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  • - [Jeff] When you watch or listen to the news,

  • have you noticed that there are a few topics

  • that always get covered?

  • Weather, sports, unfortunately politics,

  • and news about the stock market.

  • While maybe easy to understand the weather

  • or sports segments,

  • stock market news can feel like a secret code.

  • You know, some people make a lot of money somehow, but how?

  • If the stock market confuses you, you're not alone.

  • According to the Global 2014 survey,

  • 2/3 of adults are not financially literate.

  • It's not your fault schools don't teach this stuff,

  • but the good news is you can understand

  • the basics quite easily.

  • First, what even is stock?

  • Imagine taking a company and breaking it into

  • a lot of tiny pieces.

  • A stock is one of those small pieces,

  • or a share of a company.

  • And when we say a lot of tiny pieces, we mean a lot.

  • Amazon, for instance, is made up of over 500 million shares.

  • When you buy a stock, you're buying one or more

  • of those pieces of a company.

  • For the most part,

  • you can only buy shares of public companies.

  • A public company is one whose shares are available

  • on a public market called a stock market.

  • While many large national companies are public,

  • not all of them are.

  • In fact of the approximately 600,000 U.S. companies

  • with at least 20 employees, less than 1% are public.

  • For example, say you really like candy

  • and wanna live out your Willy Wonka fantasies

  • by owning a piece of a candy company.

  • If you wanna buy shares of Mars,

  • the company behind M&Ms, Snickers, and Skittles, too bad.

  • It's a private company so you can't buy any shares of it.

  • Instead, you might have to settle for Hershey's,

  • which is a public company

  • and so offers its shares in the stock market.

  • Now that we know what a stock is, let's go back to the news.

  • When you hear the stock market went up,

  • that means that overall,

  • the price for pieces of public companies increased.

  • This doesn't mean every company's share went up,

  • just that across the whole stock market

  • people generally paid more for pieces for a company today

  • than they did yesterday.

  • But when you hear the opposite, the stock market went down,

  • that means that on a whole the trader's paying less

  • for stocks today than they were yesterday.

  • You may hear things like the Dow was up today,

  • or the S&P was down today, but what does that mean?

  • The Dow and the S&P, also known as the S&P 500,

  • are bundles of stock that are actually considered

  • to be representative of the stock market as a whole.

  • Think of it as an appetizer sampler platter

  • with some pieces a lot of different things.

  • The Dow is a collection of 30 different companies,

  • while the S&P 500 reflects the shares

  • of 500 different companies.

  • While people often use the Dow or the S&P 500 as stand-ins

  • for how the stock market is doing,

  • it is important to realize the stock market

  • is not a standard for how the economy is doing.

  • This may be counterintuitive since many of us associate

  • the economy with the stock market,

  • but they are different things.

  • The economy is a big and complex system.

  • So big, so complex that it's actually hard to even define.

  • It encompasses different metrics like the employment rate,

  • the prices of goods and services, taxes,

  • and a myriad of other factors all interrelated

  • and affecting one another.

  • Because the economy as a whole is so big and complex

  • but the stock market is relatively easy to understand,

  • the Dow goes up, Dow goes down,

  • many people use a stock market as a substitute

  • in their minds for the economy as a whole.

  • Think of the entire economy like a football stadium.

  • The stock market is like the scoreboard.

  • It tells you a lot of useful information

  • about what's going on inside the football stadium:

  • the score, player stats,

  • the number of people in attendance,

  • but you never say the entire football stadium

  • is the scoreboard.

  • It may be an important part of it,

  • but there's so much more to the economy

  • than the stock market.

  • In fact, there are times when the stock market

  • and the economy can become disconnected.

  • For instance, during the 2020 coronavirus pandemic,

  • the stock market is reaching new highs.

  • Millions of Americans, however,

  • are expecting financial disaster.

  • How can that be?

  • The answer's in the fact that a booming stock market

  • only directly benefits those who own stock.

  • According to "The New York Times,"

  • 84% of stock owned by Americans

  • belong to the wealthiest 10% of households.

  • That means when the stock market's doing well,

  • those at the top benefit the most.

  • According to one of the most influential economists

  • of the 20th century, Milton Friedman,

  • a CEO is an employee of the owners of the company,

  • i.e. the shareholders.

  • This means her only responsibility is to maximize profit.

  • Since profit is revenue minus cost,

  • her job is literally to keep costs down.

  • A major cost for many companies is salaries and benefits

  • for its workers.

  • If a company were to announce raises

  • for all their employees,

  • it would certainly benefit the finances of those employees.

  • However, it would make the cost of doing business to go up.

  • So according to Friedman,

  • in order to do her job and increase stock prices,

  • a CEO would look to keep employee's compensation down.

  • So even if you work for a company

  • whose stock prices is going up,

  • it doesn't necessarily mean

  • your economic fortunes are improving.

  • So how do average people like us get stocks?

  • And how do you make sure you make money

  • and don't lose money?

  • There's no shortage of companies or apps

  • that will allow you to buy or sell stocks,

  • together called trading.

  • Do some research before picking one

  • as many may have fees that outweigh any money

  • you expect to gain by trading.

  • Once you set up a stock trading account,

  • called a brokerage account,

  • trading a stock is actually pretty easy.

  • A simple stock trade can be broken down into three steps.

  • Buy one or more shares at the price

  • the market is selling them.

  • Two, wait some amount of time.

  • It could be minutes, days, months, years, or even decades.

  • During this time, the price of the stock will change

  • for all kinds of reasons

  • that people spend their entire lives trying to understand.

  • Three, sell those shares at the price

  • the market is buying them.

  • That's it.

  • There are more complicated ways of investing

  • into the stock market, but this process is a basic one.

  • Buy something, wait until the price change,

  • and then sell it.

  • You want the price to go up after you buy something,

  • but it might go down.

  • To make money, hopefully you can follow

  • the conventional wisdom of buy low, sell high.

  • You might be wondering, how do I know if the value

  • of a stock is going up or down?

  • Unfortunately, you don't.

  • That's sort of the whole point of the stock market.

  • When you buy a stock, you're essentially making a bet

  • that over time the stock will become more valuable

  • than it was when you bought it.

  • Prices, however, can go down.

  • Meaning you might find yourself selling your shares

  • for less than you paid for them.

  • That's how you lose money.

  • Since no one knows the future, in general,

  • it's pretty foolish to think

  • that you can time the stock market.

  • Whenever you hear someone with flashy stock market tips

  • or no-lose trading strategies,

  • they're almost certainly lying

  • and trying to sell you something.

  • No one knows how to make guaranteed money

  • in the stock market.

  • If they did, they would keep the secret to themselves

  • and spend all their time making money that way.

  • It's similar to when you see

  • scam exercise products advertised that promise easy results.

  • It's just for suckers.

  • The tried-and-true way to make money in the stock market

  • is slow, boring investing

  • so you have money when you're older.

  • Buy some stocks and don't sell them again for ages,

  • even if the market goes down.

  • Even if the market's sores.

  • A good way to do this is with retirement products

  • such as IRAs and 401ks.

  • Over the long run, the stock market has trended upwards,

  • which is why a steady, unexciting investment plan

  • is usually the best one.

  • Again, like exercising products, if you wanna get healthier,

  • the tried-and-true way is consistent diet and exercise,

  • not the quick gimmicks.

  • To wrap things up,

  • while the basics of the stock market are easy to understand,

  • buy, wait, sell,

  • before you do any investing,

  • it's important to do much more research

  • than this video provided.

  • Talk to qualified financial planners,

  • people who you trust to be looking out

  • for your financial wellbeing

  • and not trying to make a quick buck.

  • There's no rush.

  • The stock market isn't going anywhere

  • and neither other news segments reporting on it.

  • Hopefully, however, now you understand a bit more

  • of what those stories mean.

  • (upbeat instrumental music)

- [Jeff] When you watch or listen to the news,

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    林宜悉 posted on 2020/10/30
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