90% of all US stocks are owned by just the top 10 percent of Americans.
The stock market is one of the best ways to get to the top of the financial hierarchy,
but because it's so complicated, only the top 10 percent of Americans are making money
from the stock market.
In this video, I will be teaching you how to actually make money in the stock market
by sharing with you 5 of the most important lessons I have ever learned investing in the
stock market.
There are a lot of places to invest your money, such as real estate, the bond market, and
crypto, but if you look at the numbers, the stock market is the best by a huge margin.
During the pandemic alone, the top 1 percent made $6.5 trillion dollars from the stock
market.
Not billions!
Not millions!
but Trillions with a T!
And that's because the stock market is huge but at the same time very liquid compared
to real estate, for example, where it takes quite some time to buy or sell real estate.
You can’t trade real estate like you trade stocks, it’s much more time consuming and
bureaucratic.
So let's try to break down the stock market and make sense out of it.
1.
behind every stock, there is a real company
Let’s say you want to start a business.
The natural thing would be to work hard and save some money to start your business.
But that can take years, especially if you want to build a huge business that will be
making millions of dollars if not billions, and not just a corner shop that will pay the
bills.
Unless your dad will give you a small loan of a million dollars, it will take you a lifetime
to save that much money.
If your dad can't give you a million dollars, someone else's dad might give you the capital
to start in exchange for a share in your business.
Yes, he will own 20 percent of your company, but now you have a million dollars to start
with.
After hiring your friends and renting an office, you will quickly run out of money, so you
will have to raise money again by selling another part of your company.
Now, since you have a team, a product, and clients, the value of your business is much
higher, so you might be able to raise another million dollars by selling just 5 percent
of your company.
The problem with this way of raising money is that you are raising money from a few people
who are not willing to pay you more than a few million dollars at best.
To compete with the likes of Amazon, Meta, or Airbnb, you need to raise billions of dollars,
and that's what the stock market is for.
You are not just going to raise money from a few angel investors but from the entire
world by offering your stocks to the public in the stock market.
The stock market is essentially a place where companies are traded.
But because they are so big, they are divided into many many small parts called stocks or
shares.
When Facebook went public, it raised over 16 billion dollars.
They raised so much money that they could relax and keep expanding for the next few
years.
That's more money than the entire budget of a country like Serbia.
So before buying any stock, remember the lesson number: behind every stock, there is a real
company, with real products and services.
The stock market isn't just about some charts and numbers, investing in the stock market
isn't about predicting how the graph will behave but rather understanding how the company
behind the stock.
Wait a second?
1.
I get all of that but how do you make money from the stock market?
When you buy a stock of any company from the stock market, you become an owner of that
company.
That sounds a bit too optimistic.
Let me put it a bit more clearly – you become one of the owners of that company.
Instead of buying the latest iPhone, if you spend that money on Apple stocks, you can
proudly call yourself one of the owners of Apple.
Apple has almost 16 billion outstanding stocks, which means hypothetically, Apple has billions
of owners.
Let's say you own the corner shop.
How do you make money out of it?
At the end of every month or a quarter, you will take your total revenue, deduct all the
possible expenses, and the rest is net profit – assuming you have paid your taxes.
It's the same thing with stocks.
Whenever one of your companies makes money, they have to share that profit with you.
It's called a dividend.
Apple, for example, pays almost a dollar of dividend for every Apple stock you own.
The more Apple stocks you own, the more dividends you receive.
Fair enough.
However, not all companies pay dividends.
Take Meta, for example.
It's one of the largest companies in the world.
It almost has a monopoly on social media.
It owns Instagram, Facebook, Messenger, WhatsApp, and now Threads.
But it hasn't paid a dime in dividends to its investors since the day it went public.
If that's the case, you might be wondering, why people are investing in Meta?
Tech startups like Meta have a slightly different business model.
They are telling the investors that whatever money Meta makes, they will reinvest it back
into the company and expand the company.
Instead of sharing the net profit they have made with you, they will buy WhatsApp for
19 billion dollars or Instagram for a billion dollars or spend a few billion dollars developing
a new app to challenge Twitter.
The bigger the company gets, the more valuable your ownership of the company will be.
5 years ago, the price of a single Meta stock was 130 dollars, today it's 285 dollars.
Yes, we haven't paid you a dime in dividends, but now you can sell your stocks and make
114 percent on your investment.
In fact, since the dot-com revolution, more and more companies are focusing on expanding
the company instead of paying dividends, which makes more sense as it's getting harder and
harder to compete.
There are other ways to make money from the stock market, but these are 2 primary ways
investors often make money from the stock market.
1.
invest in what you understand the best.
The reason why most people end up losing money when they enter the stock market is that they
are competing with professionals on Wall Street who have more resources.
When you're in the stock market, you're literally competing with people like Warren Buffett,
Bill Ackman, or even huge financial institutions like JP Morgan or BlackRock.
But don't worry, there are ways to beat Wall Street investors, and this idea comes from
Peter Lynch.
If you haven't read his book, "One Up On Wall Street," please do, as it's one of the best
books to start with.
Most investors on Wall Street don't care about the company itself; all they want to do is
make money.
So, they follow thousands of companies.
Good for them, they can afford that strategy, but you, my friend, can't.
But here's what you can do.
Apart from reading and analyzing financial statements, it's important to follow what's
happening in the industry.
If you're a doctor who understands medicine, you're more likely to predict whether the
product that this pharma company has come up with will work or not, and how likely it
is to change the industry.
While analysts on Wall Street are looking at charts and numbers, you know which company
has a product that will sell.
If you're into tech and follow every single news and are literally aware of everything
that's happening, that's your industry, you should focus on tech stocks.
Warren Buffett is a great example.
While he's considered the best investor in history and one of the richest people on Earth,
did you know that he has missed a lot of opportunities?
He missed Amazon, which was a clear winner.
He missed Google, even though 10 years ago Google was a leader in the industry.
If you list down the top 10 tech stocks, he has missed them all.
His first tech investment was Apple in 2016 But how did he make his money then?
Mostly from banks and insurance companies, which is his industry.
The stock market isn't about being right all the time.
There's a new company every day capturing headlines, but your job isn't to chase the
headlines.
Rather, find that one opportunity in the industry you are good at.
Of course, it's not just about the product; you should also know how to read and analyze
financial statements.
But how can I learn how to analyze financial statements and find out the true value of
a company?
I have good news for you!
You've been emailing me for years, asking me to teach you how to invest.
Finally, we have launched our investing academy, where we will teach you everything you need
to know to start investing.
We've been working on this program for the last 8 months.
Instead of just giving you knowledge, our primary goal was to help you develop your
investing skills.
So, it's not just lectures but a program that, by the end of it, you will have the investing
skill in your arsenal.
I've taken the best lessons from the hundreds of books I've read on investing, finance,
and economics.
I've included the best practices from all the courses I've gone through, mild it together
with the best lessons from my accounting and finance background, mixed it with my 8 years
of experience in the stock market.
And that’s how this program was born.
I made sure that the program only contains the best lessons that are practical and are
aimed at turning you into an intelligent investor.
The first 100 people who will use the link in the description and use the coupon code
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1.
Don’t let your emotions get in the way
The pandemic was the best time to invest in the last 10 years.
Without any exaggeration, it was a one-in-a-decade opportunity.
Such opportunities will come again, but not soon.
However, most retail investors, although they made some money, ended up losing most of it
when the market crashed by 2022, including those who invested in crypto.
And that's because they let their emotions get in the way of investing.
The moment you let your emotions take control, you are done.
You will get greedy and sell too late or get too scared to invest when the market is down.
One of the ways Wall Street investors make money is by playing around with your emotions.
They know that you don't have all the data in the world; they know that you haven't analyzed
the financial statements.
They have enough resources to play around with you.
I mean, BlackRock literally has 9 trillion dollars under management.
You have no chance to compete with them if you are going to get emotional.
It doesn't matter how much you like the company; investing isn't about liking or disliking.
It's about finding which companies will thrive and which ones will not.
One of the rules of investing is: every stock will come back to its true value.
So, if it's hyped, sooner or later it will collapse; if it's undervalued, it will jump
back to its true value.
The best way to stop your emotions from making bad investing decisions is by learning how
to find the true value of the company.
So, even if the stock falls down, you will know that it will rise back.
And if it’s hyped, you know that its overvalued.
1.
if you are not sure, don’t invest
Just because you've spent time researching a company doesn't mean you should invest in
it.
The first rule of investing, according to Warren Buffett, is: don't lose money, and
the second rule is, don't forget rule number 1.
Remember, your capital is the most important thing when it comes to investing.
If you make 15 percent annually, you'll be considered a great investor because the market's
average is 7 to 10 percent.
So, anything above that is extraordinary.
That will put you in the same league as Warren Buffett and Bill Ackman.
If Warren Buffett makes 15 percent on his net worth, that's 18 billion dollars since
his net worth is 119 billion dollars.
However, if you make 15 percent on your barely saved $10K, that's just $1500 annually, not
even enough to cover your rent.
And if you make a bad investment decision and loose half of that, next year, even if
you make 20% return that’s just a $1K.
So, preserve your capital as much as you can.
Investing is always risky; you can never be right all the time.
You will make mistakes; that's the nature of the stock market.
But you should minimize the mistakes as much as possible, especially if you're going big.
Building wealth in the stock market takes time, sometimes decades, but once you build
a big enough capital, you have won the game of money.
Your capital will generate enough income to retire you for the rest of your life.
So, if you're not sure about a certain stock, it's better to skip it and invest when you're
confident that you've stumbled upon a great opportunity.
If you want to learn more about investing, read some books or ask people who have experience
in the stock market to teach you.
Investing is a skill, just like any other skill.
It’s learnable.
For those who are interested to enroll in our program, don’t forget to use the code
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I hope you enjoyed this video but most importantly found it helpful.
Thanks for watching, and see you in the next one.