INTRODUCTION TO STOCKS in 2021

By definition, a stock or share represents a security within a publicly or privately traded company and are purchased by individual shareholders and institutional investors. Companies offer stocks to raise capital, help grow the business, and fund huge projects to sell to consumers. Investors buy stocks in hope to increase their overall net worth, save for retirement or for a down payment on a large purchase. Prior to buying and selling stocks an individual must open a brokerage account. Here's how you open a brokerage account....

The Stock Market

The stock market is where millions of investors and traders buy and sell securities between the hours of 9:30am-4:00pm and from Monday-Friday. There's also before and after hours. 4am-9:29am would be considered before hours and 4:00pm-8:00pm is after hours. Major holidays are closed. Many people are afraid to invest in the stock market due to lack of information and manipulation by the media. The news are quick to report a bad day but rarely admit a great day. Fact is, with a good strategy the stock market can bring you more of a return than your job, savings account, money market account, and a certificate of deposit.

When investors hear the words stock market they think of Dow Jones Industrial Average (Dow) and S&P 500 (standard and poor). Dow Jones is a collection of the top 30 large companies listed on stock exchanges. S&P is a stock performance of the top 500 publicly traded companies listed on stock exchanges. Instead of buying 500 different stocks you can buy it in a single portfolio and that's the purpose of indexes.

Crazy Fact: To buy stocks it had to be done over the phone with a broker and you would have to buy it in bulk (100 shares). Which included a large amount of fees to place them.

Let's do some quick math. Hypothetically speaking, let's say you buy one share of Facebook for $10. Months later Facebook's stock price increased to $100. Now, how much did you profit and how much do you have in total? You profited $90 ($100-$10) and have a total of $100 in your brokerage account. Simple. Last example, you bought 100 shares of Apple for $50 each. In total that's $5,000 (100x50). Weeks later it rallied to $88 a share and you'll have a total of $8,800 in your account. That's it. That's a 76% increase. You'll hear percentages more often calculating how much the stock increased or decreased. The math part is easy just use a calculator.

Buy Stocks. Dump Liabilities

Buy the stock and dump the unwanted liability. Let's use the example above. Let's say in 2012 you wanted to buy a nice all white Tesla Model S for $77,000. On 6/22/2012 one share of Tesla was $6.75 ($76,996/11,390). Let's say I decided to buy 11,390 shares of Tesla instead for about $76,996. Fast forward, November 24. 2020 your Tesla Model S is worth $31,300. Here's why investing is amazing.... My 11,390 shares of Tesla are worth $6,227,824! For being patient for 8 years Tesla stock rallied from $6.75 to 546.78 a share. Okay, most of us don't have that type of money but what if you bought 100 shares only? That would've cost you $675 in 2012 and would be worth $54,678 as of 11/24/2020. As of 1/4/2021 those 11,390 shares would've been $8,348,870.

Avoid 'hustlin' backwards. If you own an iPhone you should definitely own a stock of Apple, If you own or love buying Air Jordan's you should own a Nike stock, and if you buy from Amazon you should plan to buy a share from them. Whatever products you own or use on consistent basis maybe you should consider ownership within the company such as Facebook, Google, Snapchat, Airbnb, DoorDash, T-Mobile, AT&T, Twitter, Netflix, and Pinterest. You're giving them all your hard earned money anyway. Now it's time to get paid too.

What is a Share?

A share represents the units of a stock in quantity. Meaning, Nike is an individual stock and it's stock price is $140. Let's say you want to put $1,000 towards a Nike stock that will result in 7 shares worth $980 ($140x7). Shares is how much of that stock you have.

What are Fractional Shares?

A fractional share is a piece of an equity stock that's less than a full share. Started in 1999, investors can purchase a portion of a stock. So basically if a share like Amazon ($3,159.26) is too expensive to buy, an investor can buy it at whichever price they can afford. For example, buying $100 worth of a share of Amazon.

What are Dividends?

By definition, a dividend is a distribution of profits paid monthly or typically quarterly to shareholders by a company for a owning a stock. So, a company pays you a bonus every three months for owning a stock. That's it. Now, not every company offers dividends and if you research online you'll see which companies do. For example, before the pandemic Apple offered $0.77 a share in dividends. So if you owned 100 shares of Apple they'll pay you $77 a quarter as a bonus just for owning their stock.

What is a Stock Split?

Shares of a stock perform so well it becomes expensive for the buyer or investor. The company's board of directors decide to split the stock in which it will increase the number of shares, decrease the market price, and make it affordable for investors. In 2020, a stock split occurred with both tech giants Apple and Tesla. Apple's original share price was about $500 and Tesla was $1,300 per share. Apple's split resulted in a 4 for 1 meaning if you owned one share of Apple at $500 after the split you would have 4 shares worth $125 each. Tesla split their shares into 5. So that $1,300 would result to 5 shares worth $260 each.

What is an IPO?

Initial Public Offering is when a private company decides to go public for investors to buy or sell stocks. Not all companies are being traded so look it up. For example, DoorDash and Airbnb went through an IPO in December of 2020 and began being publicly traded later that month.

Start Investing

There's so much information that I have to write a sequel. In part two, you'll learn how to understand a chart, know which stock to buy, and why a stock fluctuates.