Stock market for beginners 2019. Welcome in guys if you’re new here I am Karan. This is the financial education article and here today if you’re a beginner in the stock market you are in the right place. OK, I’m going to take you through some of the most important questions you got to ask yourself if you are a beginner in the stock market and kind of like how do you invest in stocks. We will answer some of the most popular questions out there. What are stocks what is the stock market? Where do you buy stocks? How do you make money from stocks? What are different stock market strategies there are a ton of different strategies like what are they OK? Where do you learn about stocks? All right. How are you? Gains tax so if you make money on stocks. How are the tax or the tax differently than regular income right? How long to know everything like how long does it take to kind of accumulate a lot of knowledge in the stock market. How much money should you put in in your first year of investing?
If you’re lazy can you still make money from stocks and isn’t even worth investing small amounts of money so we’re going to go through all of those today some of the biggest questions out there. I hope you guys get a tremendous amount of value out of today’s article where you go through all has hit a thumbs up if you do. If you’re looking for more premium courses on stock market investing I have those linked in the description so you can check out that if you are interested. All right. So first thing what are stocks how I want you to think about a stock.
It’s basically ownership in a company OK. It’s ownership in a company and that’s how you should be thinking about stocks. All right. So if you buy one share of Apple stock for instance right. You are now part owner of the Apple corporation you are a very very very very very small owner of Apple Corporation but you are technically the part owner of Apple stock. OK, you go and buy one share of Coca-Cola stock or 10 shares or one hundred shares. You are part owner of the Coca-Cola Corporation. All right. And the more shares you accumulate the bigger as a percent of an owner you are. All right. Now as most people are most average Joes out there if you’re investing you know let’s say thousands of dollars even hundreds of thousands. You’re a very very small owner in that company but you are still an owner of the company and these stocks trade on the stock market which is basically where it shares our exchange. OK. People are buying and selling stocks constantly for many different reasons. All right. The markets open Monday through Friday it’s open seven hours a day every day on Monday through Friday unless it’s like a holiday or something like that when the markets are closed and you sell these stocks anytime you want.
You can buy em Anytime you walk and you are literally the part owner of a corporation that’s how you should think about it. OK. And it’s pretty cool because you can think about it as you can go from basically having no ownership in anything in life to you’re actually part owner of a major corporation. It’s cool you’re a very small owner but it’s still really cool guys. OK. Now, where do you buy stocks like where’s the where do you actually buy stocks out. There are a few different apps and different platforms and whatnot.
investing small amounts
I’ll kind of talk about two. So most people if you a beginner in the stock market especially if you’re investing small amounts of money there’s an app called Robinhood that’s more and likely going to be good for you. OK. This app called Robin Hood is awesome for most beginners in the stock market because they don’t even charge commissions so essentially meaning that you can buy a stock and they don’t even charge you for buying that stock. Okay. You just have to pay how much the shares were so let’s say you buying Home Depot shares right. And let’s say Home Depot was trading one hundred dollars a share. All you need is one hundred dollars in your account. You can buy the Home Depot share for 100 bucks. They don’t charge you a commission on that. We’re almost every other platform out there actually charged you a commission meaning that you have to actually pay a fee every time you buy or sell a stock. OK. So for most beginners, the stock market Robin Hoods good customer service levels maybe not as good as some other platforms and whatnot. The one I mainly used as a company name Fidelity Investments.
I’ve been using them for a long long time and they’re phenomenal they’re about five dollar commission trade per trade placed out there whether you buy one share or a thousand shares or anything across the board. They charge about five dollars but Fidelity Investments. I really love them because they have really good customer service. OK. I feel like I also have good security and things like that. Customer service like I can call them up anytime a day and they’re there to answer my questions. OK, so they’re the ones you can do out there.
They’re like Scott trade new trade and T.D. Ameritrade in some other different platforms but in my opinion, like it depends if you’re looking for really good customer service you’re probably into want to go fidelity and especially if you’ve got bigger amounts of money probably fidelity. If you’re investing smaller amounts of money you don’t care as much about customer service you just want to you know place trades with no commissions. The Robinhood app is going to be phenomenal for you guys out there. OK now, this next one. How do you actually make money from stocks?
All right. So as a beginner in the stock market there are essentially two main ways you’re going to have a chance to make money from stocks. All right. There are more complicated ways to make money from stocks that we’re not going to get into options and things like that when I get into the business of beginners in the stock market article here. But essentially how you can make money from stocks is you buy a stock. Okay let’s say you buy the stock ABC and you buy 100 shares hopefully over time holding those shares it goes up in value it appreciates.
No different than anything out there real estate or something like that. Right. And hopefully eventually you know it also gets to one hundred and twenty dollars or whatever price and you decide to sell out and so you saw it for 120. You bought it for one hundred. So you made a 20 dollar profit per share on that stock. All right. That’s one way you can make money from stocks as if you get it in the stock market the other way is through collecting dividends. So as I say not all companies pay a dividend but there are a lot of the bigger companies out there which are mostly the companies you’ll want to invest in as it began in the stock market.
They pay a dividend yield. OK. So meaning you can basically buy these shares and you get paid dividends every three months generally speaking. OK so let’s say this stock has like a 2 percent dividend yield when you buy it. OK. So that means per know each year you’re going to basically receive two bucks in dividends per share you own in that stock. So you just hold that stock and you get dividends paid out every three months into your account. OK. That’s a 2 percent yield and over the course of a year, you’ll get two dollars in dividends.
Make Investment in bigger companies:
Now one of the great things about dividends is a lot of the bigger companies that are very profitable and very well-run they actually raise their dividends over time. So although you first buy the stock and you’re getting two dollars per share paid out to you per year right. Also over time as long as they continue to execute on their strategies also over time you can start getting four dollars per share and then six dollars per share and their dividends generally increase. Are there a massive amount of companies out there that have consistently raised dividends for like 20 30 40 50 years in a row and these dividends get bigger and bigger so all you know you buy in and you might only be collecting two bucks per share also over time.
You know it goes up and up and up. OK. So those are two main ways. As a beginner in the stock market can make money one is buying your shares increasing in price over time and you’re selling it for a profit and the other way is obviously through collecting dividend money all right. Just one disclaimer about dividends is it doesn’t always count on dividends because a company can cut dividends at anytime they want. Most bigger companies usually don’t unless they go through some big financial troubles and you want to stay away from those kinds of companies.
All right. So that kind of covers the main ways you can make money from stocks overall. Now this next one. What are some different stock strategies and they’re kind of like three IO say three main stock strategies out there and almost everything branches off of these three stock market strategies all right. I’ll tell you which one I do. So the first one and this one I do not do but there’s one called day trading. OK. There’s one called day trading and there’s another one that’s called swing trading.
Day Trader and Swing Trader:
And once again almost every type of investing or trading goes off of these three strategies. And then there’s long term buying. buying and holding basically and almost everything comes off of these three strategies. OK, one strategy two strategies three strategies. Now the goals of each of these are very very different OK. A day trader is generally trying to get out of stock very quickly. So they’re trying to capitalize on a very small movement in stock in the basics that’s how they’re trying to make money
So they buy a stock and if it goes up a few cents or a dime or whatever they’re going ahead and selling and trying to book a profit that way. All right. That’s one strategy I definitely don’t do that when swing trading is more like me. There are a lot of different ways you can swing trade but it might be something like you’re really bullish on the market. Coming up this upcoming week you think you know the government’s going to come out with some good economic data. You think a specific company is going to come out with some amazing earnings or something to go ahead and buy a stock for the short term and try to swing trade and hope you know it goes up and everything goes your way.
And then you sell out and hopefully make a profit. OK. That’s different that’s another strategy that’s also a short term in nature. But generally yes is a much longer term than something like day trading usually swing traders are doing something for a full day or maybe even a full week or maybe even a full month type play where day traders are literally just getting into stocks like within minutes or something like that. OK. Sometimes even seconds with the machines. Now the one for me personally that I really like is long term buying and holding.
OK. So there are a lot of different strategies even in long term buying and holding. There are different strategies like some people buy stocks and they say I’m going to take this stock to the grave with me as in they’ll keep that stock forever so they buy a stock and they’d like just hold it for their entire life. OK. And hopefully over time they get paid out NASA amounts of dividends and those shares appreciate over time and that’s awesome for them. OK. There are some people that are like I’m buying a stock for at least 10 years.
My kind of horizon for long term buying and holding is more like three to five years out is what I’m looking doesn’t mean I’ll always hold a stock for three to five years but when I’m thinking about the company I’m kind of thinking like three to five years out because that’s what I can kind of realistically see 10 years from now.
That’s too far into the future. OK. It’s too far into the future. And if I’m thinking only like one to two years out in my opinion that’s just too short term in nature. So I really got to think like where’s this company going to be in three years from now five years from now maybe even seven years from now that’s kind of my strategy there and I’m basically buying those stocks sometimes is to collect dividends depending on the stock. But sometimes I believe those companies are going to appreciate greatly over the next 3 5 7 years because they have a lot of bullish vectors going for them.
OK. And this is the one that in my opinion most people can pull off. OK. I think most people if you have a work ethic you have a passion for investing. I think most people can become long term investors in companies all right. This is love Warren Buffett type philosophy where you buy stocks you hold them for several years hopefully they appreciate over time and you can collect dividends if it’s a dividend paying company all right. These other ones are a much harder challenge in my personal opinion. OK. So those are your strategies out there.
I’m definitely down here with the more of a long term buying perspective right now by the way. And you can sell a stock at any time. So if you’re just wondering like how long do I have to hold a stock for like you said like you would buy a stock and within seconds you would sell that stock if that’s something you want to do or something like that. So that’s one of the beauties about stock market investing is it differs from a lot of other things like real estate investing like you can’t just magically sell a real estate investment property or something in seconds a stock you can get out of in seconds.
Where do you learn about stocks?
OK. So the question is Where do you learn about stocks. So the best place to learn about stocks is let’s say you find a stock. Let’s say you want to look into Google stock. All right let’s say Google you’re like man I like Google they own you know cloud products they obviously own Google search engine they own YouTube Google I want to look into this company OK. I want to research it. How do I go about researching this? Well, you go to actual google search and then what you do is you just type in Google Investor Relations OK Investor Relations.
All right. And when this is typed in basically generally speaking almost every single time whatever company you search Investor Relations it’s going to be the first tab that comes out. So you can type in if you want to look into Coca-Cola you could type in Coca-Cola investor relations if you want to look at Pepsi you can say Pepsi Investor Relations Apple investor relations generally going to be the first thing that comes up in the Google search engine. OK. So you go ahead and click that. Now you’re into you know the Googles Investor Relations page and one of the places I would like to start is what’s called the 10 K or the annual report.
OK. The annual report. And I suggest you read through this entire annual report 10k you’re going to find out so much incredible amount of information that’s going to give you know a very good understanding of that business model overall. All right. The 10k annual report you’ll see all the financials of the companies that we’re talking income statements the balance sheets all those type of things where balance sheet is you know like how much money they hold in cash and investments and things like that versus some of their debts and things like that where the income statements more like how much revenue is coming in the door and how much of that revenue is actually reaching that bottom line and the profit engine and things like that.
So a 10k annual report you’re gonna find out so many good things in there you’re gonna find out you know their strategies you’re going to find out who their competitors are why their business was up or down versus last year almost anything you could possibly want to know is going to be that 10k in your quarter. After you’ve done that then I suggest you listen to the latest conference call. OK companies will all have their latest conference calls available on for the last quarter they did and listen to that kind of Foley and just kind of you know judge off that then after that I suggest you read what’s called a 10 Q which is a quarterly report which will also be on their Investor Relations page and after you’ve done all three of these things you should have a pretty good understanding on if this is a business you are interested in good looking more into okay in the future as far as like looking at PE ratios and things like that.
And if it’s something you’re still not you know you still don’t understand the business you like I don’t have any clue and you’ve already read the full 10k you’ve listened to latest conference call you’ve read the 10 Q And you still have no idea what that business does or its competitive advantages or why their business is good or bad then it’s probably not the company for you in this probably you should probably look into another company. OK generally speaking after you’ve done all three of these things you should have a pretty good understanding of the business.
But if you just can’t wrap your head around it move on to the next one. There are thousands and thousands of stocks out there to look into. So if you don’t understand one lie Don’t sweat it. Then the day but that’s what you’re going to want to do. Then you can use Web sites like Yahoo Finance and Web sites like CNBC and some other different Web sites out there to kind of look at PE ratios and different statistics like that. But here is the juice of it. OK here’s a Meet the Investor Relations page that’s the main place you’re going to want to learn about companies because they’re going to have the most accurate information on there and pretty much anything you possibly want to know about a public company is going to be disclosed in there.
how are stock gains tax?
All right. Now let’s get to the number six how are stock gains tax. The very important question here. All right. So stock gains are taxed differently depending on how long you hold a stock for and depending on if you receive dividends. So if you receive dividends first off OK. Remember we’re talking about those good old dividends. Just a minute ago you receives dividends into your account. That’s basically going to be taxed at. Right now I believe the government’s taxing those somewhere around of 15 15 percent rate and I think it can go up to just under a 20 percent rate if you get like a sort of you know a huge of dividends or what not but for most people you’ll be taxed the amount of 15 percent rate which is great for most people because that’s probably a lower tax rate than what you get taxed at your job or something like that.
And then basically if you hold a stock for more than one year and sell that stock for profit you’re going to be also be taxed at around this 15 percent unless you have a huge you know huge positions and like hundreds of thousands or millions of dollars in profits then I think your tax a little bit closer to 20 percent. But for most people out there you’re gonna be taxed at 15 percent. If you’ve held the stock for a minimum of one year and you went ahead and sold it. OK. Now if you hold for less than one year you hold a stock for less than one year and you saw a profit then you’re taxed at your income tax rate.
Riches generally you know pretty high I mean most people probably paid the income tax rate in the 20s. And if you make a lot of money then you’re probably paying closer to the 30s. So you can see a big difference if you hold stocks for more than a year. The taxes are definitely on your side at the end of the day because you’re paying a 15 percentage rate versus 20 or 30 or 35 percent rate or something like that. OK. And so it’s a big tax advantage to kind of be more of a long term investor and even a dividend investor versus someone that’s doing short term activities just because you’re taxed at a much higher tax rate.
How long until you know everything?
All right. All right. Let’s get into number seven here. How long until you know everything. All right. This is a this is I hear a lot of people ask me this. You know like how long does it take till you know everything. First off you will never know anything. Everything. And I just don’t suggest you go into anything in life and kind of like with the mindset of oh I’m going to know everything about this in one year or two years and like I know everything, in my opinion, you can get a very good understanding of stock market investing within one to two years.
OK within one to two years you should have a very strong understanding of stock market investing as long as it’s been something you’ve worked on each and every week for a year straight or something like that. You should have a very good understanding of stock market investing how it works. Good companies to invest in versus bad companies things like that. But in terms of knowing everything. I don’t think you ever know what everything like. I’ve been the stock market for 10 years. I wouldn’t consider myself I know everything about the stock market and like I’m a genius.
And the same thing I hope I never get them mentality even want to hit 20 years in the market 30 years. Do you get a lot of experience? Yes. And as time goes on everything is cumulative in this game. Meaning you get smarter and smarter with your decision making over time. OK. And as long as you stay away from bad things and bad decisions as far as like margin and things like that which we won’t get into in this article. But don’t ever touch margin something like that as long as you avoid things like that like your decision making process your understanding of companies everything’s very helpful your understanding of stocks and think about this way like for instance you know I’ve been the stock market for 10 years the number of stocks I understand their business models and I hasn’t looked into them let’s say in a few years.
All they have to do is do a quick refresh company and I’m already late like I’m thousands of companies in my head already mentioned somebody like Warren Buffett that’s been doing this for 60 or 70 years. So everything’s a game you know again as time goes on everything is cumulative and you get to you get more and more knowledge but don’t ever consider yourself as Oh I’ve been doing this for two years now I know everything I just don’t think it works that way. You’re always getting smarter you always get your decision making should get better and better as time goes on.
How much money should you put in in your first year?
All right. So that answers that question number eight. How much money should you put in in your first year? Well the rule, in my opinion, it once you know have looked at your stock market strategy and you decide which one you’re going to go after and decide like what type of stocks you want to invest in. In my opinion, it’s better to start small. OK. The reason being is and by small I mean generally hundreds of dollars or maybe you know a thousand dollars or a few thousand dollars or something like that.
It’s generally better to smart start smaller and that’s why I love when. When younger folks get started investing people that are just you know 18 19 20 or in their 20s to something that because generally speaking if you’re in those age brackets generally speaking you don’t have much money to your name yet. I think that’s the best position. The ones I worry about as a person that is forty-eight years old. They study stock market investing they learn the strategies and they think they’re ready to go and they’ve got a half million dollars saved and they put all half a million or a quarter million of those dollars into the stock market right off the bat.
That, in my opinion, don’t do that type of stuff. OK. The best position is when you’ve got only hundreds of dollars or a few thousand dollars and you start off small like that. OK. And you start building up because here’s the thing. You got one hundred dollars saved or you got a thousand dollars. Like if you lose some money in your stocks go down. You know 10 percent or whatever. Let’s say it goes down 30 percent. OK, so your thousand dollars went down to seven hundred dollars.
It’s not like that extra three hundred dollar was some magical money that was so important in your life right. Whereas it is a big difference so let’s say you invest a half a million say you had a 500 k saved and let’s say you know you lose you know half that money also you lose 250 K or something like that and a very quick amount of time. That’s not the position you want to be in. So in my, in my opinion, you should start with smaller amounts of money. John in the hundreds of dollars or thousand dollars as you get more and more experience as you get more comfortable as you get more confidence in yourself that you can do this you can pick individual stocks then you can go bigger and bigger as time goes on and as the years go on.
But in my opinion that first year that the second year doesn’t go crazy with it because you know it’s just it’s too dangerous for you because you lack the experience at that particular time. OK. Now engine number nine only two left here say I’m lazy I don’t want to do stocks. OK so let’s say you are you know you’re lazy you don’t want to look into the Investor Relations page you don’t want to read that in your reports of cuz you don’t want to listen to conference calls you to want to study companies can you still make money from the stock market OK.
Yes, you can. OK. Basically, you can still have a 41k at your workplace if you work for a company. You can buy an index fund or something like that that basically just you know tracks the market and how well the market does over time is how well you do over time something like that. That’s perfectly fine. You can still benefit from the stock market over time without picking individual stocks. In my opinion, you know if you have passion for and you have the work ethic I think picking individual stocks is great.
I think it takes your bureau your financial power into your own hands rather than having somebody else dictate that financial power. I think it’s great but it’s not for everybody just because some people just don’t want to put in the work ethic or they don’t have the money and they just don’t have the confidence in themselves to make the investment decisions and say Apple stock is undervalued here. OK. Amazon stock they’re going to go bigger in the future I’m investing in Amazon stock Shopify I love Shopify I believe in that company a lot over the time I think it’s going to grow massively over the next five 10 years Tess.
So I want to buy Tesla stock. So people don’t want to deal with that. They don’t want to deal with the volatility and that’s fine. You can still benefit from the stock market and you’re not just maxed out your 41 k and maybe invest in index funds attract the stock market or whatnot. There’s no shame in that at all. The name of the game is growing and growing. I think it’s definitely possible to outperform the markets over time as a long term investor as long as you put in a good amount of work ethic and stay disciplined.
But if you don’t do that you can still benefit a lot from this. OK, guys. And the last one. Number 10. This is a question I get a lot. Is it even worth investing small amounts of money remember we talked earlier just a few questions go? How much do you need to start in the stock market or how much should you be investing. Oh, that’s only a few hundred bucks or a thousand bucks and some people say a man isn’t even worth doing because let’s say you have 500 bucks in stocks right.
You start out you have 500. Even if you double that up to you only get up to a thousand dollars and some people are like Oh is that even worth doing. It’s even worth going through the work and whatnot. In my opinion, it’s 100 percent worth it and because here’s the thing. You got to understand everybody starts somewhere in this game. I started my first investments were like two or three hundred dollars. All right. Nowadays I’m investing tens of thousands or hundreds of thousands of dollars at a time. All right.
So the fact is you’ve gotta get started somewhere when you start this game OK. Whether you’re talking about 300 dollars a thousand dollars two thousand dollars eight hundred dollars it doesn’t matter. Guys know what the Robinhood app you because you don’t have to have to pay commissions you can invest like fifty dollars at a time. It doesn’t matter and the name of the game is just getting started. OK get started in this. If you get started in this you’re going to likely do very well for yourself over the next 10 20 30 years and as long as you stay disciplined and you put in the work ethic toward it.
But if you’re always viewing it as oh I don’t have enough money to get started I only have a certain amount of money. You’re never gonna get started. Generally speaking, that’s just the way it works guys. So, in my opinion, it’s better to start you when you don’t have a lot of money because like we talked about earlier. So you saved a lot of money. Let’s say you have a good job. You saved yourself a lot of money. You didn’t learn anything you can’t learn by just watching stocks all the time.
You’ve got to be in the game right. I can go down to the basketball court and shoot shots all day running till I play a game with somebody I don’t know how good I am. You don’t know how good you are in stock market investing you know how you’re going to react until you actually have money in the line and it’s but it’s much much better to in those early years those first ones to three years in the stock market to be playing around with smaller amounts of money rather than Oh I saved fifty thousand dollars in my life savings fifty thousand I’m dumping on the stock market.
That’s a much more dangerous game guy especially when you’re going right off the bat like that. So there’s no amount of money that’s too small the name of the game is just to get started. All right guys. I hope you’ve got a ton of value out of this article hit a thumbs up if you really enjoyed it makes you follow me on Instagram if you have not already. Thank you for watching and have a great day.