yego.me
💡 Stop wasting time. Read Youtube instead of watch. Download Chrome Extension

Three things to know about stocks


2m read
·Nov 10, 2024

When you own a stock, you're owning a fractional share of a company. Now, there's three things that I always like to keep people wary of when they buy a stock. The first is, is there's sometimes a perception that the stock prices everything, that maybe a $10 per share stock is truly cheaper than a $20 per share price stock. That is not the case.

When you think about what you're paying for a share of a company, you have to think about what the whole company is valued at. So let's say that there's a $10 per share company, but it has a billion shares outstanding. That means $10 per share times a billion shares, that the company is valued at $10 billion.

On the other hand, there might be another company where the stock price is at $100 per share, but there's only a million shares outstanding. So that would be $100 times a million, or a $100 million company. Now, it doesn't necessarily mean that, let's say, the $10 billion company is overpriced or that the $100 million company is underpriced. What you have to think about is why would you own it?

Well, you would own it because companies generate profits, and in theory, those profits, at some point, are going to come to the shareholders or someone else might wanna buy that company. So for example, that $10 billion company might be making a billion of profit a year, while the $100 million company might be making only $5 million of profit a year.

Now it can get more complex. You might be willing to pay more if the company is growing, if you think that there's going to be something exciting that happens in the future. Now, the last thing I will point out is when you buy a stock, you are buying it from someone else. So it's tempting to look at the stock market as this magical thing that just moves up and down, but it's just people buying and selling shares in these companies.

So if you think you have an edge on someone, you just have to think about, well, why are they actually selling it?

More Articles

View All
The Soul of Music: Sampa The Great Returns to her Roots | Podcast | Overheard at National Geographic
Foreign [Music] Douglas: I’m a producer here at Overheard, and this is the second episode of our four-part series focusing on music exploration and black history. It’s called The Soul of Music. National Geographic explorers will be sitting down with some…
Hot Tip | Wicked Tuna
Georgy Banky, here we come, baby! Do you later, Gloucester. Oh, gonna be out there a few days on this one, going far. We need it now, man; we need it more than ever. We’re past the halfway point of the season, and we’re not doing as well as I hoped so far…
When the functions of money break down: Hyperinflation | AP Macroeconomics | Khan Academy
So in the last video, I was talking about various functions of money. You know, the first was that it’s a medium of exchange. If you want to trade for things, typically you give someone money, and they give you the thing, rather than trying to barter, tra…
Rainn Wilson Rappels Across a Ravine | Running Wild with Bear Grylls
RAINN: I guess I just, I’m gonna step off the edge. BEAR: Okay, Rainn. I’m not entirely sure how strong these ropes are, so just ease yourself off it. BEAR (off-screen): Actor Rainn Wilson and I are only a few miles from our extraction point. But a deep r…
Lecture 8 - How to Get Started, Doing Things that Don't Scale, Press
Yeah, thanks for having me, Sam. Um, I’m Stanley. I’m the founder of DoorDash, and it’s really amazing to be here because it wasn’t actually that long ago where I sat in your seats. Um, I was class of 2014, graduated in CS, as well as my co-founder Andy. …
Howard Marks: A Storm is Brewing in the Stock Market (The "AI Bubble")
Every bubble ensues from widespread conviction. People are now convinced AI will change the world. I imagine it will, but you know, if you go back 25 years ago, exactly to, uh, to mid-1999, everybody was sure that the internet would change the world. And …