You may believe that this is tough, but in reality, it is not. I'm going to explain everything to you in an easy-to-understand way.
To get things started, let's talk about stocks
What exactly is a stock? I'm not going to bore you with a textbook definition. Here's how I'll explain it to you: Assume you run a profitable lip gloss business with a ten-thousand-dollar yearly sale. However, for just $1,200, you've been able to construct your Tik Tok page and make a few lip gloss prototypes. You're ready to enter the market, but since you don't have the $12,000, things aren't moving as rapidly as you'd want. You need money to run your business, such as to pay for marketing or to hire employees to pay for operations, so you contact nine relatives and ask for $1,200 each. Now that everyone has given a thousand dollars, you have the ten thousand dollars you need to continue your business. But, of course, there's always a catch, right? You no longer own 100% of your company.
Each individual owns 10% of the company.That's the chatter around your workplace, but you don't mind since you're about to be paid $12,000. You can turn the business into a six-figure business. Large firms like Apple, Tesla, Microsoft, Coca-Cola, and McDonald's need money as well, but not just a few thousand dollars; millions, if not billions, are required to function. As a consequence, they launched an initial public offering (IPO) to make the stock available to the broader public. "Hey, everyone in the world, including you and me," they say as they head out into the public.
When you buy a stock, you're basically giving a business money in return for a little piece of it. Stocks in certain companies may be acquired for as low as $25, while others might cost more than $3,000. But why would you want to put your money into the shares of a company? Is it even feasible to make a lot of money doing something like this? Yes, which brings us to our main point. Number two, how can stocks produce money? Stocks may make you wealthy in two ways: capital gains and dividends. Now let's speak about capital gains, which are essentially gains on your capital.
For example, if you invest money in a stock and are able to purchase it at a cheap price and sell it at a high one, you will have a capital gain. If you want to earn money by investing in stocks for capital gain, make sure you purchase cheap and sell high. A lot of novice investors don't know how to time the market, and more and more people are starting to talk about it. My favorite person who does this is a woman named Terry, who was a teacher before learning how to make a thousand dollars a day in the stock market. She then started teaching other people how to make a thousand dollars a day with the goal of getting 1,000 people to make a thousand dollars a day.
The second way is through dividends,
which is my personal favorite because it is one of the ways I make passive income. Remember that when you buy a share, you are purchasing a piece of the company, and as a proud owner, you are entitled to a portion of those profits. Just like your family members will come to you and ask for your money if they give you $1,200 each, you can sit back and receive checks in your bank account. While dividends are a wonderful thing to receive, not all stocks pay them. If you like this video, don't forget to like and subscribe to the channel.
Types of stocks are the third item on the list.
Technically, there are different types of stocks, but in general, we have blue chip stocks and growth stocks, and the type of stocks you choose to invest in will depend on how you want to make money in the stock market; whether you're a short-term or long-term investor; what your risk tolerance is; and what your goal for investing is. These are all factors to consider when deciding which one you like, but a blue-chip stock is a stock of a vested corporation. Growth stocks are stocks of companies that are still in their early stages of development; their prices go up and down, up and down, and there are people who get excited about stocks like this: today it's $1,500; in two days it's $3,500; they're usually very volatile; they're the ones that make a lot of people say "buy the dip, buy the dip," and sometimes the dip even goes deeper, but if you're a new investor, you don't want to get too excited about them.
Number four, the simplest way to get started investing in
If you are a new investor, you may have completely avoided the stock market because you believe it is risky. While you are correct, there is a degree of risk with investing in general. However, that risk can be minimized through something called diversification. Think of investing to build wealth as dating to get married if you only date one person. Okay, listen, an index fund is a collection of stocks that track an index.
An example of an index is the SP500, which is composed of the stocks of the top 500 companies in the United States. Now think about it. If all 500 companies at the top fail at the same time, we're all going to the dumpster while going to the mud. Unless Jesus is about to come right now, how is the entire stock market going to fail? It's been consistent for almost a century, which is why I love index funds because they track indexes that have been consistent for years and decades. We also have etfs, which is an exchange traded fund, which is basically a bundle of stocks, but it doesn't track only indexes; it can track literally any kind of bundle that you want.
Their communication is facilitated via EFT. There are hospitality ETFs and even index fund ETFs, so basically a smart woman who is a fund manager is somewhere putting stocks together that are diversified in some way into different bundles so that you and I can buy them for low prices, and that's why they're my favorite now that you understand exactly what a stock is, the different types of stocks that exist, and how to make money with stocks. In my next investment video, I'm going to speak about how to get started investing in stocks, what to watch out for, what applications I use, whether I use a conventional brokerage business or fintech, and what I believe the benefits and drawbacks are, and I'm going to spill all the beans.