Do you know what's the best financial tool
humans have ever invented?
Passive income, the ability to let your money work for you!
And one of the best places to do that is the stock market.
While there are a lot of good retail investors, there is a good number of beginners who try
to predict future stock prices by looking at charts.
If this is how the chart was moving, then this is what should happen.
If it has been growing for the past few months, then it should keep growing for the next three
months.
Whatever the argument is, we have to understand that Stocks are not lottery tickets to gamble
with!
Behind every single stock there is a company That manufactures something, builds something,
or provides a certain service! so you don't have to look at the stock only
but rather look at what is the business behind that stock and how well its performing.
I know that sometimes it might get a bit difficult because there could be so much news around
some stocks that you don't even care bout the business as long as the stock price seems
like it's growing.
That's why here in this video, I want to share with you how to take your investing skills
to another level.
I am not going to talk about the basics of investing because we have covered that in
previous videos.
I will assume that you already know what the stock market is, you have traded some stocks,
and now you are looking to improve your investing skills.
You want to be a little more professional.
So here are the 5 things that if you understand and follow, you are going to become a far
better investor.
If you are ready, give this video a thumbs up, and by the way, we have a new channel
called Proactive Clips, where we are sharing short clips from the main channel, so if you
miss something important from the main channel, you might come across it on the second channel.
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The link is in the description.
And now, let's get back to the video.
understand How the Market Moves
Timing the market is impossible, and whoever tried has failed miserably—That's why long-term
investors have always emerged victories and made most of the money.
However, the market doesn't just move up and down randomly.
The stock market dates back to the beginning of the 17th century when in 1611, the Dutch
East India Company decided to sell its stocks to the public, and since then, the market
has developed enormously.
So the market follows certain patterns and rules.
If this is what the government does, that's how the market reacts.
So if you understand these patterns, you might be able to predict the market to a certain
extend.
When the economy slows, consumers buy less, which means corporate profits fall, and stock
prices decline.
That's when investors prefer the regular interest payments guaranteed by bonds.
That's why bond yields rise.
Understanding the relationship between bonds and the stock market will help you to understand
the direction that the market is headed to.
But that's just one out of many factors that influences the market.
Take, for example, fiscal policy when the government regulates the spending and tax
policies to influence the economy, especially macroeconomic conditions, such as aggregate
demand, employment, inflation, and economic growth, which will end up influencing the
stock market overall.
Lowering taxes will make corporations more profitable, for example, since now they can
keep a bigger chunk of their profits; therefore, their stock prices will rise.
However, the government doesn't randomly raise or lower taxes but instead follows policies
to keep the economy stable.
There is also a monetary policy where the fed controls the supply of money in the market
by either adjusting interest rates or printing money.
And each of these policies influences the market in different ways.
So if you want to become a slightly more professional investor, understand these concepts!
Find out to what extent they influence the market!
You won't be looking at stocks as some numbers on the screen of your smartphone but you will
have a broader idea of how the market is actually performing and not what random Youtubers say
on YouTube like my self that's why they will always tell you that this is not financial
advice, and everything that's said in this video is for educational purposes.
2.
learn how to read financial statements
I am really grateful that apps like or Robinhood or Webull have democratized investing.
Anyone can now invest in almost any company from the comfort of his couch as long as you
have a smartphone, even if it is a 100 dollar smartphone.
No offense but most of these retail investors don't look at a stock as a company but as
a name that triggers the news, which makes their financial decisions quite irrational.
Remember, the purpose of any company is to make money.
That's the most important thing that matters!
So if you want to know if a certain company is a good investment or not, you have to read
its financial statements.
If you are investing in a certain company without analyzing its financial statements,
you are gambling!
I know that I might get criticized for saying this, but that's the truth!
A certain company might hit the headlines for developing a technology that will make
us immortal, for example, but after looking at their financial statements, you may find
that this company has a lot of debt, it doesn't have enough cash to survive till the end of
the year, and its sources of cash flow are drying.
The stock price might seem promising-looking just at the chart, but looking beyond that
chart, you start seeing the real value of that company
However, looking at the financial statement isn't enough, if you want to take your investing
skills to another level
3.
learn how to do a fundamental analysis
When you go through financial statements, you will realize they have current assets,
non-current assets, liabilities, long-term debt, short-term debt, equity.
The company might not have any debt, which might look like a good sign but it's not.
If the company is not borrowing enough against its equity, then it might not be taking the
best advantage out of its resources.
Something might be wrong with this company.
So we have metrics such as debt to equity ratio, where you divide a company's total
liabilities by its equity.
The ratio is used to evaluate a company's financial leverage.
It is a measure of the degree to which a company is financing its operations through debt versus
wholly-owned funds.
It illustrates business's ability to cover all outstanding debts in the event of a business
downturn.
Or we have something called the price to earnings ratio that we have previously explored on
the channel that measures the current stock price relative to its EPS or earnings per
share.
Once you master how to do your fundamental analysis, you will have a much deeper understanding
of the company you are looking to invest in, and you will understand how well its performing
compares to its competitors.
4.
Define your strategy
If your strategy is to just get into the stock market, buy whatever is trending on the news,
and expect to become a millionaire, then you can only rely on luck.
Then good luck! and if you get lucky, you could be making millions of dollars, but luck
is not a strategy!
That's why don't invest randomly.
Before you start throwing money into the market, understand what your strategy is.
Are you trying to profit from the rise of highly volatile tech stocks? or maybe you
are more into passive income and betting in high dividend stocks?
Or maybe you are more conservative and emotional so you are more into mutual funds?
Or maybe you do not want to wait that long to enjoy the fruits of your investments, so
you get into day trading.
It doesn't matter what your strategy is, as long as you have one!
5.
Master a few industries
What distinguishes a great investor from an ignorant is how much the investor knows about
the company he is investing in.
As we have mentioned before that behind every stock, there is a company, and behind every
company, there is a product or service, and the success of that stock is going to be based
on the success of that particular product or service.
The people who early on invested in amazon or Netflix, for example, had a really deep
understanding of the internet.
These people understood the internet so well that they could clearly see how 20 years later,
everyone is going to buy his next gadget on the internet or would replace his cable subscription
with online streaming such as Netflix.
So to find a great opportunity in the market, you have to become an expert in a few industries.
it doesn't matter what it is, energy, tech, financial services, whatever!
Remember, to make a lot of money.
You don't have to be right every single time.
You have to right just once!
10 or 20K dollar investment in amazon back in the 2000s would have made you a multi-millionaire.
The same applies to almost everything else, including the cryptos.
so if you want to start making great investments, become an expert in a few fields.
By the way, don't forget to subscribe to our
second channel - Proactive Clips.
Just click on the link in the description.
And hit that subscribe button.
That's all that I am asking!
Is that too much?
Anyways, thanks, guys for watching.
This channel is possible because of you, you are the best audience in the world, and we
will always try our best to make the most interesting and useful videos possible.
Thanks for watching and I'll see you in the next one.