- Stocks: I know very little about stocks
besides the iconic bull on Wall Street.
When people get into the stock market
do they imagine themselves facing off
against the Wall Street Bull?
Does investing have the same intensity as a bull fight,
or it's not that literal?
Well, what do people think about stocks?
Do you know what a stock is?
- Yes.
- You invested at all in anything?
- No.
- Do you know anything about stocks?
- No, but I am trying to get into it.
- Not really.
- No.
- Buying low, selling high,
that's all I know!
- Yeah, basic fact.
- I'd like to kind of learn more about it.
- Stocks? I don't understand how those work.
- No.
- I don't know a lot, but I do think I know
probably more than I give myself credit for.
- You know more than I do—that’s great!
A stock is an investment that represents a share
or partial ownership of a company—
meaning that a single share of a stock
means having fractional ownership of a company
in proportion to the total number of shares.
From the company side of things,
stocks are a way to give a company capital.
So, you probably want to know how this affects you,
and how to make money.
I promise we'll get there,
but first, cue the history lesson.
The first modern stock trading
was created in Amsterdam,
when the Dutch East India Company
became the first publicly traded company in 1602.
The Dutch East India Company was established
to take advantage of trade opportunities
in the East Indies.
But, they had a problem:
They needed a lot of money, and they didn't have it.
In order to raise money for their voyages,
they decided to sell stock in the company
to anyone in Amsterdam who was willing to invest.
In return, investors
got a fractional ownership in the company,
and a distribution of profits
if the company itself turned a profit.
But, what do stocks look like today?
Hello, Callie, thank you so much
for joining me here today.
- Hey! Thanks for having me.
- So, since you're the expert,
on a very basic level,
because I know nothing, what are stocks?
- A stock is ownership in a company
that can be publicly or privately traded.
Public companies can be traded on an exchange—
I'm talking about the New York Stock Exchange,
I'm talking about the NASDAQ—
are two that most people know.
On the other hand, sports teams like NFL teams,
for example, are private enterprises
meaning that shareholders own them,
but you can't trade them on the stock market.
- So on an individual level,
would you say that stocks are a great way
to generate personal wealth?
- So, first of all, nothing guarantees wealth.
That being said, history over decades
has shown that investing in the stock market
and holding a diversified portfolio,
or a portfolio of a bunch of different kinds of stocks,
can be a compelling way to build wealth.
- What is the main reason that the stock market
has been such a wealth generator?
- You end up making money through something
that we call 'capital appreciation,'
which is basically where the company
becomes more and more valuable over time.
If you have $100, and you buy a stock that's $10 a share,
then you're hoping if that share
moves up to $20 over time,
and you sell it at $20, then you essentially have $200.
It can work both ways too:
You could buy 10 shares of a $10 stock,
and that stock's share price could go to zero as well,
and you could lose all your money.
So there isn't a certainty, there isn't a guarantee
that you're going to make money
off of stocks or in the market—
and that's the risk you take for that hopeful return.
- All right, so can you tell me what the difference is
between an individual stock versus a mutual fund?
- Single stocks are what most people think of as investing:
it's buying a share of Apple.
By comparison, ETFs and mutual funds allow you
to invest in a basket of companies.
An ETF trades on an exchange,
it's like Apple for example.
It's just like a stock; you can see its prices
during the day change by the second.
A mutual fund, however, doesn't necessarily trade.
They are actively managed funds
that allow you to invest in a basket of companies,
and many investors choose them
because it is the easier way to get broad-based exposure
to certain markets in certain sectors.
- If I wanted to start buying stocks
and investing in companies,
what should I know before I begin?
- The big thing you need to do when you start investing
is to sit down and ask yourself,
"Why do I wanna invest?"
Because when you're investing in the stock market
you are taking on some risk— nobody has a crystal ball.
And the concept of diversification
and asset allocation
really stems from all of that.
So 'diversification' is basically the act
of putting your money in different assets,
in different sectors, in different stocks
because you ultimately can't tell the future.
And as much as you like a certain stock
or a certain sector,
you want to hedge your bets by spreading your money out.
And then you need to track it;
you need to watch it as markets move,
and make sure it doesn't stray
too far away from your targets.
Of course, you can lose that money that you invest,
but sometimes the best way to learn is by doing.
And I usually tell people to, you know,
"A: Read about it."
You know, start looking into the stock market,
how it works, how investing works.
Even if you haven't started investing,
that's a great way to become comfortable with it.
- How do young people
who don't have a lot of extra money to invest
get started in buying a stock?
- If you come to a brokerage and you have $10 or $20,
chances are you can find a way to invest that.
- Oh really, only $10, $20?
- There are no minimums,
and a lot of brokerages also don't charge fees for trading.
- Wow, okay.
- Even if it is just $15 or $20, staying engaged
can lead to, you know, a nice portfolio value over time—
if you give it time, and if you're willing to be patient.
The real power of investing happens
when you invest over time on a regular schedule,
and you increase the amount of money
you invest as you can.
- Thank you so much, Callie,
this has been a great interview, and very informing.
I really enjoyed speaking to the stocks expert,
and learning the value of investing early on.
The stock market always felt
really intimidating to me, personally,
and investing was reserved for my more mature friends
who enjoyed staring at their computer screens all day.
Now I realize that anybody can do it,
especially with the help of professionals.
While it will always be a risky game to play,
investing can ultimately make a huge difference
in one's finances—
and you can start with any amount.