Stock Trading 101: The Basics

Stock Trading 101: The Basics

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Text Transcript –

The stock market truly is great for everybody and I’m going to take a very negative view on the stock market and hopefully show that, despite whatever you may think about it, at the end of the day when you step back, it really is a thing of beauty.

Now to set the context of why I’m going to do all this, I want to read a YouTube comment that I got and as you’re about to see, this person didn’t exactly have the most positive feelings towards the stock market. Here’s the entire exchange and I’m not going to read through it all for the sake of trying to keep this video as short as possible, but if you want to pause it and read through it in its entirety, you are more than welcome to do so, but like I said. This person is not a fan of the stock market and if you do read through it all, you will see that. I want to focus on this statement here. “Now I invest in long-term real estate. Where I put my money down with a mentality of here’s my money. Go build something. Create. Build a house. Something that will grow our GDP and that’ll help advance our civilization. Day traders, all they’re doing is for their own personal interests.”

Now I don’t know if you paused the video at that point so you could read through the entire exchange, but if you didn’t just take my word for it. This person does not like the stock market. It’s a scam. It’s just for the lazy and then you saw at the end, “Especially for day traders. It’s all for their personal gain.” This person’s alternate choice is, “You know what? I’m going to go with real estate because it’s more real. It’s more tangible.” I fully buy that. I myself also invest in a real estate. I don’t have any problem with people investing in real estate, but this person logic about the stock market being evil and not doing anything for society. It doesn’t do anything for our GDP. Investors, traders, just all that, so I’m going to go with real estate. I’m going to hopefully persuade this person and just … It does a great job of showing why the stock market is great. Why the stock market is very very important for everybody.

This person has a piece of real estate. Fair enough. What does this person, who has real estate … How are they going to make money from it? Well if they’re renting it out. If they’re trying to flip it. It sounds like this person has just long term real estate where they’re a landlord. So they need to rent it out. How are they going to get rent? They’re going to need somebody to pay the money, right? They need to be able to pay the monthly rent I’m assuming. Okay. Thanks, Captain Obvious. There we go. They need somebody to pay them the money in order for real estate to be worth their time. In order for real estate to just actually be a viable method of investing. The next thing they’re going to need is what? Well what does this person need to do in order to pay? This person needs a job, right? In order for the money … In order for them to have money to pay the landlord, they need to have a job.

As you can see, we’re kind of working backward right now looking at what this person needs to have from real estate. Well, job. Where is a job going to come from? Well, a job is coming from some sort of company. Again, I would assume a lot of this is kind of just, “Okay, yeah. No kidding. Thanks, Captain Obvious.” Bear with me. This person wants real estate. In order for them to be profitable, they need to be able to be paid. In order for this person to be able to pay, they need to have a job. In order to have a job, the job’s come from companies. The next thing here is what is the job of a company? What is a company supposed to be doing? They are supposed to be maintaining or at least growing. So maintain. Grow. That’s what a company’s job is. They need to just, “Hey. Stay in business. Maintain or keep increasing. Get bigger and bigger.” That’s the goal of any sort of business and that is their job.

Now how are they going to … We’re going to change markers here. How are they going to grow? How are they going to maintain? Sometimes companies just … They need money. They need to raise money. They need to just … Multiple … I don’t want to get into all the details of it, but just know that in order for companies to grow or maintain, a lot of times they need the stock market. If you want to kind of sound cool with trader lingo, they need to raise capital. That’s what companies use the stock market for. That’s the whole point of it at the end of the day is companies use it to, again, raise capital and then that capital can be used to maintain. It can be used to grow and you can go through the whole sequence of things. Now who makes up the stock market? Traders and investors. Hopefully you can kind of see what I’m getting at here, but let’s just go through the sequence here. Remember, this person is choosing real estate.

Traders and investors. They are going to make up the stock market. They are going to make up the stock market. They are the ones that are putting their money on the line. They’re investing. They’re the ones that are, well just … There is no stock market without traders and investors, who this person does not like. Now you have a stock market. What does a stock market help companies do? It helps companies, well again, raise capital. Remember, that’s the lingo that you can use with your friends if you want to try to impress them. The stock market’s there to raise capital so that companies can maintain or grow. Again, that’s the job of a company. Maintain. Grow. Preferably grow. Now if they’re going to be able to maintain or grow, what do they need? Well they need a bigger work force so companies are going to want to create jobs or at least maintain those jobs. When those jobs exist, people have money and this person down here, one of those people’s going to be a tenant.

Let’s go through things and say all right. Well fine. You hate the stock market so … You think traders and investors are lazy, terrible, whatever. This person was not high on them. Let’s just get rid of that. All right. They’re gone. They’ve been outlawed. Banned or whatever. See you later to the stock market. You get the point. It’s a domino effect. Companies can’t maintain. They can’t grow anymore because the stock market doesn’t exist so sorry. We can’t maintain. We actually have to shrink. We have to downsize. We’re going to have to cut your job. This person doesn’t have a job. See you later, money. Now this person’s going to tell the … Hey, sorry. I can’t make my payment. Okay. Well … This person gets evicted or whatever. Here’s the next thing that happens which occurs for the entire economy. This person, what’s going to happen to their property? A bunch of other properties now are going to start to go into foreclosure because people don’t have jobs. They don’t have money.

This goes back to the whole real estate bubble that popped in 2008. People can’t make their payments to the banks. They can’t make payments to their landlords so property values are going down and then when property values go down, what happens to that real estate’s investment? Their values are going down meaning this person’s investment right here is now also dropping and before they know it, theoretically speaking, that could be worth just pennies on the dollar. Again, for those of you that lived through 2008 and that whole real estate bubble pop, that’s exactly what happened. Not exactly because the stock market was eliminated, but my point here is that the stock market benefits everybody. At its core, the stock market is help giving jobs because that’s how companies raise money, expand, create jobs, maintain jobs, all that. I’m not saying that most people think that the stock market’s evil or think that traders and investors are terrible human beings.

This was definitely kind of a unique case, but it kind of prompted that, “Oh. This would be a good example to show just how the stock market benefits everybody.” If you have a job, sure, you’re not a trader or an investor, but somewhere in the grand scheme of things, the stock market was allowing you to have the job. For you people that … You don’t want to get into real estate. Real estate is only as good as an economy. An economy’s only as good as its jobs. It’s kind of like … Maybe we should play the Lion King theme song right now as I do this. It’s like the circle of life. Eventually … Here’s the other thing. Here’s what would complete right here is … Thinking about it out loud. Maybe this person, maybe not this exact person, but some other real estate investor’s like, “Hey. I now have money because my values are going up so I hey. Now I want to get involved in the stock market.”

Now they’re going to get involved in the stock market. Where as if they’re in this case where values have gone down, well hey. Guess what? They don’t have any money so they can’t get involved in the stock market and the circle just doesn’t work. Everything helps one another. If real estate investors succeed because the stock market’s succeeding, then hey. Guess what? They can diversify from not only real estate, but also into the stock market too. It’s really just one big circle of life and to say that the stock market is evil so I’m going to go with real estate, well real estate would not function without the stock market and vice versa. To say that real estate is evil and everything should be in the stock market, well they need one another because it’s all part of the general economy.

That is how the stock market truly does help everybody whether you’re a real estate investor, whether you just need a job, investors, traders are allowing the stock market to exist which is allowing companies to raise capital and they can use that capital to maintain, grow funds, pay dividends. Dividends, still once again, that’s just extra money in people’s pockets. Those people can go spend that money at Best Buy. Best Buy … It’s just the circle of life. Hopefully this makes clear and I do want to show this last part of the discussion because you’ve got to give credit where credit’s due. This person, after I ask them a couple more questions, comes back and says, “After re-evaluating myself, apologize if I offended. I never really had thought about it until now. Thanks for sharing the video. It helped.”

Mad respect. Mad props. It’s one thing to really come out raging and roaring against a topic and then publicly confess. “You know what? I re-evaluated. I was totally wrong. Thanks for the video.” Hey. Water under the bridge. Sounds like you’ve learned something. That’s awesome. I wish there could be more people like that at the end say, “You know, yeah. I probably was a little wrong. Sorry. Let’s move on.” This person is now on board, but I still wanted to use them as an example because they brought up real estate like that was some sort of great alternative, so I wanted to at least take advantage of the educational opportunity here so hopefully this makes sense. If there’s any questions, comments, as always, leave those down below, but if you’re kind of jaded towards traders or investors or jaded towards a real estate, just understand it’s all one big circle and each part needs one another.

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