Stock investing lesson 2

The course will not only teach you about the stock markets, k plans, and retirement, but it will also address personal financial issues that are often ignored, but essential to your success as an investor. Each lesson explains these concepts in detail, so you understand how and why things work in the investment world. Provide yourself with the independence and confidence you will need to make your own investment decisions. Lesson List: Lesson 1 - Overview of Class This first lesson introduces the course and helps you set up your investing game plan.

Lesson 2 - The Theory and Importance of Investing You need to fully and fundamentally understand the theories, laws, and concepts that govern investing. Explore what gives money its value, how to increase that value, and more. Learn how this pertains to the three most important investments: retirement, education, and housing. Lesson 3 - First Things First Which investments should you make first?

Would it be more beneficial to invest in an IRA or should you be thinking about college? Or might this perhaps be a good time for you to invest in rental property? This lesson explores all of the benefits and drawbacks of these options to help you decide. Learn all about stocks and bonds, what gives them value, how to look up their prices, and more. Lesson 5 - Stocks, Bonds and Mutual Funds - Part II Learning about stocks and bonds will bring you an understanding of a whole new set of securities and investments.

This lesson focuses on different investments, how they work, why you might want to invest, and the pros and cons to investing. Lesson 6 - The Markets and Exchanges Where do you purchase said stocks, bonds, mutual funds, and other investments? So the stock market is like a continual, real-time reaction to the news cycle—and what new developments in the world mean for corporate profits. And when the market becomes a wild ride, investors say that volatility is high.

These are private exchanges where everything is kept secret. No one knows who is buying or selling shares, so an electronic system matches interested buyers and sellers. Dark pools are most often used by companies or organizations rather than individuals.

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It may lose value when you buy it due to something else, but a share never loses its value because you purchase it. Bull market vs bear market The Bull Market: a market on the rise; the conditions are good to invest, and if you invest wisely, it is generally guaranteed to make you some amount of money over time. We are currently in a bull market, meaning that if you invest wisely right now, you will have made money in a few years from now.

This does not mean that you should invest your money and expect returns by next week, it means you will passively earn money over the course of years. Even if we are in a bull market, you can still lose money if you do not invest wisely. Fun fact: if you visit New York, on Wall Street where many trading companies are based there will be a bronze statue of a bull.

The Bear Market: a market which is generally not favorable to the average investor, and that you can very easily lose money in, even if you invest in ways that are typically considered to be wise. Involved risk There is always a sense of involved risk when you invest into the stock market.

It is always possible for someone to lose money. In fact, if you do that, there is a high probability that you will lose much of that money because that is not wise investing. That being said, you must always consider that at any time, you could lose money in the stock market from your investments. If you are not in a place, financially speaking, where you can invest because you cannot risk losing any money, that is okay. However, you do not have to have much money to begin investing and making money over time.

Once again, you must always be okay with losing this money, although it is unlikely that this will happen if you invest wisely. Hedge funds are a different way of investing your money, and they are totally different and optional; you do not need to invest in a hedge fund, and many people do not.

A hedge fund is a joint portfolio account used to invest between many different people. There are even more ways to invest money including ETFs. These are accumulations of multiple sometimes hundreds of securities which are sold for a single price. Generally, if these countries do well, so will this stock. There is not just one ticker for each ETF. They are different prices, meant to attract different levels of investors. ETFs are a great way to diversify your investments, but more on that in another section.

Bonds A bond is another way of investing money, and it is different from stocks although they can both sound the same. A bond is essentially a loan that the investor you would give to a company or the government. They would promise to pay you back the original amount plus some interest. If they kept it for over a year, they would pay you more money.

You may be thinking that a bond is less risky than a stock because the buyer has to pay you back, and although there is some truth to that, you must also watch out for small details. But if the interest rate is adjustable, that means that the buyer can change the interest rate and make it really low.

You would make less money off this. The three types of bonds are: treasury, municipal, and corporate bonds. The treasury bond is when you have a bond with the US Treasury. Net income and earnings are pretty much the same. Again, net income and earnings is the money that has gone through the process.

Tax and cost have been deducted and net income is all yours as an owner. Similarly, when you own a share, those earnings are your money. She can either use that for her personal expenses or push it back into the business in order to make more money.

For instance, she can invest in a lemonade squeezer or another new ice cream machine which will eventually produce more income. Most businesses follow this procedure. Those earnings can go in two directions that you absolutely have to understand. Let us compare a small business and a large business. We now understand how money acquired through a small business flows from the customer to the business and then to the owner. As you look at the schematics, you can see that the board of directors represents the owners.

Your voice as an owner is represented by the board of directors who are huge share owners. However, when you just own ten shares, you have a voice and you have a voting power with those shares. That voting power is delegated to one of the members of the board of directors and they represent the shareholders and all other owners for that one specific business.

As you step down to the business itself, this is where the CEO and all other high rank employees come into action. They can be owners at the same time, but their role as the CEO is mainly focused on the product. A lot of times, people get confused between the board of directors and the CEO. The CEO is an employee and works for the board of directors.

What is this thing worth? How did he figure that out? If Nancy had to sell this ice cream stand, what is it worth? Assume this business has very little risk. Take note of this! The business stayed exactly the same! The business did not change but as you went through different purchase prices and paid more for that business, your return went down drastically since those price points changed.

This is exactly what happens when you buy stocks too. If you overpay, expect your percentage to go down significantly every year. To summarize lesson two, we learned how to value a business. Since the net income was the final figure that shows the profit of the company, we can use this number to determine the general value of the business.