Hey guys it's sasha in this video, i will show you how to invest in the stock market. This video is a little bit long because it covers everything that you need to know about: investing in the stock market for beginners, it's more of a course, and if you are a beginner, this will take you through investing step by step, and if you want to Really understand it, i would highly recommend watching it all the way through. There will be a lot of very useful information throughout the video if you've done some investing before or you want to brush up on some parts of the course feel free to use the timestamps. In the description to skip to the different sections that you are most interested in, i would recommend that you go and grab yourself a drink, a pen and some paper and take some notes.

As there is a lot for us to go through, i will be using a mix of showing things on the screen, explaining concepts and showing you plenty of examples. This is going to be a very interactive video. Also, i won't be selling you anything in this video. There is no upsell to some kind of other course or anything like that.

I will give you all the information that you need for free. There will be some affiliate links in the description like there are in all of my videos, but that is about it. Just before we do get started, i do have to make a disclaimer. This is an educational video.

I am not a financial advisor and i'm not your financial advisor and nothing in this video is financial advice. I am just here to share as much useful information as possible on investing in the stock market for beginners, and, if you don't know me, i've been investing for some time, both professionally and personally. I studied mathematics at oxford, university and graduated in 2007.. I then worked primarily in the financial sector.

I have worked for big banks like capital, one and bank of america, and for private equity companies and fintech startups. My work included working in risk, doing valuations of businesses and portfolios and also doing mergers and acquisitions. I've also worked for a shorter period of time in trading the sort of six monitors in front of you kind of thing, and then i was the founder of a strategy consulting company and for eight years i've been working with a large number of banks and financial Companies i have actually lived and worked both in the uk and in the us in new york, so i'm familiar with how things work in both countries. Recently i started this youtube channel, sharing my perspective and providing useful information for free to anyone who wants it.

I've been doing this for about two years now, as i'm recording this video and i'm on about 69 000 subscribers. I will provide a full guide that you can download in the description that will also be free and you can just click the link. You don't have to give me your email fill out any kind of form or anything like that. I'll have all the resources and a summary of this course in that guy, so please feel free to go and get yourself a copy.

There are also chapters with timestamps below so please feel free to skip around to different sections when you want to do that. So, first, let's talk about why you should invest in stocks. Investing is a tool for growing wealth and it is a very powerful tool to grow your wealth. If you have money on your hands and you keep that money as cash, then over time, inflation will mean that the same amount of money is worth less and less every year inflation tends to average around two and a half percent a year or thereabouts, although it Is running much much higher at the moment, and that means that on average, a hundred dollars from a year ago loses about 2.50 every year in terms of what you can buy with that money.

The stock market, though, has historically average returns somewhat over nine percent per year, and this is much higher than the rate of inflation. So that means that on average over the long term, your money is going to be worth more in the future. Keeping money in your bank will usually earn you nothing or very little, and so over time, because of inflation, your money will gradually be worth less. Some other investing options like bonds have less risk, but they also pay substantially lower returns and things like property or business.

Investing typically require large amounts of money up front. It used to be very difficult and quite expensive to invest in the stock market, but that has really changed recently. Now you can invest starting with very small amounts of money at no cost or very low cost. There are a lot of new investing apps in different countries around the world that let you get into investing very easily in the us.

There is robin hood: weeble, m1 finance, public and others in the uk. You've got lightyear stake trading toronto and there's others as well. There are apps like interactive brokers and etoro that operate in most countries around the world, including the us and the uk, and there are also new investing platforms launching all the time i will leave links in the description to platforms that i personally use and personally, like I will try and keep them updated with all the new platforms as and when things change and some of these even offer free shares or other kinds of bonus just for signing up using my links. So if you want to get started with any of these and want a free share or a free 10 or whatever, it is feel free to check them out now before i go into all the detail, it's important to draw a big distinction.

Many people believe that investing is a very high risk. It is often compared to gambling in the way that investing is portrayed in the media and the movies and places like that, and it is probably not surprising it's all the fugazi. You know what ferguson is and i'm not here to tell you that investing is risk-free because it isn't, but investing is a very powerful tool that can and has allowed many people to grow their wealth over time. It is very important to understand the rewards and the risks before you get started, and hopefully this video will do exactly that for you.

So what is a stock exactly? What is a share. A share is a small part of a company when a company is first formed. It issues a number of shares and each person who owns one or more shares in a company is a shareholder. Each shareholder owns a small part of a company, so if a company has 100 shares and you own one share, then you own one percent of that company companies you can invest in on the stock market will have millions and sometimes billions of shares.

Most companies, especially smaller ones, though, are private, and that means that the shares of those companies can't be bought and sold on the open market. You can't just go and buy those shares in your favorite investing app. You can still buy and sometimes sell those shares privately, but it is much more difficult and depends on the company's rules. Some private companies eventually decide to go public and when a company does go public, its shares begin trading on the stock market on some kind of stock market exchange.

The main reason a company goes public is so that they can raise money on the public stock market. One of the most common ways of going public is via an ipo or an initial public, offering during an ipo. The company creates a bunch of additional new shares and when people go and buy those shares, the company receives the cash from people buying them, which they can then use to reinvest in their business. There are other ways that the company can go public as well.

Sometimes this happens via a direct listing, and this is not the same thing as an ipo, although it is almost the same process except the company doesn't create any new shares. It is a simpler process in some ways, and some of the existing shareholders start the process by selling a portion of their shares on the market to get the float going, so a company doesn't raise any funds during a direct listing. Another common reason trend is for companies to become public through an acquisition. If a company that is already listed buys another company, then that company that's being bought automatically becomes listed as part of the one that's just bought them and in the last few years, has become particularly popular as a way of going public.

Although recently the regulators are stamping this out, it is much faster and much easier than an ipo and the company can still get to raise capital. Often shell companies are created for the sole purpose of acquiring another company to make them go public. These are called special purpose acquisition companies. You might have heard recently people talk about spax, or maybe you heard it in the news.

It's just a holding company that does all the hard work initially of getting listed on a stock exchange and just has a whole boatload of cash in a bank account. Eventually, they will go and buy a real company that wants to go public quickly and that pile of cash in the bank account is then used to pay for the acquisition. After a company is public. They can then issue more shares whenever they want to.

This allows the company to raise more capital very quickly and relatively easily. Younger companies will do this more often to raise funds for growing, and sometimes a company can use the stock market to raise funds to get out of a tight spot. All public companies are listed on a stock exchange. There are two big, well-known u.s stock exchanges, the new york stock exchange and nasdaq they're, both based in new york, but they're.

Two separate institutions, other famous exchanges around the world - are the london stock exchange shanghai, hong kong, tokyo and euronext. So how do stocks earn money from investing? Well, there are two ways. The first way is through dividends. Dividends are a way for the company that you are invested in to share some of its profits with the shareholders.

The money is paid directly to you and you'll see it arrive in your investing account. When a company is making a profit, they can do three things with that profit. They can either leave it in their bank account for the future, or they can reinvest it back into the business by spending it, for example, spending it on research and development. Marketing maybe build a factory things like that, or the company can go and pay it out to their shareholders as a reward, because remember the shareholders are all part owners of the business.

Usually companies don't pay a lot in dividends. The average dividend yield in the s p. 500. At the moment, the s p 500 is the 500 largest companies in the us is about 1.4 percent.

Some companies will pay very high dividends. Altria williams, companies, kinder morgan, british, american tomaco and chevron all pay dividends of six to nine percent, but you might notice a trend. High dividend paying companies are often declining companies in declining industries. Large oil companies, tobacco and telecoms will often pay higher dividends to keep their shareholders happy and to stop them from jumping ship paying out.

A lot in dividends means that you are not reinvesting that money back into the company. You are not reinvesting it into growth, and this often means that the company's future prospects are a little bit more stunted. If it's not reinvesting in growth, then that means that the growth is less likely to happen. So you get your quarterly or sometimes monthly, even dividend.

Payments, but the company is often not going anywhere fast and the share price is flat or even declining. Shell spice, for example, hasn't really moved in 25 years, and vodafone shares today are worth four times less than back in 1999.. So you might have guessed that the second way that you earn money from stocks is through growth in the value of your shares. This is where the majority of the growth in the stock market is today.

Growth in the value of your shares is not as obvious. You still own the same number of shares and you don't actually receive any money. So there are a lot of investors who subscribe to the dividend, investing way of thinking, because you can see the money it feels more tangible dividend. Investing will often, though, underperform the overall stock market, with a majority of the returns from the stock market coming in the form of share price growth, not from dividends.

The stock market is highly unpredictable and it will go up and down and up and down over time over the long term, the s p 500 has grown by an average of around nine to ten percent per year. That's the 500 biggest companies in the united states, but if you look at the chart, you'll see that it is also very volatile. There are frequent market crashes, where the market can very quickly lose 30 to 60 percent from the peak to the bottom of the market, and then there is bull markets and bear markets. Bull markets are periods when market is generally going up, there's been a bull market.

All the way, from 2009, until a small crash in 2020 and then again through 2020 and 2021. overall, that 12-year period has been one of the biggest bull runs in history. You can see that the total value of these companies has risen very sharply compared to other times in the past. The opposite of a bull market is a bear market.

That's when the shares are generally losing value on average over time and the value of the stock market is dropping. There was a bear market after the dot-com bubble burst in 2000, a general bear market through the 1970s, and we are currently this year going through a bear market since january. These charts can seem very scary if you invested all of your money into the s. P.

500 back in february 2000, you would have had to wait until september 2014 before you even break even before you make your money back following the big crash, and in february 2009, nine years after you've put your money in in the first place, your investments would be Worth 60 percent less than when you first put the money in, but this is a very unlikely scenario, because most investors will not just go and put one lot of money at one very fixed, specific point in time into the market and never touch it again. If the investor was gradually investing into the stock market over a long period of time, then some of their investments would have been made at that peak. But in the years before the peak, the investments would then still be up. Even after the market crashed and investments made after that peak would now be up by a much larger amount.

This concept of continuously investing over time is called dollar cost averaging, as you put your money into the stock market over time week after week, month after month, some of the time you'll be putting your money in at the best possible time, and sometimes it'll, be at The worst possible time it is easy to know when the bottoms and the highs are in retrospect, but at the point, when you are making the deposits, it is impossible to know - and it is this approach of continuously investing over time - that yields those robust good average Long-Term returns, some people are afraid to start investing because they think that the market is near the peak and a few months ago we were at a peak, and some maybe would argue that now we are on the way down. Other people will say that maybe we're right at the bottom, but if you start investing at the peak - and you continue to investing over a time, you will also be investing on the way down at much cheaper prices and, at some point, you'll be investing at the Bottom, when the prices are at their best and the old saying goes that time in the market always beats timing, the market, if you were looking at this chart in may 1995, you could have also thought that the market is maybe nearing a peak and if you Held onto your cash and you didn't invest, you would have missed out on one of the biggest bull runs ever in fact, the biggest bull run ever over the next five years, and the stock market would never drop to the same price again now, let's quickly cover The difference between investing and trading because a lot of people confuse the two and sometimes people use the two words interchangeably. Investing and trading are very different things. Investing is the aim to grow your money slowly, but surely, on average over time, many investors will put their money into stocks for years and years waiting for those big returns as an investor, you will typically be putting your money into investments every now and then maybe Every month, when you get paid and you won't sell your investments very often at all trading is different.

Trading is trying to capitalize on the short term movements on a stock. This might be based on news, maybe based on trends, maybe something else as a trader. You don't really care what the stock price will do in the long term. You are not here for the long term, you will be looking at price movements within the day, sometimes doing swing trading over periods of a few days as a long-term investor.

You should be making your decisions based on fundamental analysis. This is the complete analysis of a company digging into their financials forecasting. What you think the share price will be in the future. Based on that information, and i will cover fundamental analysis in a huge amount of detail later on in this video traders, though, will use something called technical analysis.

They will look at the fluctuations on the share price by the minute. They'll be looking at these candlestick charts that you might have seen in movies and try to predict what will happen based on the shape of those candlesticks based on support lines, trading volumes, etc. There are a lot of people out there on youtube. Who will tell you that you can make a lot of money doing trading and many channels pretend to talk about, investing and really talk about trading? But the truth is the exact opposite.

The vast majority of retail traders will lose money over time as a trader. You are competing against professionals and highly sophisticated algorithms, and then you have to pay trading fees and platform fees and taxes, and the worst thing is that most of the movements in the market in the very short term are somewhat random and pretty much impossible to predict. Even by those sophisticated platforms and take it from someone who has actually done it professionally, no matter what you get told about the shape of the candlesticks, no matter how many lines you draw on the trading chart, nobody actually really knows where it's going now. Out of the small minority of traders who do make money, most of them actually end up earning less per hour than the minimum wage job.

So just think about that as an investor. There are two ways in which you can invest your money. There are active and passive investors, passive investing is when you don't have to do any of the work or the thinking. Your job is just to put the money into the stock market on a regular basis, and that is it.

Passive investors will invest in an index which covers a whole, the market, maybe some kind of large chunk of it, depending on your preference. This could be something like the s p 500, which i mentioned before, which includes the 500 biggest companies in the united states, or you can invest in an index related to a specific stock exchange, like the nasdaq 100, for example, which is the 100 biggest companies trading On the nasdaq stock exchange, another popular option is the total market index, which includes smaller companies, as well as the s p, 500, or even a total world index, which includes companies from all over the world. But once the money is in that index just tracks those companies and adjust the distribution of the companies within the index based on the relative size of those companies, the s p 500 by the way will be the majority of your index. Even if you invest in the us total market or even the world index, because those companies are so huge, so it is pretty important to track what's happening in the s p 500, regardless of what it is that you're investing in active investors, on the other hand, Choose to pick the specific companies that they're investing in the thinking is that if you pick the best companies in the market and do not pick the ones that you think will underperform, then you can beat the market and get better returns.

Active investors will need to assess each investment and decide if the share price is lower or higher than they think it should be. I will explain this process in more detail a little bit later. I personally am an active investor. The vast majority of my personal portfolio is made up of specific stocks that i have picked.

However, if you choose to go down that road, it is really crucial to know that the vast majority of active investors will lose versus the market in the long run. This is true even for big funds, with thousands of analysts and sophisticated tools trying to pick stocks. The s p 500 contains large cap u.s companies and 94 of actively managed funds trying to beat the s. P 500 over the last 20 years have actually earned less and as a retail investor, you have access to far less information, far less analytics than those funds, and you don't have a thousand smart analysts working for you and you don't have the time that those guys Have so, unfortunately, the vast majority of active investors will lose versus the market in the long run.

The numbers don't lie. If 90 to 95 of active funds lose versus the market, then it is likely. The number is even higher for retail investors. So if you choose to be an active investor, this might not be one you want to hear, but it is important that i make you aware of the statistics.

Maybe you're going to be able to beat the market, but the chances are that you will not. Now. Let's quickly talk about the stock market risks, you have probably seen the disclaimers and the warnings that people write your capital is at risk, etc. I have them in my description too.

So what are the main risks of investing in the stock market and how much risk do you carry? How risky are these types of investments? Well, the main risk for stock market investors is called market risk, and this is the risk that the value of your investments will drop. Pretty simple right and the main component of that risk is called equity risk. This is the risk of the specific stock that you have chosen, or the group of stocks that you have chosen through an index just drop in value. So let's say you buy a share of tesla for let's round it up and call it a thousand dollars and then that share price drops to let's say eight hundred dollars, as has recently happened.

This drop is the equity risk. If you invest in foreign stocks, you also have currency risk. This is the risk of the currency that you're investing in will lose value versus your home currency. So i live in the uk and i invest in u.s stocks.

If the value of the dollar drops and the price of my stock stays the same, i will actually still lose money in pounds on my investments. When i convert the money back, the next important risk is inflation risk. This is the risk that inflation will go up, and this has a direct and an indirect impact on stocks. The direct impact is that higher inflation will increase the cost of capital, and this will increase the rate at which company valuations are discounted, and that means that profits from next year, the year after and all future years, will have a higher discount rate applied to them.

And that will drive down company valuations as valuations drop. There is a good chance that the market price for the stock will fall as well. This has recently happened with a lot of great stocks, a lot of earlier stage. Companies losing a lot of value because of this effect, the indirect impact of higher inflation is that central banks will have to start raising interest rates to combat the inflation.

This is the situation that we're in right now, as these rates increase the yield on government bonds. Also increases that's the interest that the government will pay to people lending the money and if that rate increases a lot, some money will move from the stock market into the bond market. Many investors will much prefer a stable and guaranteed rate of six or seven percent per year from bonds to an average rate of return of nine percent per year from the stock market that could crash at any moment. The next type of risk is liquidity risk.

This is not really much of an issue if you're investing in large blue chip stocks, but it can be an issue if you're investing in smaller companies. Small companies will only have a small number of shares being traded every day and depending on your broker, it could take hours or even days, for your trades to go through the london. A market is a good example. It has some smaller uk-based companies listed on there, and i've sometimes had to wait days for my trades to complete companies with lower liquidity also often have a higher natural spread.

This is the difference between how much people are prepared to buy and sell the same stock. At the same time, the gap between those two a little bit like with foreign exchange, you can also suffer from liquidity risk. If the company you are investing in runs into trouble. This is rare, more rare than some people would like to think, but sometimes companies declare bankruptcy or run into other issues and in those cases their stock can stop trading or even be completely delisted.

In that case, you will have lost everything we have seen this happen recently with chinese stocks being delisted from the new york stock exchange and russian stocks being de-listed in london. In these cases, you will own a load of shares that you cannot sell. Sometimes the d-listing process might grace your shares, for example, to the hong kong exchange or pays out their fair value at the point when they get delisted instead. Sometimes, though, you are left absolutely with nothing, the last important risk to note is horizon risk.

When you buy into a stock, you will have a period of time over which you plan to hold it. That may be a few months, depending on your circumstances, or maybe many many years, and during that time the price of the stock will fluctuate. Sometimes it might go up. Sometimes it might drop back down.

There is a risk that at some point when the price is particularly low, for example, when we're going through a crash life, will throw you a lemon. You might have to sell your stocks because you need the cash urgently. You might need to replace your car. That's broken down, maybe you need to repair your house urgently.

Buy a new house. Have a wedding have urgent medical bills, whatever that may be, and it is really important to be aware of this risk because some people completely ignore it and if life forces you to go and sell at the worst possible moment when the market is down, you might Be forced into taking a really big loss on your investments. Next, let's talk about how much you should invest. This is a very popular question, but the answer really is: it depends.

Investing is a powerful way to grow your wealth over time and there are a lot of very good reasons to start investing, but it also has risk, and it also takes time to really learn and really understand how to invest. If you really need an in-depth guide for how much you should invest and when you might want to actually consult a licensed financial advisor, who would then be able to look into your specific situations, your specific circumstances, but here are my three top tips. The first tip is to start with lower amounts and go for low volatility and lower risk options, such as investing in the s p 500 index. That way, you will get to see how the market works see, how investing works build up a bit of experience before you go and plow more money into higher risk assets.

Should you choose to do that? The next important tip is to be very careful with investing money that you might need in the next year or two or even five. If you have a lump sum that you might need for something quite important like buying a house, it might not be a good idea to go and put it all in the stock market, because a market crash, for example like the one that we are having right Now would easily wipe out 40, 50 or even 60 or theoretically, even more of your investment, and if you need your money urgently, that could mean that you can't buy the house. You can't do whatever that important thing is that you wanted to use the money for, and the most important tip is to invest frequently and consistently because of stock market fluctuations. Investing money regularly means that you can get that consistent, robust average rate of return.

Over time. Remember that time in the market always beats timing, the market in the long term and trying to be strategic with when you put your money in when you put a lot of money back out, will, on average lose money versus just making regular monthly deposits. For example, every time that you get paid so, let's quickly cover what the different types of equities and securities are. What are these different things that you can invest into in the stock market? It's actually pretty simple and i think most people will only ever use the first two, so the options that you have and that i'm going to explain in detail are individual company shares etfs index funds, mutual funds, trusts and instruments.

First, let's talk about individual company shares. These are the most basic things that you can buy in the stock market. You simply invest your money into specific companies, the best thing about buying individual stocks, that you know exactly what it is that you are invested in, and you have full control over that investment and there's no algorithm or fund manager making the decision for you. As a result, you also don't have to pay any annual management fees when you buy stocks, as you would do, if you are buying funds, the big downside with individual stocks is that they require far more time, far more effort and knowledge to do right.

Investing in individual stocks also carries a much a substantially higher level of risk. You really need to know how to value stocks when to buy and when to sell those stocks and how to manage your portfolio. Stocks are very volatile. Some bad news about your particular company can send the shares down by 20 in just a few minutes, and so you will usually pick a number of different stocks in order to have some kind of balanced portfolio.

Some people recommend, having 50 or even more different stocks to diversify your risk, but i personally don't think that is a good idea and i'd say it is probably best to stick to a maximum of maybe 24 individual investors. This is because you have to constantly monitor and track each stock. Revise your valuations, reassess the numbers balance your portfolio rebalance your portfolio. It is almost impossible to do this properly as a regular retail investor.

If you have 80 or 100 different companies to keep track of and reassess every quarter next up are etfs. These are very popular options and i would say that some etfs are probably the best starter options for beginner investors. Etf stands for exchange, exchange-traded fund. It's basically a fund that has its own stock.

You can buy it on exchange. Just like a regular company. Etfs can be active or passive. They can either have the managers decide what it is that you are going to be investing in based on a theme or an objective, or the etf can have some preset rules in place which determine which stocks they buy and sell over time.

A popular example of an active etf is the arc innovation etf, led by kathy wood, which is very popular at the moment and focuses on tech companies. You put your money in and then the fund decides which companies they buy and sell on any given day. You just get to sit back and watch and follow their decisions. An example of a passive etf is the vanguard: s p, 500 etf, a vue in the us vusa in europe.

It's the same thing: they invest in companies in the s p 500 index and make daily adjustments to the portfolio to make sure that the companies are properly weighted by the relative size. But that is all that they do. There is no judgment and there is no determination by the fund manager as to what the trade should be. The biggest advantage of etfs is being able to diversify your investment automatically with really very low fees.

The vanguard s p 500 index that i just mentioned only cost between 0.03 and 0.07 per year in management fees depending on where it is you live and which version of it you buy. You won't even have to directly pay these fees. They will never come out of your account. You won't ever see it on a statement.

They are automatically deducted through the share price movement of the etf, but as the fee is so low, the likelihood is, you won't even ever notice it market index based etfs will outperform the vast majority of active investors over time. This is critical to learn critical, to understand and to keep at the forefront of your mind. So for anyone starting out and investing the overwhelming likelihood is that you will earn more money by investing in one of these over picking your own stocks. The downside with etfs is that you don't have any control over what you are invested in either market forces or the fund manager will make all the decisions for you.

If you're invested in arc and kathy wood just goes and decides on some really particularly bad. Investing decisions, then your investments will also suffer if the whole market goes and has a downturn, except for some sectors and you are invested in the whole market, then your investments will go down too. So now you might be confused. What is the difference between index funds? Mutual funds and etfs they all sound kind of similar, aren't they kind of the same thing.

Well, i just talked about the vanguard s. P, 500. Etf! Isn't that an index fund, because i use the word index well because it tracks the s p 500 index. We refer to those types of funds as index funds.

Etfs are basically a more modern version of an index or a mutual fund. In fact, index funds are really a subset of mutual funds. Index funds track a predetermined index, while active mutual funds try to go and beat the market famous indices are the s p 500. The 500 largest companies in the us, the nasdaq composite the nasdaq 100.

These are companies listed on the nasdaq stock exchange. Some people choose the dow jones industrial average. This is a weighted average of 30 selected large us companies or the ftse 100, even for example, which is 100 largest publicly traded. Uk companies funds are the same as etfs in that by investing in one fund.

You are really investing a big basket of different companies or assets. The fund, though, does make all the investing decisions, just like with an etf and rebalancing of the portfolio and etfs are just a more modern version of the funds. That's how i like to think about it: etfs are traded, live on the exchange, the prices move just like they do with regular stocks, while funds will often only allow you to buy or sell once a day at closing, ets will usually have lower fees and not Require large minimum investment amounts, as some funds do, but there aren't that many etfs registering and operating one requires a fair amount of work, a lot of capital, and there are a lot more funds focused on specific investment strategy or investment types than there are etfs. Although the number of etfs is growing, fast, trusts are not as common or popular as stocks, etfs or funds, but they are another option and you might have heard of them as an investing option as well.

Trusts are very similar to funds. You invest in shares of the trust and the trust then goes and invests in stocks and assets, but there is one really critical difference. Funds are typically open-ended while trusts are closed-ended and what does this mean? Well, funds and etfs have an unlimited supply of shares. You can always go and buy more and buying and selling shares does not affect the share price.

The price of the underlying assets is what affects the share price. Only movements in the price of the stocks within the etf within the fund investments is what affects the share price and the return. So if an etf only carries shares of tesla and you go and put in a thousand dollars buying more of that etf, that etf will simply go and own an extra one thousand dollars worth of tesla. Tomorrow, you can deposit, another thousand, and the etf will just go, buy another load of tesla for a thousand dollars, and so on and so on.

A trust has a fixed number of shares and this is the critical difference so supply and demand for the trust shares. Also affect the price, as well as the things that the trust is invested in and so trusts are quite a bit more complicated. They have less rules and can be more flexible with their investments, but their share price is determined by the performance of the underlying assets and the sentiment on whether the trust is performing well. Reits are a type of trust that have become very popular recently.

They're just trusts that specifically specialize in investments in property read stands for real estate investment trust, but although reits invest in property, the returns and the way that you earn money on actual real investments and property work completely differently. So don't confuse the two investing in property and investing in reits are really not the same thing last. Let's briefly touch on instruments and derivatives as a beginner. I would strongly urge that you do not try to invest in these types of products until you really understand the way the stock market works have significant amount of experience.

It is very, very easy to lose all of your money. If you do not know what it is that you are doing, and in fact the majority of retail investors, investing in these types of products do end up losing money, even if they do know what they are doing. You might have noticed some of the investing platforms that you have looked at. Have this disclaimer saying that 70 or 80 of their users lose money when trading cfds? That is a legal requirement in the uk, for example, and cfds, are a type of instrument.

There are a lot of different kinds of instruments. There are basically products whose price is based on some kind of underlying asset, but isn't a direct representation of that asset. Some of them use money as leverage. You can borrow money to trade more stock than the amount of money that you have.

This is how cfds work, in particular, for example, so c of d stands for contract for difference, so you might only have money for one share of tesla, but you go and buy a cfd and you get the equivalent of five shares of tesla. Having borrowed money for the four extra shares, the big risk there is that, if tesla's share price drops by a fifth, you will lose a hundred percent of your investment because of that leverage. Whereas if you only owned, one share you'd only be 20 down, and if the share price of tesla then goes back up, you'd be able to make up the difference. Other instruments use time as leverage you agreed to buy or sell something at some point in the future at an agreed price.

You hope that the price at that point in the future is going to be either higher or lower than the agreed price, depending on whether you are selling or buying. But instruments carry much much higher risks and are really not suitable for beginners leveraged products could make you lose all of your money if the price swings too much in the wrong direction and some types of leveraged products, some types of instruments have unlimited downside, which means That, even if you only can make up to say a hundred dollars in terms of upside, you could theoretically lose thousands or hundreds of thousands of dollars along the way instruments and derivatives can amplify your gains in exchange for paying extra fees. So in some ways it is possible to make more money with the same amount of capital invested. If your stock goes up on price, you can earn in theory several times that gain by using leveraged instruments, but if the price of the stock goes the wrong way, if there is a market crash, someone news that you haven't expected, you could lose all of your Money and if the price doesn't move, you will also lose out because you have to pay a load of fees associated with those instruments.

Okay enough about that, let's now move on to how you would actually choose your investments. Remember i am not here to tell you to buy or not to buy something. This is just an educational video everything i'm going to be covering is just being used as an example. There are a lot of factors to consider when you're choosing your stocks that you want to invest in.

If you want to go down that road. This whole section deserves a whole series of videos on its own, and i will be making more in-depth videos and guides on these topics. If you haven't subscribed already make sure you do so, you can go and watch those and remember that in the majority of cases, investors would do better, not picking individual stocks and investing in an index instead, but no matter how many times i say that and i've Said that enough times in this video already, i still know that a lot of people will go and pick their stocks anyway. So, given that we all know that this is going to happen, let's talk about it here are a few quite basic but fairly important tips.

Clearly, you want to identify companies whose share price will grow in value in the future. That is the point of investing. There are three core reasons why a company's share price might grow in the future. The first is because of general market movements, market fluctuations, booms, bus market crashes, speculation and a whole lot of other stuff that you can't really predict or plan for.

The second is if the company grows and develops at a higher rate, at a faster pace than what the market on average expects from them at the moment, and the third is if the company's current share price is, for whatever reason undervalued compared to what a true Fair share price, for it should be. This would happen if the investor consensus, for example, underestimates the value of the company's assets or the value of their future earnings and cash flows from the company. So how do you go and find these companies? Well? There are a few factors that are often underestimated by the markets. The first one is industry growth.

A company can be a particularly good investment if the company is growing, but also the industry within which the company is growing is also growing. This is how some tech giants have been able to grow in value so much in relatively short periods of time. In the 90s, people would say that the internet won't catch on. There was quite a lot of skepticism when the first iphone launched.

There was a lot of negative news when the dot-com crash happened, and yet those new industries were clearly disrupting our lives for the better and the share price of the leaders in those disruptive industries has gone absolutely ballistic. Another important factor in picking companies is analyzing their unique competitive advantages. Are there big reasons, specific reasons that you are aware of why this company's product or service cannot be commoditized? Do they have unique strengths that cannot be easily replicated brand history patents, economies of scale experience? These are all huge competitive advantages and one of the most overlooked factors, often investing that can create many competitive advantages, is being first to market. First mover advantage is a huge factor.

It is also one that people will very easily dismiss. People will say that well, facebook wasn't the first social network and youtube wasn't the first video sharing platform and those things are true, but that is because being first is not the only important factor and first mover advantage really really takes hold once you get above a Particular adoption threshold early on in every industry, there will be a lot of different competitors trying to take a slice of the market. But when a true leader emerges just like what happened with facebook or google or many others that can lead to very, very substantial long-term advantages, somebody could go and create a much better social network tomorrow than facebook, maybe with better design, maybe with better policies whatever, but Their platform will have nobody on it, while facebook has 2 billion active users every day. So if you want to use a platform to communicate with other people, why would you use the new competitor, however much better? It may be once facebook has already stolen that much anyway.

Let's talk about how to evaluate a stock in this section, i will walk you through how to look at company financials, which key numbers you need to know and understand, and what some of the jargon in these papers means analysis of a company stock falls into two Different parts, quantitative and qualitative one state of analysis is what i will mostly be talking about in this section. It is all about the numbers, the data things like the company's profit and loss statement, their balance sheets sales numbers. Qualitative analysis - is the opposite. It is looking at things that can't be quantified at least not quantified easily.

How good is the company's strategy? How strong is the management? How good is their product both of these are really important, and you really need to make sure that you do both when you're assessing an investment. So, let's start by talking about the financials, there are four key types of financial information that you will want to look at when evaluating stocks. That's trading data, profit and loss statement, balance sheet and a cash flow statement, i'm going to go through each of these. In turn and explain what they are trading data is the easy bit.

This is the information about a company stock. You can find it on lots of different websites. I personally use seeking alpha and find it extremely useful. I use it for all of my analysis.

If you want to use it, i have a 50 discount code in the description in the resources section of the presentation so feel free to go and check that out. If you're interested, even i didn't, get a 50 discount code because i started using them way way way before i started talking about it on youtube, you want to know what the total number of shares is and what the current share price is. The total number of shares outstanding for a company is how many shares there are in total out there for that company and if you take the current share price and multiply it by that total number of shares, you get the company's market capitalization or market cap. So it's relatively easy and the market cap is a sort of total value of the company.

Imagine if somebody wanted to go and buy that business outright, so they had a whole load of cash like elon musk at the moment, trying to buy twitter and they wanted to go and buy. That company market cap is how much it would cost to go and buy every single share. Some of the other indicators can also sometimes be useful to look at, although i really don't pay very much attention to them. The beta value, for example, shows you how volatile the stock price is.

If beta is above one, it is more volatile than the market on average, and if it's below one, then it is more stable than average. You can see that tesla, for example, has a beta of 2.09, indicating it is more volatile than average, while coca-cola has a beta of 0.7 trading volume is another interesting metric and can be useful. That shows how many shares on average trade hands every day. So the more shares that trade, the easier it is going to buy and sell the stock and with large companies there are millions of shares being bought and sold every day, but if too many shares are being traded every day, it is also an indicator that that Particular company is susceptible to trader based fluctuations, because people are not necessarily investing in the business as much as they are just trying to catch the swings.

You can sometimes see trading volume as the little bars underneath the share price chart, and you can see that tesla, for example, has a trading volume that can be 17 million shares a day on the low days or as much as 140 million shares per day. On the high trading days and given that tesla has roughly 1 billion shares out there in total, that means that between 1.7 and 14 of all tesla shares are bought and sold on average every trading day. Now, let's briefly, look at the profit and loss statement. All three different financial statements are very easy to find for any publicly listed company.

You can use tools like seeking alpha to get the data or you can just go, and google company name investor relations, and you will usually find quarterly reports and annual reports relatively easy from that for u.s companies. You can find more in-depth information if you go and look up the company's sec filings. Those go into a bit more detail. The profit and loss statement is the one that tells you whether a business is making money.

So let's look up tesla's, for example, and look at the p l, so i will go into google and i will type in tesla. Investor relations then go and find the latest results. Usually, you will see them when you scroll down and click around and you'll find them pretty quickly. Here is tesla's latest results for q1 2022, which came out not too long ago.

Here you will have all three. The p l first sometimes called the statement of operations. Then the balance sheet and the cash flow statement, the order can sometimes be different. Sometimes companies like to put in the balance sheet first, sometimes it's the p l just go and look at what they're showing now the formats of these profit and loss statements.

Kind of look a little bit different, but generally when you look at them more and more you'll notice that they kind of follow the same structure in each one at the top, you have the total revenue. Sometimes this is split out into segments like it is over. Here you have three different types of automotive revenue, energy revenue and then services and other. This is the total amount of money that the company has earned, how much they got paid for selling their services and products, and at the top you will see that this data is per quarter, be careful here, because sometimes this data can be shown for half a Year, sometimes for nine months or a whole year generally, the bigger companies will almost always report it on per quarter basis, but with smaller companies it can be a little bit different and you will almost always have the same period from a year before that you can Compare the numbers to so here.

You can see that, for example, q1 2021 is the same quarter from 12 months ago, so that you can compare the numbers, because these numbers are very large. They will also always be in thousands or millions so go and check at the top here. It says that everything is in millions of dollars. So just keep that in mind when you're looking at numbers.

So you can see here that tesla has earned 16.861 billion dollars from automotive revenue in q1. They also earned 616 million dollars from energy and a further 1.279 billion dollars from services for a total of 18.756 billion in the last quarter. The next section below revenue is the cost of sales. This is the direct cost of providing the product or service by the company, so how much it actually costs to manufacture those tesla cars and whatever other products that they sell in a factory and ship them to the customers, if you like, and the total cost of Sales for tesla here is 13.296 billion dollars.

The gross margin is the difference between the revenue and the cost of sales is basically measure of how much do you make on your products and services before all the other costs of running your business? What is the difference between how much it costs you to provide them? How much it cost you to make those things and how much you then charge for them for companies that manufacture things? This gross margin will typically be a lot lower because it costs a lot to have factories and ship physical products for software and information companies. The gross margin will usually be a lot higher, sometimes in the 80s or even 90s, 90 or higher. If you divide the gross profit by the total revenue, you get the gross margin as a percentage, so here 5.46 billion divided by 18.756 billion is 29, and that is a really really good number for a company that sells physical products, especially large physical products like cars. Next, up in the p, l are the operating costs and these are the costs of running the business.

There are usually three big items in there. These are research and development, usually known as r d, marketing and general. Now. Research and development is the cost of developing and improving the products and services research into new technologies.

Development of new prototypes designing how the product will work. All of that kind of stuff marketing is just the cost of advertising and promoting your business and general expenditure is well everything else. The cost of you know having basic offices, staff, etc, etc. Sometimes companies merge marketing in general together into one, and you can see that tesla have done exactly that here.

Tesla actually don't spend money on marketing. So, although it is included that particular part of their budget is zero, but when companies do they sometimes still won't show you that marketing budget as a separate line, so in the last quarter. In this example, tesla has spent 865 million dollars on research and development and 992 million dollars on selling general and administrative. So, after subtracting those operating expenses, we have an income from operations of 3.6 billion dollars, and this is the figure that broadly says whether your company is profitable or not.

Overall, then, you have a few other things like finance adjustments that are generally not as important and then the income before tax, which will usually be very similar to income from operations, subtract tax from that income, and you have the net income figure after tax at the Bottom tesla made 3.28 billion dollars after tax in q1, and that is about all. There is to it. The earnings per share is just the net income number at the bottom, divided by the total number of shares. So you can see here how much the company earns per one share outstanding.

Next up, let's quickly, look at the balance sheet, the balance sheet shows you what the financial position of the company is, how much money they have, how much money they owe to other people. In debt, the assets are what the company has, what they own and the liabilities are what the company owes other people, both assets and liabilities can be current and non-current. Current just means that the assets or liabilities will materialize or have to be paid in the next year. Non-Current is everything that is over one year out, pretty simple.

When you know it right, it doesn't look quite so daunting.