Please note: there is a mathematical error at the 7m10s point in this video. I decided to leave it in instead of correcting it and re-uploading the video because this was one of my first videos and I didn’t want to kill the momentum, and the error doesn’t take away from the lesson of that section of the video. At that point in the video, I say that if the company has 1,000,000 shares outstanding and you own 1000 of those shares, it means you own 0.001% of the company.. but this is, of course, off by a factor of 100 and should have said: 'it would mean you own 0.1% of the company’ and, 'if the company issues 200,000 new shares you will now own just 0.08% of the company.' My bad! By the way, if you caught this yourself - Good job!
Aha! Boom! I spotted this first time watching, and had paused the video saying “no it isn’t” by 6:57 :) I’m just a little happy that my maths brain hasn’t completely died since leaving university ;) Also good call on leaving it there and keeping your momentum :) who gives a shit :=
Great video! You are good at explaining and good with the camera! Your number of subs is growing fast considering this is your second video, great job!
This channel deserves more views, you have nailed the format and delivery. I am not an investor but I work with clients who work in finance so it's important for me to have a working knowledge of markets. Your channel is by far the easiest to understand and nice easy graphics to help illustrate your points :)
I like the way you explained things. Your explanation cleared up questions I had. Today, I looked into potentially investing in Facebook, Facebook Libra, Bitcoin, Morningstar, and Etherium. I just downloaded WeBull, and I have no clue how to use it. I saw your ad as I watched the MeetKevin channel. I hope to learn more about buying stocks as the days go by.
Glad it was helpful! I would suggest staying away from the bitcoin/crypto currency. I'm going to make a video on why that is soon, but essentially it's because crypto is a non-productive asset. (I start to cover it in near the end of this video: th-cam.com/video/R98EpiTtzI0/w-d-xo.html but it needs a video of its own). Stocks represent ownership in a company - so you actually own part of something that makes money. With bitocin/crypto you would just be buying it in hopes that someone in the future buys it off you for a higher price.. but it does not have any intrinsic value because it doesn't make any money. It's like buying pokemon cards in hopes of selling it to someone for more later. Very different then buying a part of a business. Investing in good companies and buying them at great prices is the secret to real wealth. I look forward to providing more value to you in the future. Thanks for your support and for commenting, it helps out :)
Well explained!! I've ben trying to explain self trading to my partner and this is exactly what I think would work! Looking forward to other videos you have
When an ipo is issued company will get the amount equal to it's Face value or current market price? Where will the difference amount goes to.... The difference between the FV to its CMP to sellers or?
On the IPO date the company already has the money in the bank at that point because they sold the newly created shares to the investment bank who then distributed(sells) them through a syndicate of banks and brokerages. Large investors like pension funds might get a chance to buy shares before the IPO date but for the most part you need to wait until the IPO date. Before the IPO there isn’t a market price yet so the value is determined and decided on between the company (seller of shares) and the investment bank (buyer of shares). They determine number of shares and what price per share the IPO will be at, but after that it’s up to the market(everyone buying and selling) to determine the price. And that price after the IPO is most likely going to be higher than the actual intrinsic value of those shares. Once it’s publicly trading it works the same as if you were buying and selling anything. I hope this answers your question!
Value content! I’m actually learning. Question: How often should someone purchase or sell a stock without losing money ? A lot of banks charge fees for selling or buying stock :/
Hi Christine, thanks for watching and commenting! A lot of brokerage accounts these days have $0 commissions.. With the one I use (interactive brokers) it's like $1. If you have an investment account through your bank and the trade fee is like $10 or something and if you're only buying $100 worth of stock at a time, than that's probably going to be a bad idea. So, if your stock investing strategy was to buy $100 a month worth of a vanguard index fund for example, I'd say you should switch to a lower fee brokerage! If on the other hand you were investing $10k once per year than a $10 fee to do that isn't the end of the world. Hope that helps!
Thanks I really appreciate it. This is one of my older videos as well and I think (hopefully) I've improved the delivery since then too :) Thanks for your comment Jomaira!
Thank you for uploading this video this is perhaps the most informative video I have ever seen you’ve explained everything in excellent detail and have helped me understand how the entire process works keep up the awesome job :)
Wow, thanks so much for this amazing comment. I'm really happy to hear that it was so helpful Luis! The stock market is a pretty amazing wealth building tool that we have I'm excited for you to be discovering it!!
I purchased before an IPO (medical company) @ $0.25. Sold around $1.50 after it listed. Was a long time ago. Don’t even remember the name or ticker. Was part of a family/friends opportunity I think.
That point you made at the end where dilution isn't necessarily bad is accurate. If stock issuance enables the company to grow at a rate faster than the percentage diluted, value will be created despite the ownership stake going down for the original owners.
@@IntelligentStockInvesting I just found your channel yesterday and watched 5-6 videos and loved all of them. I will for sure let you know once there is a subject I need clarifications. Pretty new to investment
Great video and thanks for sharing. Question I've always wondered about: So in the first example you provided lets say that I go to sell 10 shares of Apple but there are zero buyers that want to buy my shares at that same time ( I know that would never happen but hypothetically)......does that mean the stock platform where I am trying to sell my shares won't let me sell for lack of a buyer at that time??
At the time of putting a sell order in you choose which price to place your order at (limit order), so if you want your sell order filled immediately you can set your limit order at whatever the BID price is at (because the BID price represents open buy orders)... if you put your order in at a price above that then you will just have an open order in the market sitting there. You can make your order good for the day or good until you cancel it. Your sell order will sit there open and waiting. For highly traded stocks the BID and ASK will be close together. But for smaller and less traded stocks the spread between the bid and the ask would be much wider so you would lose money if you were trying to jump in and out. Thanks so much for the comment! Let me know if you have a follow-up question. I hope that helped.
@@IntelligentStockInvesting thank you for the very thorough response! That answers my question mostly on the technicalities of limit orders where you set your own price that you want to pay; I was also wondering about a hypothetical scenario where you place a market order to sell a certain stock at 10am (hypothetically); and there are literally no buyers to buy the amount of shares you are trying to sell during the entire day up to market close. In this scenario does your sell order never get executed for the entire day due to lack of one single buyer over the course of a day? Again I know a scenario that is very unlikely to happen but just wanted to get your take on it. Thanks!
Can u discuss the role of pre and post market trading. It seems like it leaves retail investors at a disadvantage w reduced hours. Thanks for your videos.
Great suggestion! Something Warren Buffett says is that when he buys a stock he would not care if the market closed the next day and didn't open again for 10 years. The reason is that when you buy stock you own a percentage of a company, and you're going to continue to own it whether you get a quote on what you could sell it for or not. I would not worry yourself about pre and post market trading. Instead focus on finding a great company selling for below its intrinsic value. I'm going to make a video about calculating intrinsic value within the next 2 weeks so stay tuned for that :) Thanks for your support!
@@IntelligentStockInvesting Sometimes announcements come out during post trading hours...and a stock will react positively or negatively by several percentage points during those times. Seems that being able to get those extra few percent in the bank during those events is worthwhile because every percentage point of gain matters. It used to be that you would be happy to make 14% pa. (long term average gain) These days stocks are changing by 14% overnight... by taking advantage of pre/post trading you can bank a years return in a few days sometimes...or is this more the rare exception ?
i understand the allure of it but it will be a path that just takes your money from you. If you're going to do it treat it like it's the casino because that's what your describing would be most like. Investing is a different game. Did you watch this one yet? th-cam.com/video/R98EpiTtzI0/w-d-xo.html
First of all thank you for such informative video and I also got a question, On share dilution, isn’t it possible that company awards something to its existing shareholders in some ratio, lets take your example, on 1:10 I get 1 stock for every 10 I hold on issuing of new shares? Or just the value decreases and only company gains?
if the company issues new shares they are selling them to new people as a way of getting more cash in the bank for investing/growing the business. if the company gains you gain too since you own the company. New shares being issued benefits existing shareholders if they're sold at a premium, but new shares being issued hurts existing shareholders if they're sold at a discount. It all depends on what the shares are worth vs. what price they're being issued and sold at.... same with companies buying back shares. it can be beneficial to existing shareholders but it can also hurt existing shareholders.. all depends on the price they're being bought back at vs what they're actually worth. Price ≠ value.
I enjoyed and learned a lot from your TH-cam video. Have you done a video on how to calculate intrinsic value of a company/share ? I would like to know how to calculate this. Many thanks.
Very informative. I just want to ask when headlines go "market crash", isn't that in a way saying, few investors got way richer at the time of the majority of investors have lost?
Even if 90% of shareholders aren’t selling and are just holding, the 10% of shareholders that are panic selling are the ones setting the price. It’s not easy to profit from crashes because consistently predicting them isn’t possible. Much better to take advantage when they do happen then try to profit off predicting them. Hope this helps :)
Hi Richard this is one of the most pleasant 👌👌🤩 narration on decoding the working of stock market. Thank you for simply simplifying it for those of us who are recently learning about trading. I hope there is another video of yours on how shares of a company is calculated. Thanks !! - Rey
Thanks Rey! I really appreciate the kind words. This might be the best one to watch next, th-cam.com/video/EcPZJpIGYcc/w-d-xo.html I do have one on calculating intrinsic value here too: th-cam.com/video/UtnEHqvGeCE/w-d-xo.html
If the money goes to another seller, how are stocks affected by supply and demand? Wouldn’t this mean there is always the same number of buyers as sellers? And wouldn’t there come a point where someone is unable to buy a stock due to lack of supply?. Please reply, I’ve been tryna get my head around this for ages. Thanks.
Hi Daniel, If you're trying to buy shares and you set your purchase limit order price of $10.00 because that's what the LAST price shows, if there is someone selling their shares with a limit order in the market for $10.00 at the same time as well, a transaction will happen. Let's say instead you put your purchase limit order in but there is no seller with a limit order in the market to allow for a transaction to be made: at that point you will have an open order in the market waiting for a seller. There might be a seller with their sale limit order sitting at $10.25, in which case you could move your purchase limit order up order up to that price level if you wanted in which case a transaction would take place. If you're trying to buy and there is no sellers, you could keep moving your purchase limit order up until you find a seller that is satisfied with the price enough to transact with you. This is normal price discovery based on supply and demand. When there are more buyers than sellers the price will naturally gravitate higher and vice versa. When there are tons of buyers and almost no sellers you can see massive price jumps. When there are tons of sellers but very little buyers you can see massive price drops. Does this help? :)
Also if you own shares that doesn’t necessarily mean your a seller. But most sellers do have a price they’d be willing to sell at and buyers usually have a maximum price they’d be willing to buy at.
Very interesting. Just subscribed. It's almost hard to believe that the companies don't get any of your money with the exception of the Rights issue. Does this work the same when shorting? The company doesn't get your money?
Thanks! I know right! When shorting what is happening is you are borrowing stock from someone else that owns it and selling it to someone else. Your goal is to buy it back at a lower price to return the borrowed stock to it's owner. This borrowing and returning process happens behind the scenes automatically. The company doesn't see any of the money. You might enjoy this video on share repurchasing: th-cam.com/video/sC9tio0QYVM/w-d-xo.html and share issuing: th-cam.com/video/SLYEIBKXC80/w-d-xo.html to deepen your understanding :)
@@IntelligentStockInvesting I will watch those. This takes some worry off of my mind because so many companies, especially big ones are so corrupt and I don't want my money going towards them to contribute to their corrupt ways. Still I have to wonder if there's some things that go on behind the scenes where they illegally do get our money.
@@Bloodmoondream Some Chinese companies, especially smaller ones, you do need to be careful of. Watch a documentary called “the china hustle.” However I don’t think you need to worry too much about companies in North America scamming the shareholders. Oftentimes the management of these companies are shareholders themselves so they would be scamming themselves. Owning companies (owning shares of stock) in companies that also have high levels of insider ownership is a good way to give you some extra peace of mind that the company’s management is aligned with your best interest if that is a big concern you have :) Also if something looks fishy or you don’t fully understand something in the company’s accounting you can always just pass on that company.
Yes buying shares of the S&P500 index is a very good way to go. I discuss that strategy in detail in this video here: th-cam.com/video/5iWxCUHZEbE/w-d-xo.html and this video here as well: th-cam.com/video/n9BVsvlGUC0/w-d-xo.html Enjoy!
ok, thank you for this, now I have a clearer view. But a new question surge on me: The enterprise sell its shares to the bank and then those shares goes from one hand to another and eventually share's price will rise up. At that very moment, does the enterprise is still being benefited by that money?
The only way the enterprise (and ultimately you because you're the owner of the enterprise as a shareholder) benefits from all the trading activity is they choose to buy back shares (this just benefits you as the shareholder because you'll own more of the company as the number of shares outstanding decreases - HOWEVER it's only beneficial if done at times the stock is trading at a discount to its true value) OR if the company decides to use moments of over inflated stock prices as an opportunity to issue more shares, getting cash in return. If for every $1 of value they're able to get $1.20 of cash because the stocks price is trading higher than it's worth, it's a good way to raise capital compared to taking on debt. You as the shareholder, in spite of your ownership being diluted with the new shares being issued, can benefit still, as long as the cash is being put to good use :) Hope this helps! thanks for your comment and questions. feel free to ask questions any time!
Regarding dilution, I agree with this video that it typically has a negative connotation amongst investors. However, my personal opinion is that it can often be more beneficial, especially for long-term shareholders. Perhaps if you're looking to maintain a controlling stake or vote many shares, dilution is an issue, but for the average retail investor I think it's generally a non-issue. The reason for this is that more issued equity increases the company's ability to grow, and does so in a way that may (or may not) be less costly than issuing bonds. If you've bought a small growth stock, for instance, you wouldn't want to see it sitting with a relatively stable shares outstanding number (or worse - using limited capital to repurchase its own stock while trying to scale up). You'd expect to see dilution and would hold out hope that management is able to execute on its goals and deliver rewards to you in the form of increased investor demand (which as this video notes would drive up share price), and possibly eventually in the form of dividends.
Absolutely. Great commentary. I did another video where I talk specifically about dilution if you're interested: th-cam.com/video/SLYEIBKXC80/w-d-xo.html
Very good explanation, so what banks buy the stocks to resell to people that buy the stocks or does for e.g does the Nasdaq buy them from Facebook and then re sell them to us to then buy and sell amongst our selves?
So the cash would go to the person you're buying the shares from. If I owned the shares and happened to be selling them at the exact same moment you were buying them, my shares would go to you and your money would go to me. Does that make sense? Thanks for your comment :)
brokers charge a commission per trade and also charge you for market data. the "free" brokers give you bad order fills and take the difference + sell your trading data to 3rd parties. I use interactive brokers and they they are the best choice. I don't pay for real time market data because i don't need it. And I buy and sell very frequently and when i do it only costs like $1
@@IntelligentStockInvesting after all that brokers have been buyed all the shares of a company . The company had got the funds what they needed . My point is that how do they charge the value of per share n how these per share value gets fluctuated
Thanks, question - Then if someone like Warren buffet usually says he's "allocating capital" but he is actually buying shares in a company, how does that make sense if that money is simply going to other share owners that he has to buy the stock from??
I thought that when companies created new shares, for example they doubled them, that you just got double the amount of shares and the value went down per share.
Sounds like you’re referring to a stock split. But companies can also just issue new shares to raise money which is a different thing than a stock split :)
@IntelligentStockInvesting The claims about where the money goes haha. I believe that your description is true but how did you formulate them or know them to be the case.
Hmmm... well I guess I would suggest reading the past berkshire letters to shareholders... that's where I would recommend most people start. And also open a brokerage account, and buy some shares to get some real experience. Just become a learning machine and everything will slowly click into place in your mind. I also suggest watching this one next if you haven't yet: th-cam.com/video/I1Pk7JUqjno/w-d-xo.html
People who imagine that “investing” in stocks means investing in the business is really far away from the truth. It’s shouldn’t even be called “investing”, because no money go “in”, when you buy stock, the money actually go OUT of the market, because someone else just cashed out (your money).
Hey there, I have this huge doubt which I'm not able to clear and it is killing me and literally stressing me up. So as you told in the video that when I buy shares I get a ownership of that company, so what that means is that the company's profit should be distributed to me according to the percentage I hold. I want to know when does the company share it's profit? P.S. I'm not talking about dividends here, I'm talking about the profit that the company is making and I want to know when do I get my profit. Please help me out with this question, it is bothering me a lot.
Hi Avadh, here's how it works: the earnings that are not distributed to you as dividends are considered retained earnings. Retained earnings can be used in 4 ways: 1. paying down debt This would increase the shareholder equity, which ultimately increases the value of the company and the value of each share. 2. buying back stock This reduces the total number of shares outstanding making each share represent more ownership of the company than it previously did, which ultimately increases the value of each share. 3) Re-investing back into existing operations (capital expenditures) This reinvestment could be into things that maintain the current competitive position (which doesn't really increase the value of the company) or things that will allow the company to make more money in the future. Since the value of a company comes from how much cash it will be able to generate in the future, the value of the company will increase (assuming the money is invested wisely and not squandered) (4) Aquire new businesses This could be in the form of buying stock in other companies (rarely done) or buying entire businesses in negotiated deals. If a company purchases a profitable business it will allow the company to make more money in the future and ultimately increases the value of the company. So now that we've got that out of the way... Each of these 4 options for the money either does increase the value of the company or at least has the potential to increase the value of the company. The increased value won't necessarily be instantly and perfectly and accurately represented in the market price. That's because the market price is just inefficient in general. Often times overvaluing companies and sometimes undervaluing them. In the long run, however, the markets are fairly efficient and the market price will reflect the true value of the company. So at the end of the day, your profit comes from share price appreciation. You can sell the shares and there's your profit. It's important to note that when you buy an undervalued company, it could take 12-36 months for the market to recognize that value. If you've done your valuation work correctly the market will eventually price it in. The company will continue to report more and more earnings and eventually the market will appreciate it and price it in.
Well I beg to differ on the IPO part, I'm an investor in the Indian stock market and almost all the ipo's have given a return of more than 40% (Listing gains) as well growth in 6 months.
interesting. would you say thats generally because they are IPO'd at a price below their true value or because hype and traders often tend to drive the prices up because they anticipate lots of buying?
If the company goes bankrupt while you own it yes, you will most likely lose your full investment, yes. There's lots of companies that don't have any debt though, and if a company doesn't have any debt it can't go bankrupt. It's just a matter of doing the research and picking a company in a strong financial position :)
I'm still a bit confused. How can there be more buyers than sellers (or vice versa) if every transaction has a buyer and a seller? When I buy or sell stock on an app, who exactly am I trading with? Am I buying shares that the app owned? If a transaction requires both a buyer and a seller, why isn't it possible that nobody will want to buy? Say I want to sell all my stock if the price skyrockets, who's to say that anyone will want to buy it? The app makes it seem like I just push a button and it's sold, but surely somebody has to agree to buy.
So most people set limit orders when they're buying or selling and select the price they're willing to do the transaction at. If orders are met at the same price the transaction will happen. If not, then the orders will just sit in the market unfilled and waiting for someone to come around who wants to trade at the price their limit order is set at. When you use a market order you just transact at whatever price the nearest limit order is set at. So if the share price is showing its at $100 that means that is the last price an trade happened at. Now there may be limit orders of people willing to sell shares at $100.05 (ASK) and people willing to buy shares at $99.95 (BID). If you're trying to buy at that moment with a limit order using $100 then your order wont get filled immediately. If you move your limit order price up to the ASK price of $100.05 your order will get filled. Alternatively you can leave your order in at $100 and wait for someone to come down to your price. but of course the market could just keep going up from there and then your order doesn't ever get filled. It works the same way if you're selling but in the opposite direction. If you put your sell limit order in at $100 it wont get filled unless you move your limit order price down to $99.95. $99.95 , $100, and $100.05 is just an example. Sometimes the spread between the bid and the ask price can be much wider than that on the less traded stocks (smaller companies) and sometimes the spread between BID and ASK can be even tighter on the more heavily traded stocks.
I really do understand everything clearly the company selling 1 000 000 shares at 10$ a share. So my question is that share holder owning 1000 shares out of 1 000 000 shares which is 0.001= 0.1% So does that means he owns 0.1% of every profits the company makes??? How much is he going to make every months or yearly??? His profits will be based of profits made from the company or what ??? Reason why I'm asking this because I'm a small entrepreneur running a retail store reseller of electronics devices. My physical stock are my electronics devices that I sell so if for example my company get the $ 10M and invest it and make profits of $ 3M so does that means the share holder will own 0.1% of the 3M ?
Amazing question thank you! Keep them coming if you have more. Sound like You got it! Yes if the company’s ownership is divided up amongst 1M shares and someone owns 1000 of them, they own 0.1% of the company. I will use your example to answer your question: If your company has 1M shares and 1000 shares are owned by your brother, he would own 0.1% of the company and you would own 99.9%. If the company earns $3M and you as the President/CEO decide to pay a dividend of $2M out to the owners, you would get 99.9% of the $2M = $1,998,000 and he would get $2,000. With the remaining $1M of profit that wasn’t paid out as a dividend here’s what happens: If you sell the company right away then that $1M sitting in the bank will get factored into the sale price. Most likely the sale price will be increased by $1M. Your brother will get 0.1% of the sale proceeds in exchange for giving up his 1000 shares. So he still benefits from the $1M of profits that was retained. If you don’t sell the company and instead reinvest that $1M effectively so that now the company earns $3.2M. You could (1) now pay out a higher dividend this year. And, (2), increased the value of the company. The higher value will be factored into the sale price if you were to sell - and your brother would get his share of the sale proceeds. So he benefits proportionately. If you reinvest that $1M ineffective on the other hand.. and now the business still earns not much more than $3M, then your brother will be upset because you should have just paid that money out as a dividend instead of essentially wasting it. He would be upset, and you should also be upset with yourself, because he could have (and so could you have) taken that money and invested somewhere else where it would have earned at least a market rate of return. (I understand that not all investments pay out immediately but you get the idea) In summary. Dividends are divided up amongst owners, retained earnings add value to the company (hopefully) and owners benefit when the companies value increases and will be able to pay out more dividends in the future or company a higher sale price. Hope this helps! Let me know if you have any follow up questions :)
Also, with respect if I may offer a possibly simpler definition for your consideration. The word stock is actually slang for a debinture. Yes it's an old word no one uses anymore. But notice how it looks a bit like debt. Just like a person takes out a loan from a bank. A stock is a loan that a company takes out from the public. The price and the dividends are based on projected earnings as well as asset valuation. In other words, it's worth what it's worth, because that's what it's worth. In theory, so the word stock literally comes from the valuation of actual stock on real shelves. We wanna make these stuffed rabbits but we don't have the money to do it. If you give us the money we're going to ask 25 five dollars a rabbit. It doesn't cost nearly that much to make one. If you let us use your money in trust. We will give you a percentage of the profit minus overhead. So when you trade what you're actually trading is real debt. That's the nutshell version as I understand it many books later anyhow.
So, let me see if I got this right. Typically, when one buys a stock, you're essentially just buying a share of ownership from someone who currently owns that share. So, essentially, none of that money actually goes to the growth, operations, etc. of the company whose stock one buys. So, basically, buying stocks isn't really "investing" in the company itself, right?. It feels like it's just buying the rights to some percentage of dividends and voting power.
Yes, you got it. Shares = ownership and when you buy shares you’re buying them off the current owner and that money isn’t going to the company. Companies still benefit from the stock market when (1) they do their initial public offering (They raise a lot of money at this time to use to grow etc.) and (2) when they issue more shares to raise money (which can happen at any point in the company's lifespan). Some companies will diligently issue new shares when the market is pricing those shares higher than they're "worth" because in those moments the company would be essentially trading $0.80 of value for $1 of cash. And the company will buy back shares when it’s priced cheap: paying $1 of cash for $1.20 of value. ($0.80 and $1.20 are arbitrary example numbers) Companies acting like this however is more of a rarity to find, but when I see that’s been going on it signals to me that the companies management is really focused on maximizing per-share intrinsic value and I wouldn't be surprised if the management also owns a large stake of the company. Hope these extra little details here didn’t create any extra confusion. I recently did a whole video on share buybacks here: th-cam.com/video/sC9tio0QYVM/w-d-xo.html and I’m going to create another one that covers your question in more detail soon because it’s a great question! Thanks for your comment!
Hi Pure gg, here is a good investopedia article that discusses this topic more. www.investopedia.com/terms/d/dilution.asp ultimately a company can issue new shares as a way or raising money and buy back shares as a way of returning value to shareholders (instead of a dividend) This video here of mine also covers these details a bit more too: th-cam.com/video/trucIdrTWso/w-d-xo.html
Stocks is almost like baseball rookie cards. The only difference is that the company can still print more rookie cards at a later time if they wish to?
Kind of. A better analogy might be that stocks are like baseball rookie cards if owning them meant you woke up with money under your pillow every morning. (and people who wanted to compound their money used that money to buy more rookie cards, so they'd wake up with even more money under their pillow -- and kept repeating the process over and over until they could quit their job and just live off of the pillow money)
I don't understand how a company can issue new stock. That is to say, yesterday I owned (let's say) 1% of a company. Now they issue new stocks and my ownership has decreased to (let's say) 0.8% of the company. How can they just take away 0.2% of my ownership without a) getting my consent and b) compensating me for it? What am I missing?
if you're a 1% owner you're a minority shareholder and the rest of the shareholders don't need your consent. The board of directors was elected by the shareholders to represent their best interests and the CEO is ideally doing the same. When new stock is issued, money is raised, and so you own 0.8% (to use your example) of that newly raised money now too. Hope this helps.
@@IntelligentStockInvesting Yes it does -- I'm just going to summarize to make sure I understand. I am a part owner of the company, but I am not a part-manager of the company. Rather, I (along with the other stock holders) have entrusted that job to a board of directors who then give their trust to a CEO. If the CEO/Board believe that the company needs more more cash to help grow the business, then one option that they have is dilute everyone's share in the company so as to raise that cash. So, while we now all own a smaller percentage of the company, the hope is that that smaller percentage will be worth more then our previous larger percentage. Or, put otherwise, it is better to own a small percentage of a really large pie then it is to own a large percentage of a really small pie. As such, the board/ceo are acting in our best interest when they dilute our percent ownership of the company -- since their goal is to maximize our return on our investment. At the same time (as you mention), even BEFORE the company grows, I have been compensated for my diluted owning. I own less of the company, but the company is already worth more because of the cash that it raised in that dilution. So, in a sense, part of my ownership was purchased for me because such a purchase is believed to be in my (and every other shareholder's) best interest.
@@moshemo613 yes you explained it really well. One thing to consider though: not all companies have a board and management that are as shareholder-oriented as some other companies. So one of the things to look for in a company is how shareholder-oriented they are. When they themselves are shareholders there is a better chance of them being shareholder focused. when the board /management doesn't own any shares that are not a good sign to me. a great book on this subject is "the outsiders" by William Thorndyke
When the company starts the founders that created the corporation would own all the shares and then when the company goes public they would create a bunch of new shares (which also reduces the amount of ownership each share represents at the same time) and sell them to the investment bank that’s taking them public. The investment bank sells those shares to other banks who sells them to their pension fund clients etc leading up to the initial public offering date when they becoming publicly tradable. When you come along to buy the shares you’re buying it off of who ever is selling their shares. Could be one of the founders, a bank, a pension fund, or a random person just like yourself who bought them before you came around. Does that make more sense ?
I'm trying to figure out why people buy stock and how it's even appealing to begin with. I know you can make money. But all stock seems like is a receipt that you donated money to a company. Why is this valuable?
Hi Yoko, it’s not that. It’s a share of the company’s ownership. Purchased off of whoever owned the shares before you did. Similar to owning a stake in a private company your ownership entitled you to a percentage of the future earnings. The only difference is that with publicly traded companies it’s easy to buy and sell those shares. You might enjoy this video next IMO: th-cam.com/video/gepm_ywcmKI/w-d-xo.html
Then your buy order will sit there waiting for a seller. All public stocks have lots of trading volume though so it’s unlikely that you’ll run into that problem. Unless you put your buy order in at a price far below the current market price you’ll get matched up with a seller.
I'm not sure what you mean by fake sellers? Regarding float, this is from wikipedia: In the context of stock markets, the public float or free float represents the portion of shares of a corporation that are in the hands of public investors as opposed to locked-in shares held by promoters, company officers, controlling-interest investors, or governments.
Really the only way to reach financial freedom early is to (1) build a a business that provides you with the money you need to live, or (2) buy businesses that will provide you with the money you need. Shares of stock represent ownership in businesses so the best solution from my view is to accumulate ownership of great businesses and pay sensible prices while you're buying. The better the price you pay for your stock the higher your annual returns will be, and the higher your annual returns are, the faster your money can compound and the sooner you'll reach financial freedom. Watch some of the other videos on my channel to learn more in regards to how to know what stocks are worth so you're able to buy them at a discount. this is a good one to check out next :) th-cam.com/video/EcPZJpIGYcc/w-d-xo.html thanks for your comment Broderick :)
First, accept that there’s no easy quick money and that it’ll take a long time anything that promises quick money will just waste your time and won’t get you anywhere. Focus on maximizing your earnings / get a sales job if you want to make good money. Watch the videos on my channel if you want to learn investing. Most people are best off buying index funds and not even thinking about it.
😂😂😂😂😂😂😂 who manages price movements, now don’t tell its buyers and sellers 😂😂😂😂. It’s managed by the owners of the business,investment bank, market regulator and govt in very statergical way.
Please note: there is a mathematical error at the 7m10s point in this video. I decided to leave it in instead of correcting it and re-uploading the video because this was one of my first videos and I didn’t want to kill the momentum, and the error doesn’t take away from the lesson of that section of the video. At that point in the video, I say that if the company has 1,000,000 shares outstanding and you own 1000 of those shares, it means you own 0.001% of the company.. but this is, of course, off by a factor of 100 and should have said: 'it would mean you own 0.1% of the company’ and, 'if the company issues 200,000 new shares you will now own just 0.08% of the company.' My bad! By the way, if you caught this yourself - Good job!
You were predestined to be different(Romans 8:29), he who has an ear to hear, let him hear(Mark 4:9).
HALLELUYAH!(PRAISE YE YAH!)
Aha! Boom! I spotted this first time watching, and had paused the video saying “no it isn’t” by 6:57 :)
I’m just a little happy that my maths brain hasn’t completely died since leaving university ;)
Also good call on leaving it there and keeping your momentum :) who gives a shit :=
Haha, great catch 👌 you’re going to pick up this investing stuff very quick :)
good basic info..i learned something thanx
Glad it was helpful! Thanks for dropping a comment :)
You were predestined to be different(Romans 8:29), he who has an ear to hear, let him hear(Mark 4:9).
HALLELUYAH!(PRAISE YE YAH!)
Love it! Can’t wait for more content. Ps. The editing is on point 👏🏼👏🏼
You have an eye for talented editing ;)
To great video man, I need to keep watching and take this all in. And get started 👍🏿
Really appreciate you watching. We'll get more down and dirty in these videos soon once we get the fundamentals out there :)
I like that the timeline is categorized into the topics of the video. A handy feature I haven't seen utilized before!
Thanks Charlie I'm glad that was helpful :)
Looking forward to more videos ahead, thanks for sharing!
Thanks for watching! I appreciate the support Patrick !!! :)
Excellent video. Well made and very informative. Thanks.
Thanks Bob!
So informative and articulated in a way that makes it easy to understand. You are an outstanding teacher. Thank you.
Thanks for the lovely comment ❤️
Great video! looking forward to the next one.
Thanks Chanelle!
Explained really well, I thought I knew a lot but this helped clarify some things for me. Great video man!
Glad you liked it! Thanks Kamran.
wow this is great! a bunch of details i didn't know about, thanks
Perfect! Your feedback is very valued and appreciated. Thanks Floris.
Great video! You are good at explaining and good with the camera!
Your number of subs is growing fast considering this is your second video, great job!
Thanks! I will check out your channel too. Thanks for watching and commenting.
Always knew you'd be doing big things guy! Great advice!
Thanks Gary we appreciate it!
Great video, Richard! Looking forward to the next one!
Thanks Dan!! Every Wednesday for now and going to build it up to 2-3x per week in time
This channel really underrated
Thank Yoon I really appreciate your comment
This video is AMAZING👍🏾
Wow thanks!!
very informative!
Thanks for commenting :) Glad you liked it
Thanks for a well explained video
No problem! Thanks for watching and commenting I really appreciate it :)
This channel deserves more views, you have nailed the format and delivery. I am not an investor but I work with clients who work in finance so it's important for me to have a working knowledge of markets. Your channel is by far the easiest to understand and nice easy graphics to help illustrate your points :)
Thanks bro. I somehow missed this comment. I appreciate it! My now wife Stephanie was responsible for the graphics :)
Thank you for that explanation had no idea what stocks were actually used for! Will continue to join you towards financial freedom 🤩
Perfect I'm glad it was helpful for you !!
Damn great video! Perfectly clear to understand. I’m gonna subscribe
Awesome comment to wake up to this morning thanks Erik! Let me know if you have any other questions I can help with :)
I like the way you explained things. Your explanation cleared up questions I had. Today, I looked into potentially investing in Facebook, Facebook Libra, Bitcoin, Morningstar, and Etherium. I just downloaded WeBull, and I have no clue how to use it. I saw your ad as I watched the MeetKevin channel. I hope to learn more about buying stocks as the days go by.
Glad it was helpful! I would suggest staying away from the bitcoin/crypto currency. I'm going to make a video on why that is soon, but essentially it's because crypto is a non-productive asset. (I start to cover it in near the end of this video: th-cam.com/video/R98EpiTtzI0/w-d-xo.html but it needs a video of its own). Stocks represent ownership in a company - so you actually own part of something that makes money. With bitocin/crypto you would just be buying it in hopes that someone in the future buys it off you for a higher price.. but it does not have any intrinsic value because it doesn't make any money. It's like buying pokemon cards in hopes of selling it to someone for more later. Very different then buying a part of a business. Investing in good companies and buying them at great prices is the secret to real wealth. I look forward to providing more value to you in the future. Thanks for your support and for commenting, it helps out :)
awesome man very informative thank you
Glad it was helpful!
Subscribe for a new video every week :) th-cam.com/channels/8hyOJoF1gS_uGUL5uQqRhg.html
Great video, these are definitely facts to know for new investors. Looking forward to watch your channel grow!
Appreciate it! I'm now subscribed to your channel as well :) Looking forward to watching you grow too.
This is a really good and informative video, paints a clear picture of how stocks work!
Well explained!! I've ben trying to explain self trading to my partner and this is exactly what I think would work! Looking forward to other videos you have
Glad it was helpful! Thanks for your feedback :)
Great video. I’m glad I found this. You were sharp, direct, fluent, and got to the point quickly. Really appreciate it.
Thanks Greg! I really appreciate your feedback :)
When an ipo is issued company will get the amount equal to it's Face value or current market price?
Where will the difference amount goes to.... The difference between the FV to its CMP to sellers or?
On the IPO date the company already has the money in the bank at that point because they sold the newly created shares to the investment bank who then distributed(sells) them through a syndicate of banks and brokerages. Large investors like pension funds might get a chance to buy shares before the IPO date but for the most part you need to wait until the IPO date. Before the IPO there isn’t a market price yet so the value is determined and decided on between the company (seller of shares) and the investment bank (buyer of shares). They determine number of shares and what price per share the IPO will be at, but after that it’s up to the market(everyone buying and selling) to determine the price. And that price after the IPO is most likely going to be higher than the actual intrinsic value of those shares. Once it’s publicly trading it works the same as if you were buying and selling anything. I hope this answers your question!
@@IntelligentStockInvesting Awesome this is crystal clear!!!
Value content! I’m actually learning.
Question: How often should someone purchase or sell a stock without losing money ? A lot of banks charge fees for selling or buying stock :/
Hi Christine, thanks for watching and commenting! A lot of brokerage accounts these days have $0 commissions.. With the one I use (interactive brokers) it's like $1. If you have an investment account through your bank and the trade fee is like $10 or something and if you're only buying $100 worth of stock at a time, than that's probably going to be a bad idea. So, if your stock investing strategy was to buy $100 a month worth of a vanguard index fund for example, I'd say you should switch to a lower fee brokerage! If on the other hand you were investing $10k once per year than a $10 fee to do that isn't the end of the world. Hope that helps!
Very helpful! Thank you!
Glad it was helpful :) thanks for the comment
Great content!!
Awesome, thanks!
Hey thanks mate that was a really good video.
Glad you enjoyed it!! thanks for your comment :)
Your delivery is very clear and concise. Please keep them coming!
Thanks I really appreciate it. This is one of my older videos as well and I think (hopefully) I've improved the delivery since then too :) Thanks for your comment Jomaira!
Very informative and simply explained. Thanks as well!
Awesome! Glad you enjoyed it :)
Great explanations
Thanks!
Thank you for uploading this video this is perhaps the most informative video I have ever seen you’ve explained everything in excellent detail and have helped me understand how the entire process works keep up the awesome job :)
Wow, thanks so much for this amazing comment. I'm really happy to hear that it was so helpful Luis! The stock market is a pretty amazing wealth building tool that we have I'm excited for you to be discovering it!!
Thank you for the information my dear godbless and more powers new Familia here
Thanks !
Hey mate, thanks for explaining this.
Also I'm not certain that the math @6:59 checks out :)
Cheers
Great video man; you really drilled deep into the root of how these things work and did a great job explaining it with simplicity!
Perfect! I’m glad you enjoyed it 🙌🙌
I purchased before an IPO (medical company) @ $0.25. Sold around $1.50 after it listed. Was a long time ago. Don’t even remember the name or ticker. Was part of a family/friends opportunity I think.
Really good video bro..very knowledgeable
Thanks so much bro! Respect 🙏
Searched so much but you was spot on to the topic.
Perfect! glad you got a lot out of it :)
Great overview!
Thanks Omax :)
That point you made at the end where dilution isn't necessarily bad is accurate. If stock issuance enables the company to grow at a rate faster than the percentage diluted, value will be created despite the ownership stake going down for the original owners.
Awsome explanation
Glad you liked it! thanks for your support. Let me know if there is anything else you'd like me to talk about that you're wondering about :)
@@IntelligentStockInvesting I just found your channel yesterday and watched 5-6 videos and loved all of them. I will for sure let you know once there is a subject I need clarifications. Pretty new to investment
@@mohammadzia3929 Amazing! yes, please do :) Thank you.
Great video and thanks for sharing.
Question I've always wondered about: So in the first example you provided lets say that I go to sell 10 shares of Apple but there are zero buyers that want to buy my shares at that same time ( I know that would never happen but hypothetically)......does that mean the stock platform where I am trying to sell my shares won't let me sell for lack of a buyer at that time??
At the time of putting a sell order in you choose which price to place your order at (limit order), so if you want your sell order filled immediately you can set your limit order at whatever the BID price is at (because the BID price represents open buy orders)... if you put your order in at a price above that then you will just have an open order in the market sitting there. You can make your order good for the day or good until you cancel it. Your sell order will sit there open and waiting. For highly traded stocks the BID and ASK will be close together. But for smaller and less traded stocks the spread between the bid and the ask would be much wider so you would lose money if you were trying to jump in and out. Thanks so much for the comment! Let me know if you have a follow-up question. I hope that helped.
@@IntelligentStockInvesting thank you for the very thorough response! That answers my question mostly on the technicalities of limit orders where you set your own price that you want to pay; I was also wondering about a hypothetical scenario where you place a market order to sell a certain stock at 10am (hypothetically); and there are literally no buyers to buy the amount of shares you are trying to sell during the entire day up to market close. In this scenario does your sell order never get executed for the entire day due to lack of one single buyer over the course of a day? Again I know a scenario that is very unlikely to happen but just wanted to get your take on it. Thanks!
Can u discuss the role of pre and post market trading. It seems like it leaves retail investors at a disadvantage w reduced hours. Thanks for your videos.
Great suggestion! Something Warren Buffett says is that when he buys a stock he would not care if the market closed the next day and didn't open again for 10 years. The reason is that when you buy stock you own a percentage of a company, and you're going to continue to own it whether you get a quote on what you could sell it for or not. I would not worry yourself about pre and post market trading. Instead focus on finding a great company selling for below its intrinsic value. I'm going to make a video about calculating intrinsic value within the next 2 weeks so stay tuned for that :) Thanks for your support!
@@IntelligentStockInvesting Sometimes announcements come out during post trading hours...and a stock will react positively or negatively by several percentage points during those times. Seems that being able to get those extra few percent in the bank during those events is worthwhile because every percentage point of gain matters. It used to be that you would be happy to make 14% pa. (long term average gain) These days stocks are changing by 14% overnight... by taking advantage of pre/post trading you can bank a years return in a few days sometimes...or is this more the rare exception ?
i understand the allure of it but it will be a path that just takes your money from you. If you're going to do it treat it like it's the casino because that's what your describing would be most like. Investing is a different game. Did you watch this one yet? th-cam.com/video/R98EpiTtzI0/w-d-xo.html
First of all thank you for such informative video and I also got a question, On share dilution, isn’t it possible that company awards something to its existing shareholders in some ratio, lets take your example, on 1:10 I get 1 stock for every 10 I hold on issuing of new shares? Or just the value decreases and only company gains?
if the company issues new shares they are selling them to new people as a way of getting more cash in the bank for investing/growing the business. if the company gains you gain too since you own the company. New shares being issued benefits existing shareholders if they're sold at a premium, but new shares being issued hurts existing shareholders if they're sold at a discount. It all depends on what the shares are worth vs. what price they're being issued and sold at.... same with companies buying back shares. it can be beneficial to existing shareholders but it can also hurt existing shareholders.. all depends on the price they're being bought back at vs what they're actually worth. Price ≠ value.
@@IntelligentStockInvesting thank you bro.
Always wanted to know the answer to this question .Thanks Paul 🇮🇪
My pleasure :)
great information
Thanks! Glad you enjoyed it :)
I enjoyed and learned a lot from your TH-cam video. Have you done a video on how to calculate intrinsic value of a company/share ? I would like to know how to calculate this. Many thanks.
Thanks Sean! The 'how to calculate intrinsic value' video will be coming up within the next few weeks :)
You are so good I subscribed. Well done.
Thanks so much!!
Thank you 🙏
My pleasure :) glad you enjoyed it!
@@IntelligentStockInvesting I certainly did 👌
Do you know anyone else that would benefit from this video? If so, please share it with them. 🙂
Very informative. I just want to ask when headlines go "market crash", isn't that in a way saying, few investors got way richer at the time of the majority of investors have lost?
Even if 90% of shareholders aren’t selling and are just holding, the 10% of shareholders that are panic selling are the ones setting the price. It’s not easy to profit from crashes because consistently predicting them isn’t possible. Much better to take advantage when they do happen then try to profit off predicting them. Hope this helps :)
Hi Richard this is one of the most pleasant 👌👌🤩 narration on decoding the working of stock market. Thank you for simply simplifying it for those of us who are recently learning about trading.
I hope there is another video of yours on how shares of a company is calculated. Thanks !!
- Rey
Thanks Rey! I really appreciate the kind words. This might be the best one to watch next, th-cam.com/video/EcPZJpIGYcc/w-d-xo.html I do have one on calculating intrinsic value here too: th-cam.com/video/UtnEHqvGeCE/w-d-xo.html
If the money goes to another seller, how are stocks affected by supply and demand? Wouldn’t this mean there is always the same number of buyers as sellers? And wouldn’t there come a point where someone is unable to buy a stock due to lack of supply?. Please reply, I’ve been tryna get my head around this for ages. Thanks.
Hi Daniel, If you're trying to buy shares and you set your purchase limit order price of $10.00 because that's what the LAST price shows, if there is someone selling their shares with a limit order in the market for $10.00 at the same time as well, a transaction will happen.
Let's say instead you put your purchase limit order in but there is no seller with a limit order in the market to allow for a transaction to be made: at that point you will have an open order in the market waiting for a seller. There might be a seller with their sale limit order sitting at $10.25, in which case you could move your purchase limit order up order up to that price level if you wanted in which case a transaction would take place.
If you're trying to buy and there is no sellers, you could keep moving your purchase limit order up until you find a seller that is satisfied with the price enough to transact with you. This is normal price discovery based on supply and demand. When there are more buyers than sellers the price will naturally gravitate higher and vice versa. When there are tons of buyers and almost no sellers you can see massive price jumps. When there are tons of sellers but very little buyers you can see massive price drops.
Does this help? :)
Also if you own shares that doesn’t necessarily mean your a seller. But most sellers do have a price they’d be willing to sell at and buyers usually have a maximum price they’d be willing to buy at.
Very interesting. Just subscribed. It's almost hard to believe that the companies don't get any of your money with the exception of the Rights issue. Does this work the same when shorting? The company doesn't get your money?
Thanks! I know right! When shorting what is happening is you are borrowing stock from someone else that owns it and selling it to someone else. Your goal is to buy it back at a lower price to return the borrowed stock to it's owner. This borrowing and returning process happens behind the scenes automatically. The company doesn't see any of the money. You might enjoy this video on share repurchasing: th-cam.com/video/sC9tio0QYVM/w-d-xo.html and share issuing: th-cam.com/video/SLYEIBKXC80/w-d-xo.html to deepen your understanding :)
@@IntelligentStockInvesting I will watch those. This takes some worry off of my mind because so many companies, especially big ones are so corrupt and I don't want my money going towards them to contribute to their corrupt ways. Still I have to wonder if there's some things that go on behind the scenes where they illegally do get our money.
@@Bloodmoondream Some Chinese companies, especially smaller ones, you do need to be careful of. Watch a documentary called “the china hustle.” However I don’t think you need to worry too much about companies in North America scamming the shareholders. Oftentimes the management of these companies are shareholders themselves so they would be scamming themselves. Owning companies (owning shares of stock) in companies that also have high levels of insider ownership is a good way to give you some extra peace of mind that the company’s management is aligned with your best interest if that is a big concern you have :)
Also if something looks fishy or you don’t fully understand something in the company’s accounting you can always just pass on that company.
Thank you
No problem ! Glad you liked it Graham!
Wish I’d seen this video 15 years ago when I just started buying stocks. Lost 60% portfolio with an IPO. 😢
That’s okay. Lesson learned. Slow and steady wins the race with investing. Keep at it :)
Is it better to buy a share of a long term stock such as S&P 500
Yes buying shares of the S&P500 index is a very good way to go. I discuss that strategy in detail in this video here: th-cam.com/video/5iWxCUHZEbE/w-d-xo.html and this video here as well: th-cam.com/video/n9BVsvlGUC0/w-d-xo.html Enjoy!
Good One!
Thanks very much Bharath. Glad you enjoyed it :)
ok, thank you for this, now I have a clearer view.
But a new question surge on me: The enterprise sell its shares to the bank and then those shares goes from one hand to another and eventually share's price will rise up. At that very moment, does the enterprise is still being benefited by that money?
The only way the enterprise (and ultimately you because you're the owner of the enterprise as a shareholder) benefits from all the trading activity is they choose to buy back shares (this just benefits you as the shareholder because you'll own more of the company as the number of shares outstanding decreases - HOWEVER it's only beneficial if done at times the stock is trading at a discount to its true value) OR if the company decides to use moments of over inflated stock prices as an opportunity to issue more shares, getting cash in return. If for every $1 of value they're able to get $1.20 of cash because the stocks price is trading higher than it's worth, it's a good way to raise capital compared to taking on debt. You as the shareholder, in spite of your ownership being diluted with the new shares being issued, can benefit still, as long as the cash is being put to good use :) Hope this helps! thanks for your comment and questions. feel free to ask questions any time!
Regarding dilution, I agree with this video that it typically has a negative connotation amongst investors. However, my personal opinion is that it can often be more beneficial, especially for long-term shareholders. Perhaps if you're looking to maintain a controlling stake or vote many shares, dilution is an issue, but for the average retail investor I think it's generally a non-issue.
The reason for this is that more issued equity increases the company's ability to grow, and does so in a way that may (or may not) be less costly than issuing bonds. If you've bought a small growth stock, for instance, you wouldn't want to see it sitting with a relatively stable shares outstanding number (or worse - using limited capital to repurchase its own stock while trying to scale up). You'd expect to see dilution and would hold out hope that management is able to execute on its goals and deliver rewards to you in the form of increased investor demand (which as this video notes would drive up share price), and possibly eventually in the form of dividends.
Absolutely. Great commentary. I did another video where I talk specifically about dilution if you're interested: th-cam.com/video/SLYEIBKXC80/w-d-xo.html
Very good explanation, so what banks buy the stocks to resell to people that buy the stocks or does for e.g does the Nasdaq buy them from Facebook and then re sell them to us to then buy and sell amongst our selves?
Investment banks like Goldman Sachs, Morgan Stanley, Citigroup, JPmorgan. It’s not the nasdaq, no. Nasdaq is just the exchange :) hope that helps.
I have made money off IPO'S it took a little bit of time, but the profit wasn't bad!
Awesome!
So when I buy, where does the actual cash go to? I'm still confused. We buy ownership rights, but the actual cash is held by whom?
So the cash would go to the person you're buying the shares from. If I owned the shares and happened to be selling them at the exact same moment you were buying them, my shares would go to you and your money would go to me. Does that make sense? Thanks for your comment :)
@@IntelligentStockInvesting thank you! Seems like common sense now 🤭🤭
@@niniidi5828 haha, no problem! I'm here for you for any future questions too! :)
Downloaded 10 different apps I want use one app to make a portfolio starting with small shares in various companies what app should I use and why?
Where in the world are you located?
U.K. pay
How do that brokers gets benifit while we buy the shares n sell it
brokers charge a commission per trade and also charge you for market data. the "free" brokers give you bad order fills and take the difference + sell your trading data to 3rd parties. I use interactive brokers and they they are the best choice. I don't pay for real time market data because i don't need it. And I buy and sell very frequently and when i do it only costs like $1
@@IntelligentStockInvesting after all that brokers have been buyed all the shares of a company . The company had got the funds what they needed . My point is that how do they charge the value of per share n how these per share value gets fluctuated
@@everythingishere5276 market demand sets the price (however price and value are 2 different things)
@@IntelligentStockInvesting thanks for ur time bro . But brokers have their own investores to their new bought stocks right.
I don't understand the question sorry. try asking chat gpt.
i hate going to crowded place n those wall street images scares me... now i can be an investor from my home, all hail to the internet god...
Ahmen 🙏
Thanks, question - Then if someone like Warren buffet usually says he's "allocating capital" but he is actually buying shares in a company, how does that make sense if that money is simply going to other share owners that he has to buy the stock from??
He’s allocating Berkshire’s profits by using that money to buying more ownership of more companies. Does that answer your question
I thought that when companies created new shares, for example they doubled them, that you just got double the amount of shares and the value went down per share.
Sounds like you’re referring to a stock split. But companies can also just issue new shares to raise money which is a different thing than a stock split :)
@@IntelligentStockInvesting ah i see thanks for clearing that up
No problem :)
Great video! Do you have references or sources to support your claims?
which claims?
@IntelligentStockInvesting The claims about where the money goes haha. I believe that your description is true but how did you formulate them or know them to be the case.
Hmmm... well I guess I would suggest reading the past berkshire letters to shareholders... that's where I would recommend most people start. And also open a brokerage account, and buy some shares to get some real experience. Just become a learning machine and everything will slowly click into place in your mind.
I also suggest watching this one next if you haven't yet: th-cam.com/video/I1Pk7JUqjno/w-d-xo.html
Cool! Thanks for the clarification! Again, great video!
dhanyavad
👍👍
How about do a video on where the money goes after your stock price drops
That's a great idea i will do it soon!
People who imagine that “investing” in stocks means investing in the business is really far away from the truth. It’s shouldn’t even be called “investing”, because no money go “in”, when you buy stock, the money actually go OUT of the market, because someone else just cashed out (your money).
Interesting perspective Moon Shadow :)
Hey there, I have this huge doubt which I'm not able to clear and it is killing me and literally stressing me up.
So as you told in the video that when I buy shares I get a ownership of that company, so what that means is that the company's profit should be distributed to me according to the percentage I hold. I want to know when does the company share it's profit? P.S. I'm not talking about dividends here, I'm talking about the profit that the company is making and I want to know when do I get my profit. Please help me out with this question, it is bothering me a lot.
Hi Avadh, here's how it works: the earnings that are not distributed to you as dividends are considered retained earnings. Retained earnings can be used in 4 ways:
1. paying down debt
This would increase the shareholder equity, which ultimately increases the value of the company and the value of each share.
2. buying back stock
This reduces the total number of shares outstanding making each share represent more ownership of the company than it previously did, which ultimately increases the value of each share.
3) Re-investing back into existing operations (capital expenditures)
This reinvestment could be into things that maintain the current competitive position (which doesn't really increase the value of the company) or things that will allow the company to make more money in the future. Since the value of a company comes from how much cash it will be able to generate in the future, the value of the company will increase (assuming the money is invested wisely and not squandered)
(4) Aquire new businesses
This could be in the form of buying stock in other companies (rarely done) or buying entire businesses in negotiated deals. If a company purchases a profitable business it will allow the company to make more money in the future and ultimately increases the value of the company.
So now that we've got that out of the way...
Each of these 4 options for the money either does increase the value of the company or at least has the potential to increase the value of the company.
The increased value won't necessarily be instantly and perfectly and accurately represented in the market price. That's because the market price is just inefficient in general. Often times overvaluing companies and sometimes undervaluing them. In the long run, however, the markets are fairly efficient and the market price will reflect the true value of the company.
So at the end of the day, your profit comes from share price appreciation. You can sell the shares and there's your profit.
It's important to note that when you buy an undervalued company, it could take 12-36 months for the market to recognize that value. If you've done your valuation work correctly the market will eventually price it in.
The company will continue to report more and more earnings and eventually the market will appreciate it and price it in.
Well I beg to differ on the IPO part, I'm an investor in the Indian stock market and almost all the ipo's have given a return of more than 40% (Listing gains) as well growth in 6 months.
interesting. would you say thats generally because they are IPO'd at a price below their true value or because hype and traders often tend to drive the prices up because they anticipate lots of buying?
what happends if a companie is broke and u still have stocks of it do u lose all of youre money ?
If the company goes bankrupt while you own it yes, you will most likely lose your full investment, yes. There's lots of companies that don't have any debt though, and if a company doesn't have any debt it can't go bankrupt. It's just a matter of doing the research and picking a company in a strong financial position :)
I'm still a bit confused.
How can there be more buyers than sellers (or vice versa) if every transaction has a buyer and a seller?
When I buy or sell stock on an app, who exactly am I trading with? Am I buying shares that the app owned?
If a transaction requires both a buyer and a seller, why isn't it possible that nobody will want to buy? Say I want to sell all my stock if the price skyrockets, who's to say that anyone will want to buy it? The app makes it seem like I just push a button and it's sold, but surely somebody has to agree to buy.
So most people set limit orders when they're buying or selling and select the price they're willing to do the transaction at. If orders are met at the same price the transaction will happen. If not, then the orders will just sit in the market unfilled and waiting for someone to come around who wants to trade at the price their limit order is set at. When you use a market order you just transact at whatever price the nearest limit order is set at.
So if the share price is showing its at $100 that means that is the last price an trade happened at. Now there may be limit orders of people willing to sell shares at $100.05 (ASK) and people willing to buy shares at $99.95 (BID). If you're trying to buy at that moment with a limit order using $100 then your order wont get filled immediately. If you move your limit order price up to the ASK price of $100.05 your order will get filled. Alternatively you can leave your order in at $100 and wait for someone to come down to your price. but of course the market could just keep going up from there and then your order doesn't ever get filled. It works the same way if you're selling but in the opposite direction. If you put your sell limit order in at $100 it wont get filled unless you move your limit order price down to $99.95.
$99.95 , $100, and $100.05 is just an example. Sometimes the spread between the bid and the ask price can be much wider than that on the less traded stocks (smaller companies) and sometimes the spread between BID and ASK can be even tighter on the more heavily traded stocks.
I really do understand everything clearly the company selling 1 000 000 shares at 10$ a share.
So my question is that share holder owning 1000 shares out of 1 000 000 shares which is 0.001= 0.1%
So does that means he owns 0.1% of every profits the company makes???
How much is he going to make every months or yearly??? His profits will be based of profits made from the company or what ???
Reason why I'm asking this because I'm a small entrepreneur running a retail store reseller of electronics devices. My physical stock are my electronics devices that I sell so if for example my company get the $ 10M and invest it and make profits of $ 3M so does that means the share holder will own 0.1% of the 3M ?
Amazing question thank you! Keep them coming if you have more. Sound like You got it! Yes if the company’s ownership is divided up amongst 1M shares and someone owns 1000 of them, they own 0.1% of the company. I will use your example to answer your question:
If your company has 1M shares and 1000 shares are owned by your brother, he would own 0.1% of the company and you would own 99.9%.
If the company earns $3M and you as the President/CEO decide to pay a dividend of $2M out to the owners, you would get 99.9% of the $2M = $1,998,000 and he would get $2,000.
With the remaining $1M of profit that wasn’t paid out as a dividend here’s what happens:
If you sell the company right away then that $1M sitting in the bank will get factored into the sale price. Most likely the sale price will be increased by $1M. Your brother will get 0.1% of the sale proceeds in exchange for giving up his 1000 shares. So he still benefits from the $1M of profits that was retained.
If you don’t sell the company and instead reinvest that $1M effectively so that now the company earns $3.2M. You could (1) now pay out a higher dividend this year. And, (2), increased the value of the company. The higher value will be factored into the sale price if you were to sell - and your brother would get his share of the sale proceeds. So he benefits proportionately.
If you reinvest that $1M ineffective on the other hand.. and now the business still earns not much more than $3M, then your brother will be upset because you should have just paid that money out as a dividend instead of essentially wasting it. He would be upset, and you should also be upset with yourself, because he could have (and so could you have) taken that money and invested somewhere else where it would have earned at least a market rate of return.
(I understand that not all investments pay out immediately but you get the idea)
In summary. Dividends are divided up amongst owners, retained earnings add value to the company (hopefully) and owners benefit when the companies value increases and will be able to pay out more dividends in the future or company a higher sale price.
Hope this helps! Let me know if you have any follow up questions :)
Also, with respect if I may offer a possibly simpler definition for your consideration. The word stock is actually slang for a debinture. Yes it's an old word no one uses anymore. But notice how it looks a bit like debt. Just like a person takes out a loan from a bank. A stock is a loan that a company takes out from the public. The price and the dividends are based on projected earnings as well as asset valuation. In other words, it's worth what it's worth, because that's what it's worth. In theory, so the word stock literally comes from the valuation of actual stock on real shelves. We wanna make these stuffed rabbits but we don't have the money to do it. If you give us the money we're going to ask 25 five dollars a rabbit. It doesn't cost nearly that much to make one. If you let us use your money in trust. We will give you a percentage of the profit minus overhead. So when you trade what you're actually trading is real debt. That's the nutshell version as I understand it many books later anyhow.
Very interesting perspective thank you for sharing that.
So, let me see if I got this right.
Typically, when one buys a stock, you're essentially just buying a share of ownership from someone who currently owns that share.
So, essentially, none of that money actually goes to the growth, operations, etc. of the company whose stock one buys.
So, basically, buying stocks isn't really "investing" in the company itself, right?. It feels like it's just buying the rights to some percentage of dividends and voting power.
Yes, you got it. Shares = ownership and when you buy shares you’re buying them off the current owner and that money isn’t going to the company.
Companies still benefit from the stock market when (1) they do their initial public offering (They raise a lot of money at this time to use to grow etc.) and (2) when they issue more shares to raise money (which can happen at any point in the company's lifespan).
Some companies will diligently issue new shares when the market is pricing those shares higher than they're "worth" because in those moments the company would be essentially trading $0.80 of value for $1 of cash. And the company will buy back shares when it’s priced cheap: paying $1 of cash for $1.20 of value.
($0.80 and $1.20 are arbitrary example numbers)
Companies acting like this however is more of a rarity to find, but when I see that’s been going on it signals to me that the companies management is really focused on maximizing per-share intrinsic value and I wouldn't be surprised if the management also owns a large stake of the company.
Hope these extra little details here didn’t create any extra confusion. I recently did a whole video on share buybacks here: th-cam.com/video/sC9tio0QYVM/w-d-xo.html and I’m going to create another one that covers your question in more detail soon because it’s a great question! Thanks for your comment!
@@IntelligentStockInvesting That was a great explanation man. Thanks!
@@elnegrobembon Perfect! Glad to hear that. Let me know if you have any other questions along your journey or any topics you'd like me to cover :)
How do companies just make more shares?
Hi Pure gg, here is a good investopedia article that discusses this topic more. www.investopedia.com/terms/d/dilution.asp ultimately a company can issue new shares as a way or raising money and buy back shares as a way of returning value to shareholders (instead of a dividend) This video here of mine also covers these details a bit more too: th-cam.com/video/trucIdrTWso/w-d-xo.html
Stocks is almost like baseball rookie cards. The only difference is that the company can still print more rookie cards at a later time if they wish to?
Kind of. A better analogy might be that stocks are like baseball rookie cards if owning them meant you woke up with money under your pillow every morning. (and people who wanted to compound their money used that money to buy more rookie cards, so they'd wake up with even more money under their pillow -- and kept repeating the process over and over until they could quit their job and just live off of the pillow money)
In Tanzania we ever bought JATU company IPO and it tanked 😢
A good rule of thumb is never buy IPOs
I don't understand how a company can issue new stock. That is to say, yesterday I owned (let's say) 1% of a company. Now they issue new stocks and my ownership has decreased to (let's say) 0.8% of the company. How can they just take away 0.2% of my ownership without a) getting my consent and b) compensating me for it? What am I missing?
if you're a 1% owner you're a minority shareholder and the rest of the shareholders don't need your consent. The board of directors was elected by the shareholders to represent their best interests and the CEO is ideally doing the same. When new stock is issued, money is raised, and so you own 0.8% (to use your example) of that newly raised money now too. Hope this helps.
@@IntelligentStockInvesting Yes it does -- I'm just going to summarize to make sure I understand.
I am a part owner of the company, but I am not a part-manager of the company. Rather, I (along with the other stock holders) have entrusted that job to a board of directors who then give their trust to a CEO.
If the CEO/Board believe that the company needs more more cash to help grow the business, then one option that they have is dilute everyone's share in the company so as to raise that cash. So, while we now all own a smaller percentage of the company, the hope is that that smaller percentage will be worth more then our previous larger percentage.
Or, put otherwise, it is better to own a small percentage of a really large pie then it is to own a large percentage of a really small pie. As such, the board/ceo are acting in our best interest when they dilute our percent ownership of the company -- since their goal is to maximize our return on our investment.
At the same time (as you mention), even BEFORE the company grows, I have been compensated for my diluted owning. I own less of the company, but the company is already worth more because of the cash that it raised in that dilution. So, in a sense, part of my ownership was purchased for me because such a purchase is believed to be in my (and every other shareholder's) best interest.
@@moshemo613 yes you explained it really well. One thing to consider though: not all companies have a board and management that are as shareholder-oriented as some other companies. So one of the things to look for in a company is how shareholder-oriented they are. When they themselves are shareholders there is a better chance of them being shareholder focused. when the board /management doesn't own any shares that are not a good sign to me. a great book on this subject is "the outsiders" by William Thorndyke
So what happens when shares that don’t exist are sold to you?
I know this sounds crazy but I wish White Castle would go public, A billion dollar company!
Now I'm craving White Castle!
wait where does the money go if no one has ever bought the stock before, like the company just started or smth and someone buys its stock
When the company starts the founders that created the corporation would own all the shares and then when the company goes public they would create a bunch of new shares (which also reduces the amount of ownership each share represents at the same time) and sell them to the investment bank that’s taking them public. The investment bank sells those shares to other banks who sells them to their pension fund clients etc leading up to the initial public offering date when they becoming publicly tradable. When you come along to buy the shares you’re buying it off of who ever is selling their shares. Could be one of the founders, a bank, a pension fund, or a random person just like yourself who bought them before you came around. Does that make more sense ?
@@IntelligentStockInvesting yes tysm
Bought 1 share of coin on its ipo. Regret; didn't study buffet back then
That's okay we live and learn :)
I'm trying to figure out why people buy stock and how it's even appealing to begin with. I know you can make money. But all stock seems like is a receipt that you donated money to a company. Why is this valuable?
Hi Yoko, it’s not that. It’s a share of the company’s ownership. Purchased off of whoever owned the shares before you did. Similar to owning a stake in a private company your ownership entitled you to a percentage of the future earnings. The only difference is that with publicly traded companies it’s easy to buy and sell those shares. You might enjoy this video next IMO: th-cam.com/video/gepm_ywcmKI/w-d-xo.html
bro still when I pay for stock, where does money goes. it should go to some where rite , in any once account or it has gone puff
If I’m selling at the same time you’re buying your money will go to me and my shares will go to you
@@IntelligentStockInvesting what if if no one is ready to sell
Then your buy order will sit there waiting for a seller. All public stocks have lots of trading volume though so it’s unlikely that you’ll run into that problem. Unless you put your buy order in at a price far below the current market price you’ll get matched up with a seller.
Forgot about this dude
How can companies account for real number of stock floating in fake sellers
I'm not sure what you mean by fake sellers? Regarding float, this is from wikipedia: In the context of stock markets, the public float or free float represents the portion of shares of a corporation that are in the hands of public investors as opposed to locked-in shares held by promoters, company officers, controlling-interest investors, or governments.
so what's the best solution I still didn't get the solution to get finacial freedom early
Really the only way to reach financial freedom early is to (1) build a a business that provides you with the money you need to live, or (2) buy businesses that will provide you with the money you need.
Shares of stock represent ownership in businesses so the best solution from my view is to accumulate ownership of great businesses and pay sensible prices while you're buying. The better the price you pay for your stock the higher your annual returns will be, and the higher your annual returns are, the faster your money can compound and the sooner you'll reach financial freedom.
Watch some of the other videos on my channel to learn more in regards to how to know what stocks are worth so you're able to buy them at a discount. this is a good one to check out next :) th-cam.com/video/EcPZJpIGYcc/w-d-xo.html thanks for your comment Broderick :)
Bruh,where does the money goes when i loss in forex trading?? Plz
It goes to someone else who was a better trader than you. Forex trading is a zero sum game.
@@IntelligentStockInvesting chaos in my mind some says yes but not always plz mskes a video..
Forex trading is just gambling and I don’t gamble or suggest anyone else does so either if they want to be wealthy
@@IntelligentStockInvesting what would you suggest stocks or forex trading? I'm newbie into the financial markets..
First, accept that there’s no easy quick money and that it’ll take a long time anything that promises quick money will just waste your time and won’t get you anywhere. Focus on maximizing your earnings / get a sales job if you want to make good money. Watch the videos on my channel if you want to learn investing. Most people are best off buying index funds and not even thinking about it.
Please make videos in hindi...
I wish I could :(
😂😂😂😂😂😂😂 who manages price movements, now don’t tell its buyers and sellers 😂😂😂😂. It’s managed by the owners of the business,investment bank, market regulator and govt in very statergical way.