9. How to invest in stocks for beginners 2022 [Free Course]

Question 1

What is the stock market?

Answer 1

The stock market is a “marketplace” where buyers and sellers trade shares in companies.

Question 2

Who regulates the stock market?

Answer 2

The stock market is regulated by the SEC (for the US).

Question 3

What does SEC stands for?

Answer 3

The Securities and Exchange Commision.

Question 4

What is the job of SEC?

Answer 4

The job of SEC is to protect the public from unfairness, and to maintain efficient markets.

Question 5

The companies that are traded in the stock market are all…

Answer 5

publicly traded companies

Question 6

What do you mean by publicly traded companies?

Answer 6

These are companies where outside retail investors can go ahead and buy shares of.

Question 7

What happens when retail investors bought a part of one publicly traded company?

Answer 7

The owners of that company will dilute (a company “issues new stock” [sell stocks to retail investors] which results in a decrease of an existing stockholder’s ownership percentage of that company) their personal equity in exchange for capital.

Question 8

What does IPO stands for?

Answer 8

IPO stands for initial public offering.

Question 9

What happens in the initial public offering (IPO)?

Answer 9

Investment bank (def. a bank that provides financial services for corporate and institutional customers, such as investing and raising capital and arranging mergers and acquisitions) underwrites the IPO, buying up the shares (takes risk). Sells those shares on the market for a fee (percentage of share price)

Question 10

What if there is a private company that is not yet publicly traded but wants to be actually listed in the stock exchanges, what can they do in order to be listed?

Answer 10

They are going to do the IPO.

Question 11

This 2022, how many different exchanges are there in the United States?

Answer 11

13

1. (New York Stock Exchange (NYSE),
2. Nation Association of Securities Dealers Automated Quotation System (NASDAQ)
3. Boston Stock Exchange (BSE)
4. Chicago Board Options Exchange (CBOE)
5. Chicago Board of Trade (CBOT)
6. Chicago Mercantile Exchange (CME)
7. Chicago Stock Exchange (CHX)
8. Internation Securities Exchange (ISE)
9. Miami Stock Exchange (MS4X)
10. National Stock Exchange (NSX)
11. Philadelphia Stock Exchange (PHLX)

Question 12

What does the stock market allow?

Answer 12

It allows individual investors to buy/sell stocks in a regulated environment (auction).

Question 13

What is a stock?

Answer 13

A “piece” of a company.

Question 14

What are the different types of stock?

Answer 14

1. Common stock
2. Preferred stock
3. Categorized stock
4. ETFs (track indexes), Mutual funds

Question 15

What is the difference between Mutual Funds and ETFs?

Answer 15

An exchange traded fund, or ETF, is a basket of investments like stocks or bonds. Typically, ETFs will track a particular index, sector, commodity, or other asset, but unlike mutual funds, ETFs can be purchased or sold on a stock exchange the same way that a regular stock can.

Question 16

What is a common stock?

Answer 16

A common stock is an ownership in a company and right to vote. This also allows you to have access on dividends, this are variables; however, these are not guaranteed.

Question 17

What is a preferred stock?

Answer 17

A preferred stock typically does not give you a voting right, but this has more stable dividend, and the first priority is to pay you in case of bankruptcy. Despite that fact, preferred stocks are harder to lose or gain value, thus, not as volatile as common stock.

Question 18

What do you mean by categorizing stocks?

Answer 18

You can categorize stocks base on how big the company is:

• small-capitalization companies, mid-cap companies, and large-cap companies

You can also categorize stocks based on the sector that they are in:

• Tech stocks, energy stocks, auto stocks, and etc.

You can also categorize stocks by location, like where in the world that company is based from?

And also you can categorize different stocks as either growth companies or valued companies.

Question 19

Categorize the risk tolerance from lower risk to higher risk between the following items.

stocks, bonds, real estate, crypto, cash, and index funds.

Answer 19

1. Cash (lower risk but not going to grow and will lose value because of inflation).
2. Bonds (this security lets you invest very safely but with lower return).
3. Index funds (these are tracking indexes and you’re investing in a whole bunch of companies that is why the risk is a little bit less than buying an individual stocks).
4. Stocks (Your money is based on how the company grows)
5. Real estate (A lot of things can go wrong with real estates)
6. Crypto currencies (Crypto currencies are very volatile)

Question 20

What is the VOO ETF?

Answer 20

VOO ETF aka as Vanguard S&P 500 ETF is a great index fund because it lets you invest on the top 500 companies in the United States. This ETF is recommended if you just want to invest for long-term, and this is basically investing on the whole United States economy.

Question 21

What are the types of brokerage accounts?

Answer 21

1. Taxable account (standard)
2. Retirement accounts
3. Many other accounts

Question 22

What are taxable account?

Answer 22

A type of brokerage account that is the most standard, and with this account you’ll be paying taxes on any gains you make with your stocks. With taxable accounts, you can purchase stocks, mutual funds, Efts, and pretty much anything. Additionally, with taxable accounts, you can have a cash account or a margin account. The cash account is safer than margin account because the cash account is basically laying you to buy investments with the money that you deposited in the account; in contrast, with the margin account, it lets you borrow money from your broker to buy investments.

Question 23

What are retirement accounts?

Answer 23

• Tax advantaged
• Roth IRA, Traditional, IRA, SEP, Solo 401k, 401k
• Contribution limits
• Reduce the amount of taxes you’re paying
• Withdrawal rules

Question 24

What are robo-advisors?

Answer 24

Robo-advisors are passive investing platforms that help invest your money for you. It is automated, and uses algorithms to help you invest in stocks (so this robo-advisors are for passive investors). They require less capital to start, and the annual fees compared to human financial advisors are low. Wealthfront is one of the popular robo-advisor platform most people use.

Question 25

What are the types of trades you have when investing in the stock market? Explain and differentiate them.

Answer 25

• Market order: buying or selling at the best available prince in the current market. Market order is the fastest way to buy/sell. This is the most basic type of buy/sell, and this buy at the current asking price or sell at the bid price.
• Limit order: buying or selling at a specified price that you get to choose. The order only executes if the stock hits that price.
• Stop order: buying or selling when the price moves past a specified price.