look at what the stock market is. But an important point to take away from this lecture is that you understand the difference between the stock market and a stock exchange. 4. What do we mean by Capital Markets?: What do we mean by capital markets? Capital monkeys refers to the exchange platforms where both debt and equity securities can be traded. Debt and equity securities have different financial characteristics and can offer investors different risk and return profiles. Equity securities or stocks and shares are traded on a stock market in the stock exchange. As we have seen, Stoke's represent a real ownership in a company and the entitle the investor to a share of the future profits of that company. Debt securities are traded on the bond market. A debt security represents a loan to the company by the investor, which will be paid back at a future date, along with interest, financial compensation for making the loan. Bond markets also have primary and secondary markets. They are also capital markets which manage the issuance of securities for the trading of foreign exchange, forex, commodities, and derivatives. You should also be aware that there are private capital markets. This is typically where securities and private companies are bought and sold by sophisticated investors. Private equity and venture capital firms. Private capital markets have less transparency and liquidity, making them higher risk, and making it more difficult to buy and sell. It's important to be aware of the broadest scope of the capital markets and stock markets. But in this course, we are going to primarily focus on the equity capital markets. So let's take a look at these next. So that's a quick summary explaining what is meant by the term capital markets. We have to understand how all these terms work together because you will hear these terms used frequently. And if you're going to understand stock market investing, you need to get this terminology fixed in your mind. 5. What do we mean by the Equity Capital Market?: Do we mean by the equity capital market? The equity capital market is a subset of the capital markets. Only part of the equity capital market represented by the stock market. The equity capital market enables investors to invest in ownership in a company in return for their money. But there are a range of different instruments in addition to stalks, which enabled this to happen. The instruments in the equity capital markets include common stocks or shares, preferred shares, convertible securities, private equity, American Depositary Receipts or ADRs, global depository receipts or G Diaz, futures, options and swaps. As we have seen, common stocks are the most simple and direct form of equity ownership. Coleman stokes have rights to the future profits of the company. They may benefit from being paid dividends periodically, although it should be noted that this is at the discretion of management. Some companies such as Amazon and Berkshire Hathaway do not pay dividends as a matter of policy, preferring to retain the earnings to reinvest in the business. Preferred shares are a blend of debt and equity. They have a fixed rate of interest or stated dividend and have a claim on the company's assets. Head of the common equity, equal to that principle venue, but no claim to the residual income or assets. They do not have voting rights. You should be aware that preferred shares can come with a range of rights which may vary. You can expect to hear about irredeemable preferred shares, redeemable preferred shares, cumulative preferred shares, non-cumulative preferred shares, participating preferred shares, convertible preferred shares, and stepped preferred shares. Convertible preferred shares or convertible securities have the right under second circumstances, but not the obligation to convert from being preferred shares to Coleman Chavez. The conversion terms or conversion ratio is set out precisely in the terms of the security itself. Private equity is raised by private companies from sophisticated investors and institutional investors who specialize in investing in private equity. So-called private equity firms. Venture capitalists and leveraged buyout firms are the most common sources of private equity. Private firms are usually smaller or younger businesses. At an earliest stage of that business life, they are often not profitable. Then lack of track record limits their access to bank finance, and then not large enough to have access to the public capital or stock markets. American depository receipts, ADRs, are a certificate of ownership issued by an American bank in the name of a foreign company against the shares of that foreign company which deposited with the bank. They all tradable and represent ownership in the foreign company and I'll denominated US dollar. Global Depositary Receipts, G Diaz are similar negotiable receipts issued against foreign company shares by financial institutions in developed countries around the world. Futures, our forward contract traded on an organized exchange. They represent the right to complete a transaction at a later date in the future. They are executed and managed by clearing houses who also guarantee that both parties on the contract. This financial instrument gives the owner, are right but not an obligation to buy or sell the underlying asset or security on or before a specified date. The underlying security is often an equity stock or share. An option to buy is a coal, and an option to sell is referred to as a put. A swap is a contract where one stream of cash flows is exchanged for another between two parties. As an investor in equities in the stock market, you are seldom likely to make investments in most of these instruments. However, it is important that you have a broad understanding of the securities which can be bought and sold in the equity capital market. In this course, we are going to be principally focusing on common stocks as they are referred to in the US. These are also known as ordinary shares in the UK. So that's an explanation of what we mean by the equity capital market. And we can see that it covers quite a range of financial instruments above and beyond common stocks or ordinary shares. 6. How does the Stock Market work?: Let's take a look now and see how the stock market works. The stock market provides a low-risk, regulated environment where market participants can transact in stocks and other financial instruments. The market provides a primary market through which companies can list their shares or float. And a secondary market where the shares can be traded following the initial public offering or IPO. The purpose of an IPO is to enable a company to raise capital from investors. In the primary market. A company will divide its ownership into a number of shares. And these shares in the company called common stocks in the US and ordinary shares in the UK represent a real minority ownership in the business. The company will then offer a proportion of the shares for sale in the primary market through the IPO mechanism. The IPI process is managed by an investment bank who receive a fee for their services. Investors buy the shares in anticipation of the shares increasing in price. As the company itself grows and becomes more profitable. The investors in the shares may also periodically receive a small share of the company's ongoing profits in the form of a dividend, which is typically declared semiannually. The secondary market provides the environment where the shares can be traded between investors. The stock exchange owns a small fee every time a share is bought and sold. Companies can also sell additional shares at a later stage through a rights issue, follow on issue. And they can also buy back their shares or even d, This them if they wish. The stock market also acts as an information conduit where companies can release news updates, announcements, and report their financial performance. This is an important function as its ensures that all investors have equal access to the same level of information. The stock exchange also monitors and regulates the quality of the information provided by the companies. So that in outline are the key functions of the stock market and how it works. He didn't able companies to sell their shares to investors and then to run a secondary market off to the initial IPO. And then also, it makes sure, makes sure that the companies provide the market with adequate and timely, accurate information. 7. What are the main Functions of the Stock Market?: What are the main functions of the stock market? In this lecture, we will take a closer look at the main functions of the stock market. The first of these is fed dealing in securities transactions. It is vital that all participants in the market are operating on a level playing field. They must have equal access to data and prices must be transparent and fair. The market must efficiently match buying and selling orders. Efficient price discovery. This means that investors, a monkey participants, must be confident that prices are set fairly based upon the balance of the demand between buyers and sellers. Liquidity maintenance means that while the market is not responsible for the numbers of buyers and sellers, it must ensure that anyone qualified and willing to trade can do so and that orders are executed at a fair price. Security and validity of transactions. This means that the market must ensure that all participants are verified and remain compliant with market rules. That by eliminating the chance of default by any of the parties, support all eligible market participants. Participants may include a wide range of investors, such as market-makers, private investors, changes, speculators, et cetera. All participants should be able to operate as their roles require to ensure an efficient market. Investor protection. Investors may vary from institutional investors, sophisticated and wealthy investors down to small investors. All should be able to access the market with confidence and be able to trust the market. Balanced regulation. Listed companies, as we have seen, are regulated by the SEC in the US and the Financial Conduct Authority, the FCA and the UK exchanges also have their rules and regulations to ensure that all market participants have equal access to company information and corporate actions. The Securities and Exchange Commission, the SEC in the US, is also the body responsible for regulating stock markets. Their mission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. Which I think sums up the main functions of the stock market very neatly. So that's an overview of the main functions of the stock market. And it gives you a good impression of the structure and responsibilities that the stock market has to all its participants. 8. Who are the main Stock Market Participants?: Let's take a look now to see who are the main stock market participants. There are different groups of market participants who combine to form the stock market. Each of these has a unique role, but these roles into log to make the market operations efficient. The first of these are stockbrokers or registered representatives in the US. They are licensed professionals who buy and sell securities on behalf of investors. They act as intermediaries between the stock exchanges and investor's portfolio managers and professionals who invest in collections of securities for clients. Mutual funds, hedge funds, and pension fund managers use portfolio managers to set the investment strategies for the money they oversee. Investment bankers, advise companies on their financial and corporate strategies. And this includes various stock market roles. Ipos and merges and acquisitions are the two principle activities. But they are also responsible for ensuring that companies comply with stock market regulations. Custodians, institutions who hold investors securities for safekeeping to minimize theft or loss. They also ensure the timely chance verb Stokes between the accounts of buyers and sellers. Market makers, they are a broker dealer who facilitates transactions by posting buy and sell prices, as well as maintaining an inventory or book of shares. They contribute to the liquidity of the market and they make money from the spread, the difference between buying and selling prices. Speculators are a type of investor who makes beds in the market on share prices, on index prices. They may be long buying shares or short selling shares they do not own in the hope of buying back the shares later. At a better price. They may trade over a range of time periods for minutes to months. Arbitragers are traders who aim to benefit from pricing mismatches in the market. This is normally done by computer now and algorithmic and high-frequency trading or two examples. Finally, we come to investors. These stock market participants invest their money in the stock market with a view to benefiting from the growth and profitability of the listed companies. We will clarify the difference between investors and speculators later in the course. But these are the primary market participants in whom where we are interested in this course. So that outlines for you the main participants in the stock market. So you get a feel for who the players are. But as I've just said, the people were really focusing on, are you The stock market investors? 9. Introduction to the Stock Market Summary: I now want to summarize what we've covered so far. In my introduction to the stock market. Stock markets are a critical component of every free market economy. They enabled long-term capital formation within an economy and therefore help to provide the finance on which the growth of the economy is built. For investors, they provide the ability to purchase a part ownership in a large company and to benefit from the long-term growth in the economy. As an investor in the stock market, you need to understand how it works and who the main participants on. This enables you to channel your savings efficiently into productive, long-term investment opportunities. We have discussed what is the stock market, what we mean by capital markets, what our equity capital markets, how the stock market works, the main functions of the stock market and the main stock market participants. You will have seen that there is a hierarchy of different markets. Below equity markets, you'll find various don't mock is some of which are the New York Stock Exchange or the nasdaq, the London, so does change the hierarchy. You can see on the following slide. So at the top, you have, as we discussed, the broad-based capital markets and examples of those capital markets, all the equity capital markets, bond markets, foreign exchange markets, commodity markets, and derivative markets. Now in this course, we're predominantly interested in equity capital markets, which is why when we drill down, we find the generic stock markets and we spent quite a lot of time discussing those. And then below those you find examples of stock exchanges, the New York Stock Exchange or the nasdaq, the London Stock Exchange. So hopefully now you have a very clear picture in your mind about how all these monkeys tie into one another. And as I stressed, we're going to be focusing really on the equity capital markets and on stock markets. This has provided you with the foundations. You need to understand what the stock market is and how it works. If you are going to become an investor in companies stokes, you need to understand how the market in which you ought to become a participant works. A key point that you must absorb is that you are making an investment into a company and becoming a part owner of the business. This mindset is critical. You should not see share prices and ticket symbols for Stokes as the focus of your investment approach. In subsequent lectures and courses, we are going to drill down to understand what it really means to be a stock market investor. So that concludes the introduction to the stock market and I've summarized what we've covered so far. The most important thing is that if you're going to invest in stocks and shares, you need to really understand what stock markets are and how stock exchanges work. And hopefully now you have some idea of how all that comes together. 10. Stock Market Investing Part 1 Introduction to the Stock Market Summary: So now we've come to the end of Part 1, this introduction to the stock market. And I'm just going to briefly summarize where we are. Congratulations first of all, on completing part one of my stock market investing cause I hope you found it informative, engaging, and above all enjoyable. Your next step is to now complete the course assignment, which is a short six question multiple choice test to see if you've understood the main lessons of the course. The answers are downloadable in the attached PDF. In part two of my stock market investing course, we're going to look at some of the essential principles, the stock market itself. And I'll show you, you're going to find these very challenging, but at the same time, they will build on the learning that we've established in this first part of the course, and it will continue to develop you as a stock market investor. Make sure you click on the Follow button so that you will get notified when my new classes go live. And thank you very much for taking this course and I look forward to seeing you again in stock market investing part two. So that's a wrap then, stock market investing Part 1, introduction to the stock market. Thank you very much for taking the course, and I'll see you in Part 2.