How to Invest In the Stock Market for Beginners in 2020

Good date subscribers! Thank you so much for joining us today. My name is Graham, and welcome to the Financial Education Channel. I'm so happy! Finally, we've been talking to each other for probably like a year and a half. I finally got Jeremy on my channel today.

So, if you're not already familiar with Jeremy, he has a slightly bigger channel than me, like two hundred twenty thousand subscribers, where he talks about the stock market and everything that goes along with that. Jeremy, by the way, has grown a two hundred thousand dollar stock portfolio by the age of 25. When it comes to stocks, I really trust his judgment.

So, today we're going to be doing a video today about stock market investing for beginners in 2019. Everything you need to know from start to finish, from A to Z, exactly how to get started doing this step-by-step.

So, with that said, let's first talk about why would you choose or why would someone choose to invest in stocks in the first place. Alright, so here's how I view things. When I got started in the stock market, I was a natural saver. Here's the thing: like if you're trying to make your money into money, there aren't a lot of avenues that are realistic for you.

Real estate investing, if you don't have much money, really, it's hard to get into, right? There's a certain cost you have to get to. Stocks, you can get into stocks if you have a hundred bucks, two hundred bucks, five hundred bucks safe. You can use a Robinhood app, which is completely free, no trade commissions or anything.

Link in the description! I'm going to be shameless; affiliate link in the description. If you use that link, by the way, you end up getting a free stock. I end up getting a free stock—win-win! You may as well do that! Yeah, you can trade for free, so there's almost no cost to getting into it.

Okay, the second part is you get to own great businesses. Okay, so let's say you believe in Apple. You see how much money Apple makes all the time, okay? And you're like: that business is probably gonna do well in the future. Okay, you can go ahead and read the 10-Ks, 10-Qs, annual reports on their Investor Relations page. You can google that and you could literally learn more about Apple's business and whatnot.

And you can go ahead and if you decide that's a good investment—obviously, there's a lot more that goes into that—but that just kind of shows you the power of it. Okay, you want to invest in Google? Invest in Google. You want to invest in Facebook? You can invest in Facebook. You want to invest in Alibaba? You can invest in Alibaba. Like it doesn't matter what company it is; as long as it's a public company, you can actually invest in them.

And if that company does good financially over the coming years, you're probably going to do very well over the coming years as well. Short term, anything can happen, but a lot of long-term wealth can be created by owning great American businesses. You know, it's been done a million times before and will continue to be in the future.

Yeah, so what are some of the benefits of investing in stocks versus investing in, let's say, something else or investing in a business? You're investing in—yeah, whatever it might be. Well, first of all, I'll say if you have a successful business already, if you have a really good idea for a business, I always say that's actually the best place to put your money because you can probably make a lot of money from that business and then go ahead and stuff it into the stock market.

Okay, but let's say you don't have a successful business or you don't have a plan for that. Then let's say you're just working nine to five. Well, then your next option is, let's go ahead and invest in the stock market. Obviously, you know, on the real estate side, like we've talked about many times, there's definitely some costs and some barriers to entry costs, you know, especially, you know, in your market, LA. Like you need to have a lot of money for that first down payment and whatnot.

Stocks, you can get started way earlier, you know, with hundreds of dollars or maybe a few thousand and whatnot. Yeah, and then you feel like these savings accounts, CD accounts—you're not getting, you know, crap for a return. The returns are horrible there.

So the way I view it is, stock market investing is a realistic avenue for a ton of people out there, especially when you have a long-term vision. Okay, now starting over from the beginning, what sort of strategy do you think is best for people just starting out? We have day trading, swing trading, long-term investing; what would you recommend for someone who's literally just starting out in 2009?

Personally, regardless if they're new or if they're experienced, I always am impartial to long-term investing. You believe in a company; you think it's undervalued because you've looked at a million different metrics out there, right? You know, invest in that company. And like that, as that company grows and grows and grows, you should definitely grow your money as well.

Okay, short term, anything can happen, but I think that's the most realistic way for the average Joe out there. And I think honestly, it's the best way overall; it's a Warren Buffett strategy. At the end of the day, you buy into a company, and if that company goes down, you buy some more—okay? If you feel that's a great business.

Now, it's a business, and nothing ever works out long-term; you make a bad business decision by investing your money there, then you have to, you don't eat the loss. But, you know, day trading, swing trading, things like that—I'm not saying people aren't making money because there definitely are some people that can make money day trading or swing trading or things like that.

But the way I do it is, it's a very hard avenue to go down. Most people that go down that avenue, you know, don't end up making money. Okay, long-term investing—you invested in Apple or Google five years ago, ten years ago—like you've made a lot of money. These aren't complicated stocks to be in. If you want to get in some of the riskier stocks, then you're taking a bigger risk there.

But long-term investing, especially in the bigger tech corporations that you know, you understand, you feel are undervalued—look at all the metrics—you're gonna more likely do very, very well for yourself over a 5, 10, 15, 20 year span.

Yeah, so what's the first way then to get started? What would you say that is? What's the first step? The first step is you gotta ask yourself if you can handle volatility. Stocks are open, everything that you should have said—use the Robinhood affiliate link, sorry.

At the same time, you see a stock price every single day, and that is scary. Okay, imagine, you know, you're a real estate investor. Imagine if every single day, or, you know, not only every single day, but every single minute, sometimes during the day, the price—now real estate's changing. You're like, "Crap! My house number four just went down by ten thousand dollars!"

That's the issue with stocks, okay? You have to be able to handle volatility. You have to have the mindset that you know that position could go down a lot in the short term; that may happen. You gotta be able to handle that inside. If you can't handle that inside, then it's not the place for you.

Then if you can handle that and you think this is something you're gonna have the work ethic to, you can go ahead and start researching companies. Looking at their Investor Relations page, you can simply, like let's say you want to look into Coca-Cola. Now type in Google: "Coca-Cola Investor Relations page." You pull it up, start looking at all their documents, 10-K, 10-Q, read about the company, learn about the company, look at the company's financials, and then when you're actually ready to start investing, then you can invest through something like a Robinhood.

I invest personally through Fidelity Investments, but that, you know, I suggest that more for people that have bigger piping. So it's just about to ask you then, what are your favorite brokerages for people just starting out and then also for people that are a little bit more advanced?

Personally, I use Fidelity Investments. I've been with them for about 10 years now. The customer service is amazing, okay? I've called them up at two, three in the morning before to talk about a strategy or talk about something here or there. They're there to speak to me, alright?

However, if you got a smaller tip account, I could just imagine you by the way in your living room, and your wife's like, "Who are you talking to?" It's like, "It's just Adela Tee, honey! Honey, it's Fidelity! It's okay!" Any other person, like, "Who is it?" "It's nobody, don't worry about it. So about Elon Musk..."

No, so the customer support there is phenomenal. Yeah, nothing bad I can say about that. Again, Robinhood—definitely, if you have a small amount of money, it's worth to go with them just for the simple fact that no trade commission. Through pretty much every other brokerage, you're paying at least five dollars every time you buy a stock.

Yeah, all the stock. So, do you recommend paper trading first before anyone actually puts money at risk for a long-term investment? Not so much, because the payout is sometimes years down the road. If you're day trading—yes, you absolutely need to do paper trading. If you're swing trading, day trading, anything that is short-term volatility where you're doing short-term money types of stuff—yes, you need a paper trade.

However, for long-term investing—I'm investing in a company because I believe in them for the next three to five years; whether I hold that stock or not is gonna depend on a lot of factors. Maybe it goes up a ton; I sell it. Okay, but paper trading is more for, I say, short-term investors. You want to do something there—if you want to get in day trading, swing trading—paper trade. You want to long-term invest? It's probably, you know, start slowly. If you got a lot of money behind you, don't throw it all in your account at once. Build, get confidence in yourself, and go from there.

Yeah, so how do you begin first even finding stocks to trade, and where do you begin looking to find them? I would recommend, besides your YouTube channel—oh, I mention a lot of stocks on the YouTube channel all the time. I always recommend downloading the CNBC app, maybe spending some time on Bloomberg, some of those things. They've mentioned so many stocks in a given day.

Okay, I remember when I was first starting out, I would watch a lot of CNBC television and whatnot, and they would mention, you know, if I watched, let's say, for two hours, they would mention, you know, 20, 30, 40 stocks! And all of a sudden, I could see—or I could see their tickers going on the bottom, yeah? And I'd be like, "Let me look up that company!" Then you go to the Stock Tracker app if you had that; you go ahead and view that stock and start, you know, kind of getting in your mind, "Oh, maybe this is a company I want to look into!" Then you go to their Investor Relations page and go from there.

But I think you just kind of paying attention to CNBC, Bloomberg, YouTube channels like mine, my own, maybe even things like Seeking Alpha, which is another phenomenal app out there, and you can start getting some ideas of what companies are, what stocks are available out there, and then you can take it down to there.

So what sort of charts do you look at, or what sort of earnings do you like, or what sort of news do you read that makes you bullish on a stock? I've read everything I can about a company I own personally, and any company I track, I try to read as much as possible. All news is relevant news. All news is relevant news, okay? There's nothing I just totally dismiss; there's nothing I just totally go after—I'm reading everything, and I'm taking everything into account, okay?

Charts, for me personally as a long-term investor, are not an important thing. Okay, Warren Buffett doesn't look at charts—okay? He views a company, says, "Is this company undervalued? Where's this company's growth going forward? Let me start putting money in this and acquire a position." Charts are not important for us. If you're a short-term trader, yes, charts are vital to you.

And looking at, "Oh my gosh, you know, stock up to here now it's going down," but I'm looking at the 10-K, which is the annual report. I think that's the most important document you can read. You can find out all the information about a company, the financials—everything—and then you go from there: the 10-Qs, live conference calls, and go from there.

So what do you like to see in a 10-K? In a 10-K, I'm looking for first a business I understand. If it's a business I can't understand, it's not worth me investing in. I don't care if they have the best financials in the world; I don't care if, you know, everybody's hyped about this stock. If I can't fundamentally understand that business, why am I gonna invest in it? It's not worth it.

Because what's gonna happen is that stock will probably go down in the short term, maybe, and I'll end up selling out for a loss or something like that because I don't feel confident in the business. And that's what happens in Apple all the time—they don't know that business well enough; they don't know the ins and outs to get that confidence to go through that volatility. And also their position starts to go down; they panic, they sell for a 5% loss, 10% loss, 15% loss, 20% loss, whatever the case may be.

And you know, that's an unfortunate thing. If you don't have business insight now, you don't make those type of decisions. Okay? You make decisions based upon the business, and that's what's very important.

So what sort of bearish signs do you see in a 10-K report or in an earnings report or anything that you're like, "Always avoid that—that's a bad sign"? I try to never touch unprofitable companies—that's something I've got killed with in the past. My worst investment ever in my life as far as a particular stock was a company named GoPro. I invested in that company; it was an unprofitable company. I need to stay away from unprofitable companies. It's not my strength.

So if it's unprofitable, not for me! Somebody else wants to trade it; trying to make money out there—good for you! I'm investing in companies that actually make a profit at the end of the day, okay? And I want to invest in companies that have good balance sheets, are loaded on cash, loaded on investments, and have as low a debt as possible.

That way, when the cards come crumbling down, they can make it through it because they've got that type of money behind them. Or if they want to go ahead and buy another company that's troubled or buy another company that's on the come-up, they can—they have the money to go and do that—two beautiful things.

So how do you diversify your whole thing? Do you like to invest in a particular sector, or do you like to spread it out? And how do you recommend beginners first start allocating their portfolio? I'm looking for many different stocks from many different industries.

Okay, now I'm the most diversified I've ever been. Now it is mainly because I'm getting older. I'm still very young, but I'm getting older, and also my wealth has been building over the years, so I want to diversify more. However, if you're just getting started, it's not as important to diversify.

Let's say you buy—you only have a hundred dollars to invest. You could split that between, I don't know, maybe like two stocks? Now, like, you know a lot of stocks are a hundred plus dollars, so maybe you could only buy one stock with that. So you'll be, you know, very into one stock at one time.

If you're starting out and you're investing a ton of money—ten thousand, a hundred thousand, a million dollars—diversify from the get-go and think about getting into different industries and different businesses that you believe are gonna do very well over the long term.

Okay, so how long do you think you should ideally hold the stock for? When I go into a position, I try to think three to five years out. That's my realistic kind of like Goldman, you know, ten years out. So much can change; however, if I'm only thinking a year out, I'm thinking too short-term, and we're gonna base up things up on earnings and what an analyst says and a lot of different stuff.

I'm thinking three to five years out. It doesn't mean I'll always hold that stock three to five years; it means that's my mindset going in. That stock might jump 20 percent, fifty percent, a hundred percent in a real quick amount of time. Let's say I invest in it and all of a sudden, over the next year, it jumps so much, I might sell out of it because I feel like now it's out of fear of value—yeah, it's out of fear of value. You don't want to sell out!

Okay, you know, I'm sure if real estate was like that, a lot of people would be doing the same thing, right? If the prices jumped fifty percent or a hundred percent in a year, a lot of people would be like, "Oh, let me take my profit here.”

And his company, this house might be overvalued. So that's the way I think about it. My mind says three to five years, but I might not hold it that long—it just depends on where the stock price goes.

How do you get over then the emotional aspect of owning a stock and having the price go down or having the price go up? And you think, “Oh my god! Maybe like how much money can I make?” Or it goes down: “Did I make the biggest mistake of my life?” That's been the hardest part for me with owning individual stocks. I don't own any individual stocks more because I see the price go down or up and it just impacts me too much.

In my opinion, you've got to know everything about that business. You've got to have done, you know, massive studying of that particular business to be that confident that you know that business like the back of your hand, and you can just say, “I'm good. Like it goes down short-term—oh well! I'm gonna buy some more! I still love the business; I'm gonna buy some more or hold that position.” Because you know that business so well.

What happens is, is most people don't do the type of work necessary to feel confident in that situation. So when the shares go down and, you know, some things happen—short-term volatility, and Trump said this, or North Korea did this, and this is going on in China—although some people panic, they sell all their shares; they sell their stock market portfolios generally for a loss unfortunately.

Yeah, and it's because they never even did the real work in the first place to give them that confidence to hold through the bad times. So what about then tax treatment? Do you recommend people invest within like a Roth IRA or a 401(k) or a taxable account? Or hold it for more than a year so they get the long-term capital gains? Like how do you structure this, and what do you recommend for a beginner?

So for me, the goal is to try to hold stocks long-term. The one reason is because I'm a long-term investor. The other reason is you are taxed much differently as a long-term than a short-term investment.

So let's say I buy a stock today, and let's say a stock goes up a bunch, and I sell out next month. I'm gonna be taxed at my normal tax rate, which might be 28 percent or 31 percent or something like that. Versus if I hold that stock for a year or longer, I want to be taxed at around 15 percent. It's a massive, massive tax advantage to be a long-term investor.

Okay, and as far as, you know, a Roth IRA versus a traditional IRA or traditional 401(k), it depends on if you want to be taxed later on down the road or you want to be taxed now. And that's really, you know, up to people to decide that out there. For me personally, I just try to stay long-term, and you know, the goal is to hold a business a year plus. If it doesn't work out that way, it doesn't work out that way.

So what industries do you personally believe are gonna do really well over the next five years? I don't necessarily look at it as in a specific industry. A big trend I love is companies that have many growth levers to pull.

So think about it from the perspective of there are certain business models that they only have one product or one service, really, and they sell that one product or one service and they make their money off that. And when times are good, times are good; when times are bad, they're really bad.

Okay, there are other companies when I look at it that had many growth levers—I have a ton of different things going for it. I'll give you, you know, an example. Let's just talk about Apple for a minute. You know, biggest company in the world. When you think about Apple, they have many growth levers. They not only have the iPhone as far as volume potentially going up in future years, but they have the ASPs continuing to rise—the average selling price per phone.

They have a services business which is growing phenomenally. They have iPads they sell; they have Macs they sell; they have, you know, headphones out; they have Apple Watches—there's so many different businesses to pull from that when I look at, you know, that was the type of businesses I really want to be involved with that have many growth levers to pull.

So that's the way I think about it. Are there any industries that you think are just not gonna be doing well over the next few years? Well, besides those indicators like specific sectors or you think maybe the marijuana stock? I think there are definitely covered.

Yeah, there are definitely some marijuana stocks out there that have some ridiculous valuations. I spoke about those when you until where I went to 300 dollars a share that same day, it posted a video, and I'm like: "Guys, this stock is out of control!"

Okay, since then I think that stock's down 50 plus percent out there. Definitely some sectors there. As far as a big one, I think the auto industry is gonna be hurt very badly. You think about this next time we have a recession; everybody's gonna pull back, and a lot of these automakers are still making ICE automobiles, and the wave is all in electric.

And I think a lot of these companies are lagging. And that's why when people look at Ford and GM, they see all these companies look so cheap; well, you're not pricing in the fact that these businesses can be in a massive, massive decline, regardless if we have a recession or not.

Then you add on a recession on top of that, you know, to some of those companies, and who's going to really want to fund those companies when they make subtle deals? And we're changing to the electric wave, right? So, and, you know, the self-driving wave—who's gonna want to buy, you know, invest in Ford to get them through those times? Or a Chrysler or something like that?

So it's something some people should think about. I think autos is a dangerous industry, you know, and obviously, like we talked about, there's some speculation out there, you know, some of the marijuana stocks and how they fit that criteria.

Yeah, where do you personally see the market going over the next five years, and it's kind of short-term? Yeah, I'm always gonna be bullish. I'm always gonna be bullish five years out, you know, short-term.

I think in 10 years—how about three? And what's your personal belief? I haven't decided on that yet. And you know what I do is at the end of every year, or toward the end of every year, like November, December, what I go ahead and do is I look at all the economic indicators. You can't look at everything across the board; I listen to all the companies that are reporting in usually the October/November timeline, and I'm hearing a lot of what they're guiding out for the next year.

A lot of them do guidance for what they expect for 2019. I'm listening to all that, and I'm making that judgment. So I don't really want to make a prediction—all the stock market's gonna do that? Yeah—I gotta hear what companies expect, I gotta hear the economic numbers.

And then what do you say to the people who feel like we've been in such a long bull run? This can't last forever. And now that we're getting, like, you know, basically almost ten years into it, then it's got to end. Like, this is the longest run we've had, no? Very little time! What are your thoughts?

You know, that's a question I get a lot, and that's a lot of, you know, the further up the mountain you get, that, you know, the scarier it gets to last. It's just how it is, okay? First off, you've got to understand we went through a massive recession.

That's the first-hand tell people, and like, like that was one of the worst recessions we've had in a long, long time, okay? And it took a long time to get out of that. Most people didn't feel like we were starting to gather a recession sound like 2012, okay?

So although the indicators said we were out of that recession in 2009, I think most people in general didn't feel like we were starting to get out until 2012. That's something to keep in mind. Then also, I'm not a believer that just because you haven't had a recession in, let's say, eight years, you need to have one now or something like that.

Like, I'm not a believer in that because the economy is always changing; the industry dynamics are always changing; the political parties are always changing. So just because it's eight or nine years since we had a recession, or whatever people want to say out there, I don't think that necessarily means we're gonna crash. I don't think it necessarily means we're gonna have boom times.

I think you just have to take it day by day, and it's almost like the gambler's fallacy that if you flip heads five times in a row, the sixth time is more likely to be tails. Just as you do—it's still 50/50 every single roll. So it's a little bit like that!

When you mentioned I've gotten into some trouble playing roulette doing that—that is all about crap; I'm like, "Oh! I gotta stick it on black again! Oh! It's gonna come up black! Simulator!" And then your bank drill is done!

All about it's all about craps in baccarat, and that's my favorite games. So anyway, Jeremy, thank you so much. And for all of you watching, I really hope this is a really good beginner tutorial of exactly what to look for when starting to trade stocks.

And if this is something you want to get into, I think we have a lot of information here for you to get started! If you haven't already checked out Jeremy's channel, I'll put the link in the description, and I'm sure you better comment, and I'll pin your comments at the very top.

Yeah, I guess you have to do that. So anyway, check out his channel if you want to learn more. And if you made it to the very end and you haven't already subscribed yet, make sure to smash that subscribe button, smash that notification bell, so YouTube notifies you anytime I upload a video, which they sometimes do. The whole algorithm is broken!

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