How to Start Seeing Money in The Markets
Post on: 13 Май, 2015 No Comment
How to Start Seeing Money in The Markets
34 Apr 24th, 2014 | By Shah Gilani
Im always getting emails from folks telling me how badly they want to make money in the markets.
The problem is that a good many of these readers confess that they are literally just getting started.
So right now, Im going to begin at the beginning and show you how to make money in the markets from square one.
Today is all about stocks.
In future columns, Im going to talk about bonds. After that Ill get into options, futures, and other derivatives (theyre easy).
And finally Ill show you how they all stocks, bonds, options, futures, and derivatives come together every day.
When its all said and done, I promise you will understand everything about investing and marvel at how simple it all is.
Youll know more than your friends even more than most brokers. And youll start seeing the money in the markets.
So, lets get started.
Here are the absolute basics, the things you need to know about stocks
Investing From Square One
Stocks, traditionally, are shares in a corporation. The words stocks and shares can be used interchangeably. These days you can buy shares or stock in other business structures like limited partnerships and limited liability companies, as well as other entity structures.
But the concept is the same, youre buying shares. For our purposes were going to be talking about shares and stocks of corporations.
When you buy a share of stock, you are literally buying a share in the equity of that company.
Companies raise money by selling ownership interests to investors and the public. Equity is the business term for an ownership interest. Ownership interests take the form of shares of stock in the company. Thats why the words stocks and shares and equities are all interchangeable.
Now let me show you how it all works using Facebook Inc. (NasdaqGS:FB) as an example.
Before Facebook went public in its IPO (initial public offering), it had raised money privately by selling ownership interests in their business to venture capitalists and other institutional investors.
Institutional investors can be public companies or private companies and their business is to invest large sums of money. Mutual funds are institutional investors, so are hedge funds and private equity companies and trust departments at banks and venture capital companies.
As Facebook was getting bigger, Mark Zuckerberg, his original partners, and the investors who had given the company money in return for their equity interest in Facebook, wanted to raise more money to expand the business and to monetize their investments or create an exit for themselves.
Because interest in Facebook was enormous, the company attracted a lot of inside investors who put up money to own a piece of the company. Eventually Facebook attracted 500 investors who gave it money in return for equity shares.
There are rules about how many investors a non-public company can have.
A company can go public when it wants to sell more ownership interests or shares to more investors after it has reached the 500 investor limit.
Thats what Facebook did. The company decided it would offer shares to public investors like you and me and institutional investors.
Now, when a company hits the 500 investor limit, it doesnt mean they have to go public. It can stay private and raise more money from the 500 investors it already has.
But once another investor comes on board, investor 501, the Securities and Exchange Commission (SEC) makes the company publicly disclose its financials.
Thats because the SEC says if you have that many investors they have to be able to see what youre doing with their money and the business.
Once a companys private financials are made public, they almost always decide they might as well go public and list their shares on an exchange and let the public buy and trade them.
So the company hires an investment bank to file their registration paperwork, an S1, with the Securities and Exchange Commission and list their shares on an exchange. Facebook listed on the Nasdaq.
Today, anyone can buy shares in Facebook.
And if you own shares you can sell them in the market. With the IPO, Mark Zuckerberg, his partners, the venture capitalists and early investors, as well as employees of Facebook who were granted stock, can all sell their shares in the public market. Owners and insiders can monetize (turn into cash) their shares and exit their early locked-in cash investments by selling their shares when a company goes public.
When a company goes public, it doesnt sell all its equity. It might offer 10% or 20% or maybe 25% of itself to the public. It can offer whatever it wants. The rest of the equity is retained by the original owners and early investors and employees.
There are restrictions on when insiders can sell their stock and filing requirements for when they want to sell.
Shares Outstanding refers to the total number of shares a company issues they can be in the millions or billions.
Float refers to the number of shares available to trade. A company might have a billion shares outstanding, but it might hold some of those shares itself, so they wont be available to trade, reducing the amount of shares that float.
Thats about as basic as it gets.
Now, its up to you to ask as many questions, general or specific, as you like. I will answer them all within a week of you posting them here. So, have at it below.
Im doing this for you. The more you know the more comfortable youll be and the more money youll make. Thats what this is all about.
BTW: I found a great way for you to make big gains on Facebook and other companies reporting their earnings this week. Its a simple trade and you dont need a lot of investing experience to make as much as a 319% gain in a single day. If you havent seen this already, take a look now. Were in peak Earnings Season and the next two weeks could be very profitable.
34 Responses to How to Start Seeing Money in The Markets
- 3Cpath_to_url%3E&r=G /% Brent Cottle says: April 24, 2014 at 3:04 pm
Good basics well explained. I am with your Short Side Fortunes and cant find a broker willing to assist or reckon its costly working the US market. Any suggestions or contacts. Its frustrating as I havent taken advantage of your insights etc.
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Hello Shah,
Where does a person look up EPS, CFS, and Revenue before they are
released to the public? The way the politicians do it.
Regards.
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I like the professional info!
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Thanks for the interesting and very clear explanation of some terms often used but not often understood.
I am residing in Australia. Can you recommend a brokerage firm of repute that can address the investments which I want to make.
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Shah, I would REALLY REALLY like to be part of your new newsletter called Short Side Trading. At this point in my life I can sure use the gains (retired and not funded for it) you are saying are most likely going to happen. I know you discounted your service, which is great. I very much enjoy your blogs (I am a Money Map member) Thank you for hearing me out. Best to you always, June
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I hope to find a way to sort out the stocks that are basing for a breakout or stocks that are going to report earnings, or small caps that have just had a breakout to the upside. But the sorting problem to get 10,000 down to six or seven is the nightmare for me, and what service is it that will sort out just such watchlists.
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So are you asking individuals to buy through you? Is there such a thing as being accredited? How do we verify if we are wanting to work with you or any one else for that matter?
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Can a person purchase warrants,guaranteeing a purchase price in future or do you recommend using options.
Is there a platform to use that is simple to learn and understand for someone that is new to investing. I appreciate you work and information.
God Bless..
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At the present time I am losing 5500 dollars in the stock market. I do not know if I should sell those stocks or kep them for a while longer
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OK, so I understand that if you know, or truly believe that a company/s stock is going to go down, you can short the stock and make money.
I simply want to buy good stocks, most for growth and income, and some for pure growth. So, how do we decide to choose which ones? Large companies with a long history are paying dividends but have little chance for growth, and smaller companies may pay a small or no dividend but have more chance for growth.
I have found it easier to use mutual funds, and in the past ETFs to make this work, as it costs me a considerable amount to buy an individual stock. The only individual stock I own is SDRL, as I like the story, and mostly use Henderson, Franklin, and Transamerica funds. I am invested in mutual funds both domestically and globally, but am not all in. I am only about thirty percent invested, and am waiting for a pullback in the market. Is this logical, or am I being too careful. I am 58, and I am not employed, though I run a small business, which has slowly going down hill.
So, am I headed in the right direction? Most of my money that is invested is invested globally through Henderson, with much in Transamerica MLP fund, and Thornburg, again for global exposure. Domestically, I have about 10K in Franklin Income and am building a position in Columbia dividend growth. I am looking at putting about five percent in gold.
So, am I doing ok?
Thanks,
Todd
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Todd,
We share two things: age and SDRL. Some Eastern European countries give between 5% and 7% on deposits, guaranteed by a government insurance. If the country is member of the EU there are additional guaranties. If Gerald Celente from Trends Journal is right, we may have around the summer a major correction in the markets. If so, you are probably right in your strategy. I did not have good experience with mutual funds. I am trying to follow some recommendations and trade myself. I am new at this and I can not provide more help.
Emil
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Shah,
Could you provide a tutorial on opening an account for people who have never done so before? Would you also be able to answer questions such as but possibly not limited to the following?
Is there a way to find a good broker?
Is there a rating system or rating agency for brokerage firms?
What is the difference between a full service and a discount broker?
Is there a risk in using a broker?
Anything else that you can think of that we should know.
Thanks,
PXS
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I love you column, I read it every day its in my mailbox. You have a way of breaking things down so anyone can understand it. Were you ever a teacher for a public school. Lol I do have a question for youHow high do u see Facebook going to? I had a chance to get in early but couldnt afford it and when it hit $45 I was good on the cash but I didnt see it going much farther with all the other social media outlets popping up. I have a little cash now so I was thinking about either Silver (Which I love but the Government messes with 2 much) or Facebook (With the stock sitting so high it has me worried). What do you think. You got to remember here Im a single father whos disabled and trying to fight for my SSD benefits so theres exactly no income right now 4 us. I cant afford to lose it but I cant afford to miss out and watch it dwindle away. Any Insight would be so GREATLY APPRECIATED. Thanks for all the terrific articles so far and to come, MIKE
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Thank you for sharing your vast knowledge with me. I have not entered the market because I simply knew so little that I was very uncomfortable. Thanks again for your help.
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No questions yet, but am taking all this info in. Thank you very much for sharing!
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In the summer 2008, it was alleged that Hank Paulson told the general public Fannie Mae and Freddie Mac were in good shape ,but the next day told hedge fund managers and the heads of big banks the hammer was about to fall and essentially inside info allowed the elite few to prosper at the expense of the little guy. And our SEC looked the other way and to this day the little guy has every reason to be cynical about a level playing field. So, please address the issue of stock ownership viz a viz corporations manipulating earnings, expenses,write offs, etc. How does the little guy compete with the investment banks of the world who never seem to lose on any trade Why be long or short in the market if its an insiders game?
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Been buying physical gold & silver but realize the need to buy thru the stock mkt as well, to own shares. Dont really know how to go about this but know time may be running out. Where do I start, with whom, & how? Thanks
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Your recent posts have been exactly what I needed to make me more comfortable about trading and investing. I am one of those, who is literally just starting out. I came across Money Morning about 6 months ago and I have been trying to learn as much as possible. One of the things holding me back is, not having a clear understanding of how the markets work. The fog is clearing. If i have leaned anything from the past 6 months from the M.M. strategist and specialist. Protect your capital by knowing and understanding what your investing in. I am beginning to understand! THANK YOU.
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Hi Shah,
I am a new subscriber. My question is, should I wait for your new recommendations or are there some trades you previously recommended that are still good ones to do right now and not too late? If so which ones ?
Thanks
Alan
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what about ipo?
why do they exist before the stock goes to public market?
and how do you make sure u gain the most from the ipos? I am aware there is a locked-up period
Theres lots of hypes going on about IPO, what are the hidden risks that one has to bear?
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Have you ever heard of a IRM 72 plan? and what if youre retire?
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What does the point system on the exchange represent? When an exchange goes down, it looks like it is in terms of dollars, but it isnt. What does it represent, say when DJIA closes at a minus
98 points?
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PIE IN THE SKY?
Facebook may not be such a great example, but its a brand people recognize. 25% of FBs stock is not tradeable. ( Float is 75% of outstanding shares, Yahoo Finance). I never liked the way the IPO was handled by Morgan Stanley. They issued at least two amended prospectus in the weeks before the actual IPO executed in May, 2010. Each time there were more shares offered and at a progressively higher price/per share. Mark Zuckerman and Morgan Stanley Investment bankers definitely were greedy. They were selling shares to anybody who wanted some. They were not hard to get in my experience. Its was not exclusive and Facebook, Morgan Stanley left no money on the table either. Bad deal for initial investors anyway.
Its still a bad deal because social media is in a bubble. Imagine, the company only earns .77 cents a share. That is peanuts for a multi-billion dollar company. Plus, they have a very large amount of debt. Thats a concern. Debt is not a great idea unless its productive debt, not money to fund a company town, drones ( pie in the sky), and whatever else Little Mark wants to buy with his billions of fiat money ( excuse me, stock).
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APPLE: THE ESTATE OF STEPHEN JOBS
I like Apple. Cartoon character Whimpy liked Hamburgers, particularly ones he could eat today. Apple gives you both a hamburger today and another one tomorrow too. Whimpy would love Apple! Existing shareholders who stay with Apple will still make tons of money over the long term. I can not honestly claim the same for most social media companies or government bond holders either.
Sure, Apples high growth days are behind it, but look, it is still growing- sure not shrinking. Its BIG and has very little debt. That is good. Plus, this cash machine has a huge stash and generates lots of fee cash per share. Shares outstanding just about equal the float. Institutions dominate. Now, they are going to raise the dividend, do even more share buybacks, and split the stock 7:1 in June.
Now, does that mean shareholders will soon get 7X the annual amount of dividend income they received last year from Apple after the split is done? Sure looks that way. Could Apple Shareholders call Apple a private ATM machine that restocks at a faster rate and never runs out of money? Yes, it would appear. Please Correct me if I am wrong here.
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H. Craig Bradley, the cash divident will be split along with the shares, meaning each new cheaper share will get 1/7th of the current divident.
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I listened
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What specifically do you look for in a company before you buy shares?
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THE BIGGER THE RETURN THE BETTER
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How much money would you suggest one have to join your short side fortunes, I am interested in trading and would like to make a small fortune so i can enjoy the retirement side of life. Also, do you suggest how much money to start with at the early stage for those that have a conservative amount of money to use until we are comfortable and making more. Enjoyed your article and I actually could understand it. Thank you for that.
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Is there a Broker you can recommend that works with beginners and their fees are not so high. Give a person to learn and earn at same time. I have researched several, required fees I understand, the add ons will ruin you.
Thanks for your help.
Richard
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Whats the best and least expensive stock brokerage to use when investing in the Market. I am brand new to this, but need to do something significant before I retire. I am almost 63. I have money (several hundred thousand $) being managed by a reputable personal finance firm, but I am concerned that a large portion of those monies will disappear when (if) the Market takes a dive in the next 1-5 years.
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What is the difference between stocks and units? which is the preferred investment?
regards
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Many good questions here, especially concerning selecting a broker. How do we see your answers to all the questions?
My question concerns options and brokers. How can a newbie trade options when most brokers will not allow this unless you have some experience in the market?
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The 3,180 % article by Shah Gilani, looks very interesting. Would this type of Investment still be available to people not residing in the United States? Thank you in anticipation of a positive response!
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