Hi again. I'm Adam. Welcome back to www.engvid.com. Today we're going to look at some business
English, with an introduction to investing. Now, what is investing? Investing is putting
your money someplace with the hope that more money will come back to you later. Okay? So
it's making money over time. Many ways to do it, but today we're going to look more
specifically at the stock market. Now, before we begin to look at the stock market, we need
to know all the different words that you will find in the stock market discussion.
Of course, we have to look at "stocks". So: "stocks" and "shares". Now, many people get
confused: what is a stock? What is a share? Realistically, these are basically the same
thing, but subtle differences between the two. So, when a company decides that it wants
to make money, so it can expand its business, it wants to raise capital. "Capital", it's
a big word, there's lots of meanings to it. We're going to look at that a different time.
But for our case, "capital" means money. They want to make money, they want to raise capital
so they can grow their business. So what they do is they sell stock. Stock is a partial
ownership of the company. So when you buy stock, you get a piece of paper, you get a
certificate that says that you own part of this company. And because you own part of
the company, you have certain rights. You can make... You can vote for changes, you
can vote for things that the company should do.
Now, what is a share? A share is an equal piece of the stock. So, for example, a company
sells $100 worth of stock. That's the full amount of the ownership that the company makes
available to the public. Now, this stock, this total amount, they divide into 100 shares.
Okay? So you buy as many shares as you want of this stock. So because you have 100 shares,
the full stock is $100. Each share is, of course, $1. You buy 10 shares, that mean...
That means you're buying 10% of the available stock. You're buying $10 worth of shares.
Now, you own stock, you own shares in the company. In that case, it's the same thing.
Now, when you talk about stocks, you can say: "I own stocks."
So let's go to this word quickly: "portfolio". Your portfolio is the collection of your investments.
You may have stocks, you may have mutual funds, you may have bonds, you may have commodities,
you may have real estate. You may have all kinds of different investments. If part of
your portfolio is stocks, you say: "I have some stocks." It means I can have five company's
stocks. But when you say: "I have shares", then you have shares of a company. Okay? I
have stocks in 10 different companies. I have shares... I have 10% or I have 100 shares
in this company, I have 50 shares in that company, I have 2,000 shares in that company.
But all together, you have stock. Okay?
So it's a total amount of the companies that you own.
Now, if you want to buy stocks or trade stocks, if you want to buy and sell your shares, you
can contact a "stockbroker". Okay? A broker is somebody who deals with trades; buys, sells
stocks on the stock market. These days, you can just go online and find a "brokerage"
which is a website or a company that lets you buy and sell your own stocks and shares.
Okay.
Next: we have "IPO", this is "Initial Public Offering". Sorry I'm a little bit off line,
here. When a company decides: "Okay, we need to make more money. We need to raise capital.
We need to sell some stock of our company." So the first time that they sell this stock,
there's a big event, you know, like it's a big promotion, they have to market it, they
have to tell the public: "Look, we're going to sell stock. Get ready." This is the initial
public offering. The first time that they sell stock. We actually don't say: "Sell".
They don't sell stock; they issue stock. And then the stock brokerage or the stockbrokers,
they buy and sell the stock.
Next: "ROI". This is a very important thing to consider. "Return On Investment".
Before you buy anything, before you invest your money in anything,
you always have to consider your ROI.
How much money do you hope to get back? How much money do you think you will get back?
Because at the end of the day, a stock market is a gamble. There's high-risk and there's
low-risk companies. Your return on investment, obviously, you're hoping to make money. You
hope to get a positive yield.
A "yield" is basically the percentage gain that you will make on your investment. So,
how much did you get back? What was your yield? Oh, 5%. It means if you sold... If you bought
$100 worth, and then you sold it for $105, your yield was 5%. Your return on investment
was $5. Okay? So that's how we talk about the money that you make from your investment.
Now, you can also buy "bonds". Bonds are different from stocks. A bond is a debt. You are buying
a debt. Basically, what you are doing is you are lending money to a company or the government.
You can buy government bonds or corporate bonds. And what you're doing, you're lending
them money, and they guarantee you-the company or the government-guarantee you a certain
percentage of interest and a certain amount of time. So if you buy a five-year bond at
7%, at the end of the five years, you get your money back plus your 7% interest that
you earned. So it's guaranteed. It's a bit safer. We're not going to talk about safe
and unsafe, because there's a lot of junk bonds, there's a lot of bad bonds. But generally
speaking, bonds are very safe, but they're also... Have a low yield. Because they are
guaranteed, the return is a bit lower. You could make some investments with a very high
yield, but very high risk. Okay? "Risk" means the danger of losing, as opposed to gaining.
Now, you can also buy "mutual funds". A mutual fund is a... Basically, it's a company that
manages your money. So you put money into this mutual fund, the mutual fund manager
will then take your money, plus this guy's money, and that guy's money, and that woman's
money, and that lady's money - he will take all this money and he will buy what he thinks
are good investments; stocks, bonds, commodities, equities, all kinds of things into one group
and everybody gets their share. Okay? So, when the entire group of investments goes
up, each member of the mutual fund gets his or her return on investment, their yield.
"Portfolio" we already talked about.
Now, when we're talking about the actual stock market, these days, there's a lot of "volatility"
in the stock market. Volatility is the sense of excitement or nervousness that enters the
equation. So people, they hear a bit of bad news from this part of the world, they get
nervous because they think that will affect their stock, and they start selling all their
stock. So their stock price or their shares go down in value. So then other people, they
say: "Oh my god, everybody's selling this. I better sell mine, too." So they start selling.
And then the smart people, they see: "Oh, everybody's selling. I'll wait until it gets
really low, and then I'll start buying everything for really cheap because I know it will go
back up." So volatility is more like the mood of the investors. And people get scared, they
sell. People are stay calm, they buy. Okay? So it creates a lot of "fluctuation".
A lot of fluctuation in the market. Fluctuation is the up and down movement.
So stocks go up, they go down, they go up, they go down. Something that is steady,
goes up steadily or goes down steadily. If it's up and down, it fluctuates.
Okay? This is a very good word for all kinds of situations.
Now, there are two types of market activity. There is a "bear market" and there is a "bull
market". The easiest way to think about these is to look at the animals themselves. A bear
has claws, so when a bear uses his claws, he's pulling everything down. So a bear market
is a market that is tending downwards, that is losing value. A bull has horns, so when
a bull uses its horns, it's pushing things up. So a bull market means the value of the
market is going up. Usually it means there's a bit of a force, like something is making
it go down, that's the bear; something is making it go up, that's the bull. Something
is pushing it up.
Now, if you want to know how the markets are doing, you could look at any specific "index"
or "indices". This is the plural of "index". Now, I know many of you have heard of the
DOW Jones, or the NASDAQ, or the S&P 500, or the TSX here in Toronto. These are indices.
Okay? An index means that the stock market took a group, a collection of companies...
It's not necessarily random; they have a reason to choose these companies. But they look at
all these companies, as a whole: are these companies going up in value or are they going
down in value? So if the index is trending up, that means that the whole market is generally
doing pretty well. If the index is going down, that means the market is going down as well.
This is... This gives you an idea of how the market is trending. So in a bear market, the
index will probably start moving down; in a bull market, the index will start moving up. Okay.
Now, if you're a conservative investor, it means you don't like to take big risks. You
want to put your money in, you want to be sure money comes back. It doesn't have to
be big money, but it has to be more than what you put in. So then you would buy "blue chip
stocks". A blue chicks... A blue chip stock is owning stock in a company that is big,
that is trusted, that has a long history of doing well, of growing. For example, if you
buy Microsoft or Apple, these are considered blue chip stocks. Why? Because they're big,
they're stable. Over the... If you look at their history, they're generally going up
for a long time. You can be sure that they will pay you a good return or that they will
pay dividends. "Dividends" are when they have the profits, they share the profits among
all the stockholders. So, blue chip companies generally pay good dividends.
Lastly, we have "equity". Equity is basically what you owe... Own. Sorry. Not what you owe.
What you own minus what you owe. Okay? So, for example, if you own a house, every part
of that house that you own is your equity. If you have a mortgage, if you're paying the
bank every month to pay for your house, then you take the full house, minus the mortgage,
and whatever's left over - that is yours. You own it. That is your equity. So, when
you own stocks, that's part of your equity. So it's basically all your "net assets".
All your assets, everything you own, minus all your liabilities, everything that you owe
somebody; all your debt. Okay?
So now that we know all these words, we can start thinking about investing. And I say
"thinking" because you want to be very, very, very careful before you put your money somewhere.
A stock market is not that much different from a casino. Okay? You can gain a lot of
money; you can lose a lot of money. Find out what you need to know, do a lot of research
about the company you want to invest in, do a lot of research about the mutual fund manager.
Is he or she good at what they do? Do they have a history of success?
Then invest your money.
If you want to test your knowledge of these words, go to www.engvid.com. There's a quiz
there that you can try out. Ask questions in the comments section. And, of course, don't
forget to subscribe to my YouTube channel, and come see us again. Bye.