3 Simple Rules How to Buy Stocks [Stock Market for Beginners]
Three, simple rules how to buy stocks for beginners by the end of this video you'll have a foundation, to start investing, how to pick stocks and how to know when to sell in fact, I'm revealing my favorite, strategy, that will limit your risk and boost portfolio, returns or, talking stock investing, today on let's talk money. Beat. Day come on make your money work freed in the financial, future you deserve talk money, Joseph. Hope with the let's talk money channel here on YouTube I want to send a special shout-out to everyone in the community thank, you for taking a part of your day to be here if you're, not part of that community yet just click that little red subscribe, button it's free and you'll never miss an episode now I'm excited about today's video it's one of the most requested topics from the community and we've got some really valuable information planned, I'm gonna start with the basics of how to buy stocks and what you need to do to be a successful, investor that first part is going to be a little more basic but even advanced, investors, are gonna want to stick around because after that I'll be revealing the three simple steps I use to pick stocks I worked, as an equity analyst for more than a decade working for institutional. Money managers, and venture capital these, three, rules are all you need to produce double-digit. Returns and limit your risk, I'll also be sharing with you a link to a special, report I just finished the 10 lies Wall Street tells investors, now, these are the 10 biggest lies and cheats that Wall Street pulls, on regular investors to take money from your pocket and make itself rich you're, not going to want to miss this opportunity to, get that free report and I'll be sharing more on that later but now onto those investing, basics and how to buy stocks the, most important, thing we can do here is to start off with a foundation. That's going to make you successful I see, so many investors, get started they turn on the TV to CNBC or they they look for their favorite investing blog and they start writing down stocks, they want to buy they, end up getting lousy, returns you know the average investor made just 2.6. Percent annually. In the decade to 2013, according to Dalbir their, portfolio, goes nowhere and they never reach their investing goals I see a lot of investors like this and they ask me why isn't my portfolio, going anywhere why haven't I been able to stick with an investing, plan and it's because they didn't, start with that solid, foundation of financial, planning before. You can start even thinking, about investing you have to think first think about your goals I'm not, talking about saying that you want a million dollars before you retire I'm talking, about really, thinking, about what retirement means to you really creating, a mental, picture around your goals it's this mental, picture that's gonna motivate you to keep saving to keep investing, even when your budget gets tight every.
Time You think I can't afford that hundred, dollars in my investing account this month you're gonna pull out that mental picture of your goals and it's gonna motivate you to push your budget just a little bit further to save that money now, that's the first thing making those financial, goals real next, is to make sure that your life that life doesn't get in the way of reaching, those goals because you know life is what happens when you're busy making other plans it's a great quote by John Lennon and means so much for your financial goals it's great to say that you have a plan to invest I'm gonna show you three ways to buy stocks and share, my favorite investing, strategy, in a bit but, what happens when you lose your job what, happens when the kids need braces her when you just can't hide that cars check engine light with tape anymore this is when life happens when you have an emergency expense, that sets you back a couple of grand and it's the number one destroyer, of investing, plans pretty. Soon you're taking money out of your investments, your portfolio, goes nowhere because you feel like you're taking one step forward and two steps back so, you just give up so that second, part of our financial, foundation, is just having the insurance you need and an emergency, fund to get through life that. Means life health, and car insurance at a minimum, and deductibles, no more than $3,000, and an, emergency, fund that can cover some of these expenses, now I'm not going to tell you you have to have three to six months of expenses, saved in an emergency, fund before you start investing that's just not going to happen for a lot of people -. And five households say, they don't have enough money saved, to cover a four hundred dollar emergency. I don't, know how personal, finance experts think that people can save twenty grand in an emergency, fund but you do need to save something to cover these emergency, expenses so we're gonna aim for that first three thousand dollars that's, gonna cover just about any unexpected car, repair and it'll also cover your deductible, on health insurance it's. Not going to save you from that serious, loss of income but it'll start building, that financial, foundation, that's gonna keep you on your investing, plan know one last point before we get to those three ways to pick stocks and my favorite investing strategy is to pay off that high rate debt now I'm not a debt hater, not going to tell you you have to pay off your debt are you gonna be a failure, I had, over 60,000. In student loan debt at one point and it was in no rush to pay it off because I was able to refinance at a rate under 3% I have, a mortgage on a rental property that I was able to lock in at four-and-a-half, percent because I lived in the house for a year I make, fifteen, percent cash returns on that house and use the money I make from it to make other investments, using low rate debt is a financial, tool that every fortune 500, company does Apple.
A Trillion, dollar company, with seventy four billion dollars in cash owes over ninety, seven billion in debt why, because, it's able to use debt as a financial, tool but Apple isn't sitting around paying 18%, on, his credit cards and when I met new clients, as an advisor I'd say bring me your financial, Docs let me see where we're starting from they. Showed me their portfolio, making maybe seven, or eight percent return then, I tell them I could guarantee, them a 20 percent return on their money and their faces would just light up they'd. Ask me how it was possible and it would be like a forehead slap pay off your credit cards you've, got twenty four percent on your cards twenty percent or so on personal, loans putting. Your money in these as like a guaranteed return, now you don't have to pay off all your debt before you get started investing, starting. On that plan is gonna get you in the habit of saving and seeing your money grow but, if you have debt at more than fourteen percent then you need to pay that off first otherwise. All the money you make is just going to be going to your creditors I want, you to make money not your creditors so we've got this solid financial foundation, and, understand, that it might take a better part of the year to get these in order but, this is where you need to start set. Your investing, plan in concrete so that a little financial earthquake, isn't going to shake it loose now I want to do something to get a feel for what are your sticking points you're having I want you to scroll down and share in the comments what's been your biggest hurdle to start investing, has it been maybe with one of the foundation, basics here has, it been where to start what's, your biggest challenges, to investing, so scroll, down and tell us that in the comments when you're ready to start investing, now we can decide what type of investor, you are this, is hugely, important, and most people have no idea it really does matter what type of investor, you are how your personality fits, with investing, are, you someone that wants to follow stocks and make your investing decisions I know, this might sound like a point, question for someone watching, a video on how to buy stocks but, it's one you absolutely. Need to get right because there are really two types of investors, first, is the person that enjoys controlling. Their financial, future that wants to pick stocks and follow an investing, plan then, there's the person that just wants the financial, future they deserve but doesn't, really care how they get there they, don't want the added stress, of or involvement, of picking, their own investments, there's, nothing, wrong with either of these two paths both, can lead to the same destination but the path you choose has to be right for you if you're, someone that wants that stress-free, route the do it for me route but you get on that path of picking stocks you're gonna freak out during the next stock market crash and you're gonna be miserable trying, to manage your money conversely. If you want that engagement with your money but you set on that other path you're, not gonna be motivated, to save so you're gonna pick a path and go one of two routes on how to buy stocks either an online platform like a lion vest where you can pick stocks and make your own decisions, or you can open an account with a Robo, advisor that's gonna do everything for you now I'm gonna explain each of these some of the pros and cons of each and then show you how to open an account and buy stocks on the online investing, site I use if you've already got an investing, account or know which one you want to invest in then jump ahead and I'll share my favorite investing, strategy along, with three simple rules for picking stocks for someone that wants individual, stocks it used to be that you had to go through an advisor that was going to sell you on their experience, or that you couldn't manage your own investments, for, this they charged about a 1%, fee on your money each year at about a hundred, bucks for every 10,000, invested now, a hundred dollars doesn't seem too bad until you start adding it up every.
Year's Fees and that increase in amount as your nest egg grows if you had 10,000, to invest and then add five hundred monthly to your account earning about a seven percent annual return you, could have over six hundred and forty thousand, by the end of thirty years have, an advisor do it and those fees are gonna shave off over a hundred, and eighteen thousand, off your nest egg you'll. Pay over sixty thousand, and fees and you won't be earning money on those fees let, me ask you is spending a few hours a year on your investments, worth a hundred and eighteen thousand, dollars you've, bet it is the most difficult part of opening an online investing, account is just choosing, which website to go with seriously. Opening an account on any of these online sites take less than five minutes, this super, easy your only real decision is which one to choose now. There's nothing wrong with opening, accounts on multiple, investing sites but you probably don't need more than a couple i have, accounts on five websites but that's just because i want access to different research, provided, on different sites and i like to try out different sites, so i can review it for the blogs with your own online account you get to pick your own investments, and fees are going to be a fraction, of what you pay an advisor the, downside, to this is that you need that investing, strategy, we'll talk about in a bit you have to make those decisions yourself, but. This is all super easy and i'm gonna walk you through how to set up an investing account and how to buy stock I'm, gonna use ally invest here but most of these other platforms are very similar, i like ally for a couple of reasons first, because it's more than just an online investing platform it's, part of a lie bank a massive, financial company that offers some of the best rates around by cutting costs being an online bank ally. Offers 24/7. Customer service and everything a traditional, bank has including, credit cards auto and, home loans ally is a all-inclusive. Investing platform with one of the lowest trading fees in the industry buying, a stock or a fund is just four ninety five per trade and you can actually get this down even lower to three ninety five betrayed with accounts over 100 thousand if you do decide to go with a different investing, site ask yourself, a few questions to, pick the right one what's, the per trade feet now this is probably going to be the most important, because it's gonna have the biggest impact on your long-term goals are there, any other fees most sites don't have an annual fee but might charge a fee if you don't make a minimum, number of trades within three months you, shouldn't have to worry about return, check these there are other stuff like that but always check the fees finally, here does the site offer other services like banking, or lending so, let's walk through how to open an invest in account and how to buy stock again, I'll be using the ally platform as an example and I'll leave a link to it in the video description below, but the process is going to be almost identical on, any site so. Here we are on the ally invest website. You'll, start by clicking to open, a self-directed, trading. Account now that's up here with, open an account and invest. To, get started, this doesn't mean you'll be trading stocks it just means you'll be in charge of your own money once, you click through there you'll scroll down to choose how you want to invest with us and again it's a self-directed, trading, account now, this means you're going to be managing your own, money as a to having. A lie investment, managers manage your portfolios for you kind of a Robo investing, idea so, we're gonna click open account. Now. This whole process is very easy but I'm just gonna walk you through it real quick the first step is going to be to register, your account with your name and email address so, you're gonna start off by just putting your first name and last name here and then an email address and click register. Then. Choose whether you want to open an individual, which is a taxable, account a joint, account with your partner or any of the IRA, accounts, now these are going to be those tax, deductible, and taxed advantaged, accounts that we'll get to later the process is really similar for all of these so just, choose one of these we'll choose individual, here and click Next next. You'll enter some basic, personal information, like your birth date your, social, security number. Country. Of citizenship, and your. Marital. Status, next.
Here Is your contact, information for your address so, you just put in your address city, and state and zip code then. You'll enter your employment status and whether you work in the investment, industry or, as an insider, to a company this, is just to protect investors, against insider, trading and it probably, won't affect you if you need to mark YES on any of these questions you will know it because. These are only applicable to people working in, the investment, industry or. People. That own a company, this. Last set of questions is just some basic, investing, objectives, you'll pick from six different goals including, growth balance. And income you'll, also be given an option to apply using, a margin, on the account and to trade options now I recommend be leaving, both of these as no as you, really don't need options, or margin, and they're just gonna cause more harm than they're worth the. Last screen to open your investing account is to check the two boxes to acknowledge, the User Agreement and just verify your information, the. First thing you'll see when logging, into your ally, invest account is going to be this account dashboard, and it's going to show you the balances, and your different accounts if, you've, got separated. Retirement. And taxable accounts you'll be able to see the balances on each of these it. Will also show you how much available cash you have to invest in your stocks at the bottom across. The top of your screen is the menu - accounts, here Maya, and quotes are what you'll use the majority, of the time the, other tabs are really only useful if your research, and stocks are trading so you can basically do everything you need from just these first two tabs right here under. The my accounts, tab in the menu you'll be able to click to your dashboard to see your balances, your, account summary you'll also be able to transfer, money in or out of your account as well, as get your account records, the, next tab quotes, and research here is where you can click through to look at stocks and place an order now how I invest, offers investing, in stocks, ETFs. Options. Mutual, funds fixed, income and foreign currencies, I would. Recommend, just sticking with stocks and ETFs at, first year and that's all we really use in the course. Options. Are a bet on stock prices, you can buy basically, a ticket, to buy or sell a stock at a certain price but, you have to pay a premium for that ticket that, premium is lost whether the stock price goes up or down options. Are a tool for hedging risk but, totally, unnecessary for, most investors now. Mutual, funds are really the same thing as ETS, except. More expensive, and with other disadvantages. You, may have no choice but to invest, in mutual funds in your 401k, plan, because, there may be no, other options, but stick to ETFs. In your own investing, accounts, now. Fixed income investments, are individual, bonds for, the majority of investors anyone, with less than say half a million dollars buying, bond, ETFs, is going to be a better idea buying, individual. Bonds can be expensive if you're buying less than, $100,000. Or so we'll. Look at some bond ETFs, that will give you the exposure you need pretty, cheaply. Finally. Here foreign currencies, and other futures, investments, are very risky, and you can lose a lot of money fast these. Are mostly for companies, and institutional. Investors that need to hedge risk in international. Sales and other risks, now. Moving your mouse over markets, in the drop-down menu we're just going to show a few options you can click on US, markets, to take you to a general, page that shows market, news a chart, of the market and some other popular stocks, on almost. All pages on the site you'll see a small box in the upper right corner with get quote this, is where you can put in the stock symbol or name and go directly, to a page of a stock or an ETF when.
You're Just getting started you'll have to find all the ETFs, and individual, stocks in which you want to invest now, I'll be going through a list of ets that are going to give you great diversification, within, the asset classes and some options, you have for the core piece of your portfolio, this, will be the 65, or 70 percent of your money that you have invested broadly, so, you get those stable, market returns and don't have to worry about your money we'll. Look at these funds in the next module where, we walk through each decade, and look at how investments, change as you age once, you've invested, in that initial, group of five or six ETFs, and maybe some stocks you, can invest more in each easily from, your dashboard or Holdings, page. So. Let's say you want to buy some shares of the Vanguard REIT index, now this is an ETF that holds shares and hundreds, of real estate investment companies it's, a great way to get your real estate exposure, because it's diversified. Across property, types and across, the country the. Expense ratio is just 0.12. Percent which, is extremely, low compared, to individual. Reefs. So. You would come over here to get quote and type, in the ticker symbol which, is vnq, now, if you can't remember the ticker symbol or you don't know it you can also start, typing out the name of the fund or the stock on. Any. Stock or fund page there will be two buttons to buy or sell shares. Now. That's going to take you to the main page for this, investment, it's going to show you charts. Analysis. And highlights, of the fund. Clicking. On the buy button takes you to an easy order, page. Divide. The amount you want to invest by, the current, price for how many shares you want to buy so, if I add $100 and it's $8 a share I would, go 100, divided by 8. 12.5. Since I can't buy fractional, shares I'll do 12 shares, I'll. Toggle on market, for the price and, click. Preview order, and that's. It there's really not much to it other than picking which funds and stocks you want to invest in initially, now the alternative to, managing, your own investments, but still keeping those fees low is to go with a Robo, advisor like well simple or bet Robo, advisors, put your plan on autopilot, with smart technology and, low-cost funds now. I know a lot of people are still a little hesitant to put their money in the hands of a machine but, Robo advisors, really are a great way to reach your financial goals without worrying, about which stocks to buy Robo, advisors, use a computer, program to take your financial, goals and answers to an investor, profile, and design. An automated, investing, plan around that you'll, start off by answering a few questions about your goals and your needs then the platform is gonna spread your money across different, types of stocks and bonds and funds for instant, diversification. Now anytime you invest money it's going to be automatically, invested, in these funds besides, that do it form a process, another, one of the benefits, to Robo advisors, is that you never pay a commission to put your money to work instead. Of paying that five dollars every time you buy a stock like on online investing, sites the, Robo advisor is going to charge a flat half, percent, to make your all of your investments, for example well simple charges a half a percent fee on accounts under a hundred thousand and a point four percent for larger accounts that, means your total investing, expense is going to be $50, for an account with ten thousand dollars invested, by, comparison, if you were to invest in five funds and put new money in every three months on an online platform you, would pay over a hundred dollars in commissions a year as with, all Robo investing, services, well simple rebalances.
Your Account automatically, so your investments, are never far from that plan that's going to best fit your goals that. Computer program is going to change, your investments, as you age to make sure that you're getting that highest return to meet your goals but without too much risk now why I invest with well simple from some of those other Robo advisors, is that it understands, that sometimes you still want to talk to that person about your investments, so the platform has a team of investment, advisors to answer questions, through the phone text or email it's, a completely, free service and really a way to bridge that gap between traditional. Advisors, and Robo advisors so those are your two investing, options depending, on what type of investor, you want to be and again there's nothing wrong with being either one it, really depends on how much engagement you want with your investments, I'll, leave a link to both of those sites in the video description below so you can get more information on either one now. Before we get to those three simple rules I use to buy stocks I want to share my favorite and best in strategy and this is really for those that want to pick stocks that, want for those those three steps to finding their investments, so, this core satellite strategy, is one that most money managers, follow because it's so effective at limiting, your risk but, still getting those higher returns, so. The idea here is that you might put maybe 65, or 75, percent of your money in broad funds now, these can be market, funds or ones that invest in dividend stocks international. Companies are even in different sectors this, core, part of your portfolio is going to diversify, your investments so, no one company or sector can destroy, your wealth now that diversification, is going to give you market, returns and keep you from freaking, out when all the executives, of your favorite company get indicted for fraud but if you want to pick those individual, stocks you want that control, of your investments, and the potential, for higher returns so, that's why you have this satellite portion, of your portfolio the. Rest of your money maybe that twenty five or thirty five percent you use to pick individual, stocks with, these three rules that we'll talk about next since, it's only about a third of your money those individual, stock picks are going to give you the opportunity. For higher returns but, they aren't gonna weigh on your overall portfolio if you can't pick stocks like the Oracle, of Omaha so, now we're on those three simple rules I used to buy stocks the three-step, process that's going to help you be a better investor, thank. You for sticking with me and understand, that those basics, we talked about and that favorite, investing, strategy, or time well-spent. Honestly. That how you invest, in that foundation we, built is way more important than what you invest in so make sure you start with those basics my, first step to pick stocks is to always start with a top-down look at sectors, and industries very.
Few People maybe a handful, of professional, investors like Buffett, or Peter Lynch have ever been able to just pick great companies, but you can start with an advantage by looking at the bigger picture first, this means looking at the economy, and stock sectors like utilities financials. And energy understanding. What your going to do well over the next few years you're, looking for those broader trends. In the economy and in business it's it's much easier to spot these broader, bigger, market, trends that are gonna boost certain stock sectors, than to just start off by trying to pick stocks in fact, as good as he is at picking stocks Warren Buffett uses this approach and you can see it in his portfolio, Buffett. Has invested, almost 60 bill in dollars that's nearly a third of his money in banking stocks he, looked at rising interest rates which are good for banks he looked at deregulation. In the industry and technological. Progress and saw, that these all came together for a great outlook, in the group that table was actually part of a Warren Buffett investing, series we did here on the channel looking, at his investments, and how Buffett pick stocks I'll, leave a link in the video description below, because it really was an interesting, look and how he beats the market for more than 50 years when, you do this starting from that top-down approach, you, don't have to be a genius at picking individual, stocks those, bigger, trends, are gonna lift all the companies within that group so even if you don't pick the very best performers. You're still going to get solid returns so, between the 11 stock sectors, start by picking three or four that are going to be driven by those larger, forces our next, step to picking stocks is going to be comparing, the stocks within those sectors now, this doesn't mean you have to pick just one stock you, see that from the table warren buffett investments, before that he owns seven, stocks within that banking group all, the stocks in that group were going to get a boost but, then you pick out the leaders, for higher returns, so.
When I'm comparing stocks within a sector I'm first looking at some fundamentals. Like profitability, and growth first, you compare revenue, and earnings growth from the income statement one. Thing you want to be careful of is revenue growth that's driven mostly by acquisitions. So if a company is just buying a lot of other companies and piling, on debt but, it's not growing by itself then it's no better than any other company that's growing a revenue more slowly but, doing it organically, you can also compare cash flow from operations, on the statement, of cash flows now this is a cleaner measure of growth because management, can't manipulate actual. Cash flow like it can turnings, finally. I'm also comparing, the operating, margin of companies now this is the business's, profitability and. One of the most important, measures of a leading company it's. Pretty easy to find on the income statement you just divide the operating, income by the revenue so. That tells you how much profit the company is making after their expenses, you can also look at analyst reports available on investing, platforms, or read some of the news around the different companies what. You're looking for is what sets a company apart are there advantages like, a strong, brand or customer service that makes it a leader are, there any catalysts. In the outlook that could mean higher sales or profits with. Just, this these first two rules to picking stocks you've got a solid portfolio of leaders in a group that's gonna benefit, from those broader trends, that, alone is gonna drive higher returns, on your money but the real secret to investing, and this is something I had to learn over a decade, as an analyst, and an advisor is that, it's not about making money but about not losing it that makes you successful not. Losing money on bad investments is how you really, grow your wealth so for that there's just a few things you want to watch for to know when to sell a stock these, aren't going to keep you from losing any money but they're gonna help protect, you from those biggest losses that destroy, portfolios, and first. Here is a company producing all its growth from debt and acquisitions, now, a lot of companies think making a big acquisition is going to fix their sales problem, they, might even be losing. Sales but they think that tying, another boat onto their sinking ship that's suddenly, going to get both of them to float for, example Teva had seen sales flat for two years and even fell by 620. Million in 2015, that forty, billion dollar acquisition helps. Them make another 2 billion in 2016, but, at a huge, cost an extra expense and, interest payments, it. Doesn't, take a financial nerd like myself to understand that buying another company, isn't going to fix your broken one if you. Own shares on a company that's losing, sales and management can't do anything about it the, last thing you want them to do is to cover, it up by acquiring, other companies, they weren't able to manage that one company how are they going to able to manage it plus, an acquisition, now so. This is really two warning signs first that sales and earnings aren't growing second. Is that the company is taking billions, on debt to acquire, other companies and cover up its problems now another thing that might tip you off to when you need to sell a stock is management departures, and specifically. When the chief executive, officer or the chief financial officer leaves now, this not only my signal, that things aren't working right but, bringing on new management, means it's going to take some time to get them on board and develop a new strategy that's.
Time The competitors, are going to be eating their lunch and taking market share now, notice in all this I didn't say anything about a falling stock price that alone. Isn't a reason to sell a stock if it's still a good company so, use these simple steps we talked about to analyze the stock and decide, if you want to hold on to it from here if it's a good reason to sell part, of knowing how to buy stocks and being a successful, investors, seen through those lies Wall Street tells investors, I was, a part of this machine I've seen how it works and I can tell you that the investment, industry isn't, about, making you money anymore it's, about getting those Commission's about getting those advertising, dollars and making the army, of analysts, and brokers rich, that's, why I put together this special, report the 10 lies Wall Street tells investors, it, includes everything I saw that loses investors money all those myths that nobody talks about and how, to play the game by your rules it's, completely, free just something I've done to thank you for subscribing and, being part of the community I'll, leave a link to that in the video description below so click through, and get your copy we're here Mondays, Wednesdays and Fridays with the best videos on beating that making. More money and making your money work for you if you've, got a question about money just scroll down and ask it in the comments and we'll answer it in a future video.