[0:00] this is the best piece of advice I've
[0:02] ever heard about investing it came from
[0:04] a millionaire I looked up to as a kid
[0:07] after over hearing him talk about
[0:08] investing I wanted to get involved but
[0:11] as a complete beginner I didn't know
[0:13] where to start so I asked him how do I
[0:16] pick the right stocks to invest in his
[0:18] answer was very simple treat it like
[0:21] finding a girlfriend this is quite a
[0:24] clever way to look at it because when
[0:25] you buy a share in a company you
[0:27] actually become a part owner this is
[0:30] like a partnership between you and the
[0:32] company and just like a relationship you
[0:35] want to make sure it's happy long and
[0:37] successful but look I'm not going to
[0:39] pretend that there's a crystal ball that
[0:40] can tell you when to buy a stock before
[0:42] it rockets in value like most of the
[0:44] fake gurus online however there are
[0:47] certainly a few things you can do to tip
[0:49] the odds in your
[0:52] favor when you're looking for a partner
[0:54] you need to have a strategy in mind are
[0:57] you going to shower them with gifts like
[0:58] a s or treat them mean to keep them Keen
[1:01] you'll get very different results
[1:03] depending on which strategy you choose
[1:05] and the same goes for stocks so just
[1:07] like dating you need to figure out how
[1:09] you're going to approach the stock
[1:11] market so that you get the results you
[1:13] want there are two strategies you can
[1:15] choose from the technical or the
[1:18] fundamental approach both of these
[1:20] options are very different so let's
[1:22] quickly go over what they involve
[1:23] technical analysis is mainly for
[1:25] short-term day Traders they use charts
[1:28] and price action to identify patterns
[1:30] that supposedly help them predict if a
[1:32] stock is going to go up or down in the
[1:34] short term I use the word supposedly
[1:37] because in my opinion most of the people
[1:39] using this strategy are glorified
[1:41] gamblers is it possible to day trade
[1:44] successfully yes but more than 95% a day
[1:47] Traders lose money rather than making it
[1:49] according to the modly fold fundamental
[1:52] analysis is like being a detective for a
[1:54] company you look at everything from
[1:57] their financial reports to how well
[1:59] known the brand is and who's running the
[2:01] show all these pieces of information
[2:03] help you understand how the company is
[2:05] doing now and how it might perform in
[2:08] the future this approach can help you
[2:10] pick a range of stocks that can make you
[2:12] a nice amount of money over a 3 to 10e
[2:15] period I know saying this will probably
[2:17] ruin my watch time but I only want
[2:19] people getting into this for the right
[2:21] reasons so if you're looking for a way
[2:23] to get rich quick then stop watching my
[2:25] video now my goal is to secure your
[2:28] financial future not just help you make
[2:30] a quick Buck also remember with any kind
[2:33] of investing your money can go down as
[2:35] well as up if you're still with me then
[2:37] comment down below I'm in so I know how
[2:40] many of you are willing to invest for
[2:42] the long term right all done cool let's
[2:45] jump
[2:47] into when you're on a dating app and
[2:50] checking out someone's profile you
[2:52] usually look at their pictures and read
[2:53] their bio to see if they'd make a good
[2:55] match it's exactly the same when you're
[2:57] thinking about investing in a company
[2:59] you have to check out the company's
[3:01] profile which in this case is something
[3:03] called a balance sheet a balance sheet
[3:05] is a financial statement that provides a
[3:07] snapshot of a company's financial
[3:09] position at specific point in time it
[3:12] details the company's assets liabilities
[3:15] and share holders Equity don't worry if
[3:17] that sounds a bit confusing we'll take a
[3:19] look at one together and I'll break it
[3:21] down with you I'm going to be using
[3:22] trading 212 to do this which is a great
[3:25] place to research and buy stocks you're
[3:28] welcome to download it and follow long
[3:30] trading 212 is also sponsoring this
[3:32] portion of the video and if you use the
[3:34] code Tilbury you'll also get a free
[3:36] fractional share worth up to £100 when
[3:38] you open your account I'll put the link
[3:40] in the description plus you can get more
[3:42] free Stocks by inviting your friends
[3:44] both of you will get a free share as
[3:46] long as they fund their account I'm
[3:48] going to be using their desktop website
[3:49] for this video but you can do all of
[3:51] this on the mobile app if you want to
[3:53] for everyone in the USA you can find the
[3:56] same information on Yahoo finance
[3:58] remember that nothing in this video
[3:59] should be taken as Financial advice I'm
[4:01] not a financial advisor and when
[4:03] investing your capital is at risk so to
[4:05] find a balance sheet just head to the
[4:07] stock you're interested in for this
[4:09] example I'm going to pick coca
[4:13] colola scroll down the page click on the
[4:16] financials and then the balance sheet
[4:20] and more financials this pulls up a
[4:23] pretty complicated looking page but
[4:25] trust me it is actually very simple to
[4:28] help you understand this balance sheet
[4:30] think of it like a like a cookie jar
[4:32] there you go at the top you've got the
[4:34] current assets these are like the
[4:37] cookies you can grab and
[4:39] eat M very nice for a company this is
[4:43] the cash or anything that can be turned
[4:46] into cash within 12 months next you have
[4:48] the longer term assets these are like
[4:50] the cookies that are deeper down in the
[4:52] jar for a company this often includes
[4:55] the headquarters and Equipment here you
[4:58] have the intangible asset
[5:00] these are like the invisible things that
[5:02] make the cookies taste good you can't
[5:04] touch these things but they bring a lot
[5:06] of value for a company this is patents
[5:09] intellectual property trademarks and
[5:12] Goodwill this next section is all about
[5:14] liabilities these are like the cookies
[5:17] that you've promised to your friends for
[5:19] borrowing their ingredients I'm most
[5:21] interested in the current liabilities as
[5:24] these will need to be paid back within
[5:26] one year or a normal operating cycle so
[5:29] so now you know what all of this
[5:31] information means what should you
[5:33] actually do with it well there's a
[5:35] simple calculation you can do to easily
[5:37] know if a company is high risk or not
[5:40] and that is total current assets divided
[5:44] by total current liabilities A good rule
[5:47] of thumb is this number should be above
[5:50] one but how does this actually work in
[5:52] practice well let's put Coca-Cola's
[5:55] numbers in their total current assets
[5:57] are 26.7 3 billion do so if we divide
[6:02] that by their total current liabilities
[6:05] which are
[6:07] 2357 billion that comes to approximately
[6:12] 1.13 this means the company has
[6:15] $1.3 in current assets for every $1 in
[6:19] current liabilities indicating they have
[6:22] enough short-term assets to cover their
[6:24] short-term debts this is a great
[6:26] indicator but our work is far from over
[6:32] H when you're getting to know someone
[6:34] new you're probably curious about their
[6:36] past relationships it's like doing a bit
[6:39] of a background check right you might
[6:41] wonder whether they've ever cheated or
[6:43] how many partners they've had it's
[6:44] pretty much the same when you're
[6:46] considering investing before you put
[6:48] your hard-earned cash into a company you
[6:50] want to check out his track record
[6:52] that's where the income statement comes
[6:54] in and unlike people public companies
[6:58] have to be upfront and honest about
[7:00] their past an income statement is like a
[7:02] report card for a company showing how
[7:04] well it did over a specific period like
[7:07] a month a quarter or a year put simply
[7:10] it tells you how much money the company
[7:12] made and how much it spent this is
[7:14] normally found in the same place as the
[7:16] balance sheet if you're using the
[7:18] trading 212 app like me then just click
[7:21] on the first Tab and then you'll see all
[7:24] the information here at the top we have
[7:27] the total revenue which is the toal
[7:29] total the business took in the time
[7:31] period as we can see from Coca-Cola they
[7:34] took
[7:36] 45.75 billion in
[7:39] 2023 which isn't too shabby if we scroll
[7:42] down a bit we get to the net income
[7:44] which is the money the company makes
[7:46] after all expenses have been deducted
[7:49] for cocacola this is
[7:52] 10.71
[7:53] billion so why does this matter well
[7:57] every business has two main types of
[7:59] expenses the cost of Revenue and the
[8:02] cost of operations if either of these
[8:05] are too high then it could be a red flag
[8:08] just think about it if you were selling
[8:10] custom t-shirts you'd have to spend
[8:12] money on fabric and printing this is
[8:15] your cost of Revenue as you can't create
[8:17] custom t-shirts without these materials
[8:20] so this is a necessary expense but
[8:23] that's not it you'd also have to spend
[8:25] money on marketing and potentially staff
[8:28] these are known as your operating
[8:30] expenses once you subtract both the cost
[8:32] of Revenue and the operating expenses
[8:35] from the total money you make from
[8:37] selling your custom t-shirts you get
[8:39] your operating income now if you just
[8:42] scale up that example it's the same idea
[8:45] for big companies like cocacola see here
[8:48] this is the operating income so now you
[8:51] know what all this information means
[8:53] what should you actually do with it well
[8:55] here's a simple calculation to see if a
[8:57] business is making a healthy amount of
[8:59] profit operating income divided by total
[9:02] revenue time 100 according to tide
[9:05] banking as a rule of thumb 5% is a low
[9:08] profit margin 10% is a healthy margin
[9:12] and 20% is a high margin if we plug
[9:14] Coca-Cola's numbers into this
[9:16] calculation we get
[9:18] approximately
[9:28] 25.73084 established companies will be
[9:30] more profitable than newer faster
[9:32] growing companies so profitability isn't
[9:35] the most important thing I mean Amazon
[9:38] took years to make a profit and look at
[9:39] them now but saying this you should also
[9:42] keep in mind that a company that's done
[9:43] well in the past doesn't mean that it'll
[9:45] continue to do well in the Future Past
[9:48] performance doesn't guarantee future
[9:52] results listen it might not sound like a
[9:54] romantic thing to say but if you're
[9:56] thinking of getting involved with
[9:58] someone you don't want want them to be
[9:59] bad with money it can lead to a whole
[10:02] lot of headaches down the line trust me
[10:04] in fact money issues are a huge reason
[10:07] why relationships break up the same goes
[10:10] for companies you don't want to invest
[10:12] your money in a company that can't
[10:13] handle it correctly that's why you need
[10:16] to check out their cash flow statement
[10:18] cash flow statement shows how much money
[10:20] is coming in and going out of a company
[10:22] over a period of time is divided into
[10:25] three parts operating activities
[10:28] investing activities and financing
[10:31] activities they sound confusing but
[10:33] trust me they are super simple let's run
[10:36] through them one by one and I'll let you
[10:38] know what to look out for operating
[10:40] activities show the money a company
[10:42] makes from its regular business
[10:44] operations in Coca-Cola's case that's
[10:46] selling their various beverages all you
[10:49] need to look for here is a positive
[10:51] number like this it means the company is
[10:54] making more money than it spends on its
[10:56] day-to-day operations this is a good
[10:59] sign investing activity shows the money
[11:02] the company spent on investments like
[11:04] buying their equipment buildings or
[11:07] other companies it also includes money
[11:09] made from selling those kinds of
[11:11] Investments believe it or not this
[11:13] negative number here isn't a bad thing
[11:16] this is because the company is
[11:18] reinvesting back into the business I
[11:20] always like it when I see that a company
[11:22] is investing wisely in their future just
[11:24] be cautious that they're not spending
[11:26] too much or selling off lots of assets
[11:29] financing activities is about the moneyy
[11:31] a company borrows or gets from selling
[11:33] pieces of the company and the money it
[11:35] uses to pay back loans or give rewards
[11:38] to stock owners in the form of dividends
[11:40] it's very important for you to keep an
[11:42] eye on how they're managing their debt
[11:44] and dividend payments be cautious if
[11:46] they rely too much on borrowing and if
[11:49] they're paying high dividends with a
[11:50] negative cash flow it's like if you won
[11:53] a chunk of money and stopped working and
[11:56] then kept giving all your friends
[11:58] expensive gifts it's it's just not
[12:00] sustainable and eventually you'll run
[12:02] out of cash however this isn't the case
[12:06] with cocacola because even though they
[12:08] gave away
[12:10] $7.95 billion worth of dividends to
[12:13] their shareholders it's safe to say with
[12:15] that kind of positive cash flow they can
[12:18] afford
[12:20] it have you ever been really attracted
[12:23] to someone online who seems perfect on
[12:26] paper but when you finally meet them you
[12:28] don't don't feel that spark this could
[12:30] be similar to stocks a company may
[12:33] appear to be a good investment Based on
[12:35] data but there are factors that
[12:38] spreadsheets just can't capture that's
[12:40] why you need to cross-examine with
[12:42] something called qualitative analysis
[12:45] this basically means checking out things
[12:47] that aren't numerical like how well
[12:49] known the company is how loyal their
[12:52] customers are and how happy those
[12:54] customers are with that company so yeah
[12:56] it's not all about the numbers you need
[12:58] to seek out this information from
[13:00] sources that aren't as easy to find and
[13:03] really embody your inner Sherlock Holmes
[13:07] so what information should you be
[13:09] looking for and how can you find it when
[13:11] it's not immediately obvious well there
[13:13] are three key things you need to keep an
[13:15] eye on the first thing is brand
[13:18] recognition if you went to a bunch of
[13:20] people in the street and said tell me
[13:22] what you think about Apple you'd
[13:24] probably get mostly positive responses
[13:26] about their product quality and good
[13:29] privacy reputation I mean most people
[13:31] out there own an Apple device and
[13:33] they've built a very strong customer
[13:35] base but what if I ask you about a brand
[13:38] that wasn't as popular like XI you'd
[13:41] probably get a lot more blank stairs
[13:43] especially in the UK If you haven't
[13:45] heard of it it's a Chinese tech company
[13:47] so just through those two examples there
[13:50] is a clear contrast between the two and
[13:52] I'd say 99.9% of you would rather invest
[13:56] in Apple stock just based off its brand
[13:59] recognition even though zi is a major
[14:02] player in China and Emerging Markets
[14:05] with a growing customer base but why is
[14:08] this well companies with a strong brand
[14:10] recognition have built up a lot of trust
[14:12] with their customers meaning that
[14:14] they're less impacted by any competition
[14:17] therefore minimizing your risk as an
[14:20] investor it's like the King on a
[14:22] chessboard every move revolves around it
[14:25] and its position is Central to the game
[14:28] making it Irreplaceable the second key
[14:31] thing to check out is the company's
[14:32] leadership you can find all this
[14:35] information by researching the company's
[14:37] board of directors reading transcripts
[14:39] of earnings calls and checking out the
[14:41] executives LinkedIn profiles however
[14:44] it's not only important to know who
[14:46] these leaders are but how long they've
[14:48] been working there in general the longer
[14:51] they've been in charge the more
[14:52] knowledgeable they are meaning the more
[14:54] successful they're likely to be in
[14:56] addition to this lots of CEOs have big
[14:59] followings now on Twitter however this
[15:01] comes with both pros and cons with the
[15:04] power to influence Millions with just a
[15:06] tweet it can send stock prices to the
[15:08] moon or crashing back down I mean back
[15:11] in 2016 Donald Trump tweeted the F35
[15:15] program and cost is out of control
[15:19] billions of dollars can and will be
[15:21] saved on Military and other purchases
[15:23] after January the 20th that F35 program
[15:27] was a locked Martin project after that
[15:30] tweet loed Martin's stock price took a
[15:33] nose dive the company's shares fell by
[15:36] 2.5% on the same day wiping out nearly
[15:39] $4 billion do in market value so it's
[15:43] becoming more important than ever to
[15:44] invest in companies with a sensible CEO
[15:48] otherwise the wrong tweet could lead to
[15:49] a very bumpy ride the third important
[15:52] thing to research is any competitive
[15:54] advantages so this can be things like
[15:56] patents law customer bases or disruptive
[16:00] business models these advantages set
[16:02] them apart from the competition helping
[16:04] them make more money and grow their
[16:06] businesses faster over time for example
[16:09] Tesla has managed to secure a
[16:11] competitive advantage through
[16:13] cuttingedge electric vehicle technology
[16:15] and an expansive charging Network these
[16:19] competitive advantages are like gold for
[16:21] investors because it means lower risk
[16:23] and bigger potential rewards you'll be
[16:26] able to find all this information on the
[16:27] company's website and and also through a
[16:30] good old Google search it's time
[16:32] consuming yes but understanding these
[16:35] aspects could make or break your
[16:36] investment remember research is your
[16:39] best friend it's better to spend a
[16:41] couple of weeks researching rather than
[16:43] make a rushed investment and have it
[16:47] backfire let's say you hear a nasty
[16:50] rumor about the person you're seeing you
[16:53] might panic and dump them without
[16:55] getting to the truth this is what so
[16:57] many people do when they hear bad news
[16:59] about the company they've invested in
[17:02] they rushed to sell it without actually
[17:04] giving it any proper thought they just
[17:06] act on emotion the news is actually so
[17:08] powerful think back to when the news
[17:11] broke that we might see empty shelves in
[17:13] the supermarkets what did everyone do
[17:15] they Panic bought toilet rolls until
[17:18] they really did run out the Panic buying
[17:21] just made the situation so much worse
[17:23] just imagine if that wasn't reported on
[17:26] the news there wouldn't have been
[17:27] panicked buying and toilet rolls
[17:30] wouldn't have sold out in every store
[17:31] the news has the same power over
[17:33] investors too and can cause abrupt
[17:35] surges in stock prices but more often
[17:38] than not it causes extreme Panic selling
[17:41] one example of panic selling is when the
[17:44] Cambridge analytica Scandal broke in
[17:46] March
[17:47] 2018 and personal data was unethically
[17:50] taken causing Facebook stock to plummet
[17:54] nearly 18% in just 10 days as investors
[17:58] reacted to the the news of data misuse
[18:00] but as we can see if we zoom out since
[18:02] then the stock has gone up by more than
[18:05] 200% this was just a blip on the radar
[18:08] and long-term investors that understood
[18:11] that held strong because they were
[18:13] confident in their research so if the
[18:15] news is full of fear monring then how do
[18:17] you know when to actually sell a stock
[18:20] well there's a few occasions when you
[18:22] should sell a stock and this might not
[18:24] be what you're expecting to hear but
[18:26] these occasions actually depend on you
[18:29] and not the stock market for example if
[18:32] you find yourself in a financial
[18:34] emergency and don't have any emergency
[18:37] fund to fall back on then I'd advise you
[18:39] sell your shares to get yourself out of
[18:41] that sticky situation or on a more
[18:43] positive note maybe you've hit a
[18:46] financial goal and you'd like to take a
[18:48] vacation I wouldn't normally suggest
[18:50] this to people but if it's a figure at
[18:52] which you would feel satisfied selling
[18:54] the stock ad then do it and enjoy your
[18:57] gains the last reason to sell a stock is
[18:59] when you no longer believe in the
[19:01] fundamentals of the company and their
[19:03] future trajectory in this case it may be
[19:07] time to cut and
[19:10] run when looking for a partner you don't
[19:13] want to settle with the first person you
[19:15] date it's important to explore what
[19:18] different people have to offer some may
[19:20] seem perfect but are too self-absorbed
[19:23] While others may have a great potential
[19:26] the same concept applies when building
[19:28] your Investment Portfolio the main types
[19:30] of stocks are value and growth it's
[19:33] beneficial to understand both so you can
[19:36] decide whether to focus on just one type
[19:38] or mix and match value stocks are
[19:40] normally shares in big well-known
[19:43] companies these companies have a few key
[19:45] features first their stock prices are
[19:48] considered lower compared to other
[19:49] companies in the market they also have a
[19:52] low price to earnings ratio which means
[19:55] they make good money compared to their
[19:57] stock price addition they're stable and
[20:00] they don't have wild ups and downs in
[20:02] their stock prices and they pay
[20:04] dividends which essentially means they
[20:06] regularly give some of their profits
[20:08] back to their investors value stocks are
[20:11] often found in companies that people
[20:12] rely on even when times are tough like
[20:15] during a recession for example these
[20:17] companies make or provide things that
[20:19] people need no matter what examples
[20:22] include Consumer Staples which are
[20:24] everyday products like food and
[20:26] household items energy companies that
[20:28] provide Fuel and power financials like
[20:31] Banks and Industrials that build things
[20:34] and provide raw materials some
[20:36] well-known examples of value stocks are
[20:38] Burkshire Hathaway which is owned by
[20:41] Warren Buffett and invest in many
[20:43] different companies proor and gamble
[20:46] which makes everyday products like
[20:48] shampoo and toothpaste and JP Morgan a
[20:51] major Bank grow stocks on the other hand
[20:53] are usually seen as overvalued compared
[20:56] to the market they tend to be pretty
[20:58] pretty volatile meaning their stock
[21:00] prices can go up and down a lot these
[21:02] stocks have higher price earnings ratios
[21:05] this means that investors expect them to
[21:07] grow a lot in the future and they pay
[21:10] little to no dividends some growth
[21:12] stocks aren't even profitable for a long
[21:15] time as they reinvest their earnings to
[21:17] fuel further growth growth stocks are
[21:19] expected to grow at a more rapid Pace
[21:22] than the overall Market which is why
[21:24] they often outperform the market some
[21:27] well-known examples of grow stocks
[21:29] include Amazon meta platforms Nvidia and
[21:33] Tesla if you're not sure of the stock is
[21:35] growth or value then a quick way to tell
[21:38] is by using the PE Ratio you can easily
[21:41] find this here on trading 212 typically
[21:44] the average PE ratio is around 20 to 25
[21:49] anything below that would be considered
[21:51] good whereas anything above would be
[21:53] worse however this is just a general
[21:55] rule of fun and does vary depending on
[21:57] the industry so make sure to compare it
[22:00] with some other companies in that sector
[22:02] once you've determined whether you're a
[22:03] value growth or mixed investor you need
[22:06] to ensure you have a diverse range of
[22:09] stocks in your portfolio this is what we
[22:11] call
[22:12] diversification so if one of your stocks
[22:14] takes a dive you're banking on the
[22:17] others to balance things out a general
[22:19] rule is not to have more than 5% of your
[22:21] money in one stock and no more than 20%
[22:25] of your investments in one sector such
[22:27] as Tech technology for example it's a
[22:30] good idea to have stocks in at least
[22:32] five different sectors a minimum of two
[22:35] countries and more than 25 different
[22:38] stocks in total you could also look into
[22:40] having a cash Isa too which is basically
[22:43] just an individual Savings in the UK
[22:45] which allows you to save money and earn
[22:48] tax-free interest at the moment trading
[22:51] 212 seem to have one of the highest
[22:53] paying cash ises right now at
[22:56] 5.2% so if you've already used code tilb
[22:59] or the link in the description to pick
[23:01] up your free fractional share worth up
[23:03] to £100 then all you have to do is go up
[23:06] here and they'll walk you through the
[23:07] process if after watching this video you
[23:10] think picking individual stock seems too
[23:12] time consuming then there is a way you
[23:14] can cut out pretty much all the research
[23:17] and in a lot of cases get even better
[23:20] results if you want to understand how I
[23:22] make around
[23:23] $177,000 a week using Index Fund
[23:25] investing then you should watch this
[23:27] next video where I explain everything in
[23:30] detail but don't click on it just yet
[23:32] make sure to subscribe if you want to
[23:34] grow your wealth okay I'll see you over
[23:36] there