Beginner Investing Guide — Full Breakdown & Transcript

[00:00] this is the best piece of advice I've

[00:02] ever heard about investing it came from

[00:04] a millionaire I looked up to as a kid

[00:07] after over hearing him talk about

[00:08] investing I wanted to get involved but

[00:11] as a complete beginner I didn't know

[00:13] where to start so I asked him how do I

[00:16] pick the right stocks to invest in his

[00:18] answer was very simple treat it like

[00:21] finding a girlfriend this is quite a

[00:24] clever way to look at it because when

[00:25] you buy a share in a company you

[00:27] actually become a part owner this is

[00:30] like a partnership between you and the

[00:32] company and just like a relationship you

[00:35] want to make sure it's happy long and

[00:37] successful but look I'm not going to

[00:39] pretend that there's a crystal ball that

[00:40] can tell you when to buy a stock before

[00:42] it rockets in value like most of the

[00:44] fake gurus online however there are

[00:47] certainly a few things you can do to tip

[00:49] the odds in your

[00:52] favor when you're looking for a partner

[00:54] you need to have a strategy in mind are

[00:57] you going to shower them with gifts like

[00:58] a s or treat them mean to keep them Keen

[01:01] you'll get very different results

[01:03] depending on which strategy you choose

[01:05] and the same goes for stocks so just

[01:07] like dating you need to figure out how

[01:09] you're going to approach the stock

[01:11] market so that you get the results you

[01:13] want there are two strategies you can

[01:15] choose from the technical or the

[01:18] fundamental approach both of these

[01:20] options are very different so let's

[01:22] quickly go over what they involve

[01:23] technical analysis is mainly for

[01:25] short-term day Traders they use charts

[01:28] and price action to identify patterns

[01:30] that supposedly help them predict if a

[01:32] stock is going to go up or down in the

[01:34] short term I use the word supposedly

[01:37] because in my opinion most of the people

[01:39] using this strategy are glorified

[01:41] gamblers is it possible to day trade

[01:44] successfully yes but more than 95% a day

[01:47] Traders lose money rather than making it

[01:49] according to the modly fold fundamental

[01:52] analysis is like being a detective for a

[01:54] company you look at everything from

[01:57] their financial reports to how well

[01:59] known the brand is and who's running the

[02:01] show all these pieces of information

[02:03] help you understand how the company is

[02:05] doing now and how it might perform in

[02:08] the future this approach can help you

[02:10] pick a range of stocks that can make you

[02:12] a nice amount of money over a 3 to 10e

[02:15] period I know saying this will probably

[02:17] ruin my watch time but I only want

[02:19] people getting into this for the right

[02:21] reasons so if you're looking for a way

[02:23] to get rich quick then stop watching my

[02:25] video now my goal is to secure your

[02:28] financial future not just help you make

[02:30] a quick Buck also remember with any kind

[02:33] of investing your money can go down as

[02:35] well as up if you're still with me then

[02:37] comment down below I'm in so I know how

[02:40] many of you are willing to invest for

[02:42] the long term right all done cool let's

[02:45] jump

[02:47] into when you're on a dating app and

[02:50] checking out someone's profile you

[02:52] usually look at their pictures and read

[02:53] their bio to see if they'd make a good

[02:55] match it's exactly the same when you're

[02:57] thinking about investing in a company

[02:59] you have to check out the company's

[03:01] profile which in this case is something

[03:03] called a balance sheet a balance sheet

[03:05] is a financial statement that provides a

[03:07] snapshot of a company's financial

[03:09] position at specific point in time it

[03:12] details the company's assets liabilities

[03:15] and share holders Equity don't worry if

[03:17] that sounds a bit confusing we'll take a

[03:19] look at one together and I'll break it

[03:21] down with you I'm going to be using

[03:22] trading 212 to do this which is a great

[03:25] place to research and buy stocks you're

[03:28] welcome to download it and follow long

[03:30] trading 212 is also sponsoring this

[03:32] portion of the video and if you use the

[03:34] code Tilbury you'll also get a free

[03:36] fractional share worth up to £100 when

[03:38] you open your account I'll put the link

[03:40] in the description plus you can get more

[03:42] free Stocks by inviting your friends

[03:44] both of you will get a free share as

[03:46] long as they fund their account I'm

[03:48] going to be using their desktop website

[03:49] for this video but you can do all of

[03:51] this on the mobile app if you want to

[03:53] for everyone in the USA you can find the

[03:56] same information on Yahoo finance

[03:58] remember that nothing in this video

[03:59] should be taken as Financial advice I'm

[04:01] not a financial advisor and when

[04:03] investing your capital is at risk so to

[04:05] find a balance sheet just head to the

[04:07] stock you're interested in for this

[04:09] example I'm going to pick coca

[04:13] colola scroll down the page click on the

[04:16] financials and then the balance sheet

[04:20] and more financials this pulls up a

[04:23] pretty complicated looking page but

[04:25] trust me it is actually very simple to

[04:28] help you understand this balance sheet

[04:30] think of it like a like a cookie jar

[04:32] there you go at the top you've got the

[04:34] current assets these are like the

[04:37] cookies you can grab and

[04:39] eat M very nice for a company this is

[04:43] the cash or anything that can be turned

[04:46] into cash within 12 months next you have

[04:48] the longer term assets these are like

[04:50] the cookies that are deeper down in the

[04:52] jar for a company this often includes

[04:55] the headquarters and Equipment here you

[04:58] have the intangible asset

[05:00] these are like the invisible things that

[05:02] make the cookies taste good you can't

[05:04] touch these things but they bring a lot

[05:06] of value for a company this is patents

[05:09] intellectual property trademarks and

[05:12] Goodwill this next section is all about

[05:14] liabilities these are like the cookies

[05:17] that you've promised to your friends for

[05:19] borrowing their ingredients I'm most

[05:21] interested in the current liabilities as

[05:24] these will need to be paid back within

[05:26] one year or a normal operating cycle so

[05:29] so now you know what all of this

[05:31] information means what should you

[05:33] actually do with it well there's a

[05:35] simple calculation you can do to easily

[05:37] know if a company is high risk or not

[05:40] and that is total current assets divided

[05:44] by total current liabilities A good rule

[05:47] of thumb is this number should be above

[05:50] one but how does this actually work in

[05:52] practice well let's put Coca-Cola's

[05:55] numbers in their total current assets

[05:57] are 26.7 3 billion do so if we divide

[06:02] that by their total current liabilities

[06:05] which are

[06:07] 2357 billion that comes to approximately

[06:12] 1.13 this means the company has

[06:15] $1.3 in current assets for every $1 in

[06:19] current liabilities indicating they have

[06:22] enough short-term assets to cover their

[06:24] short-term debts this is a great

[06:26] indicator but our work is far from over

[06:32] H when you're getting to know someone

[06:34] new you're probably curious about their

[06:36] past relationships it's like doing a bit

[06:39] of a background check right you might

[06:41] wonder whether they've ever cheated or

[06:43] how many partners they've had it's

[06:44] pretty much the same when you're

[06:46] considering investing before you put

[06:48] your hard-earned cash into a company you

[06:50] want to check out his track record

[06:52] that's where the income statement comes

[06:54] in and unlike people public companies

[06:58] have to be upfront and honest about

[07:00] their past an income statement is like a

[07:02] report card for a company showing how

[07:04] well it did over a specific period like

[07:07] a month a quarter or a year put simply

[07:10] it tells you how much money the company

[07:12] made and how much it spent this is

[07:14] normally found in the same place as the

[07:16] balance sheet if you're using the

[07:18] trading 212 app like me then just click

[07:21] on the first Tab and then you'll see all

[07:24] the information here at the top we have

[07:27] the total revenue which is the toal

[07:29] total the business took in the time

[07:31] period as we can see from Coca-Cola they

[07:34] took

[07:36] 45.75 billion in

[07:39] 2023 which isn't too shabby if we scroll

[07:42] down a bit we get to the net income

[07:44] which is the money the company makes

[07:46] after all expenses have been deducted

[07:49] for cocacola this is

[07:52] 10.71

[07:53] billion so why does this matter well

[07:57] every business has two main types of

[07:59] expenses the cost of Revenue and the

[08:02] cost of operations if either of these

[08:05] are too high then it could be a red flag

[08:08] just think about it if you were selling

[08:10] custom t-shirts you'd have to spend

[08:12] money on fabric and printing this is

[08:15] your cost of Revenue as you can't create

[08:17] custom t-shirts without these materials

[08:20] so this is a necessary expense but

[08:23] that's not it you'd also have to spend

[08:25] money on marketing and potentially staff

[08:28] these are known as your operating

[08:30] expenses once you subtract both the cost

[08:32] of Revenue and the operating expenses

[08:35] from the total money you make from

[08:37] selling your custom t-shirts you get

[08:39] your operating income now if you just

[08:42] scale up that example it's the same idea

[08:45] for big companies like cocacola see here

[08:48] this is the operating income so now you

[08:51] know what all this information means

[08:53] what should you actually do with it well

[08:55] here's a simple calculation to see if a

[08:57] business is making a healthy amount of

[08:59] profit operating income divided by total

[09:02] revenue time 100 according to tide

[09:05] banking as a rule of thumb 5% is a low

[09:08] profit margin 10% is a healthy margin

[09:12] and 20% is a high margin if we plug

[09:14] Coca-Cola's numbers into this

[09:16] calculation we get

[09:18] approximately

[09:28] 25.73084 established companies will be

[09:30] more profitable than newer faster

[09:32] growing companies so profitability isn't

[09:35] the most important thing I mean Amazon

[09:38] took years to make a profit and look at

[09:39] them now but saying this you should also

[09:42] keep in mind that a company that's done

[09:43] well in the past doesn't mean that it'll

[09:45] continue to do well in the Future Past

[09:48] performance doesn't guarantee future

[09:52] results listen it might not sound like a

[09:54] romantic thing to say but if you're

[09:56] thinking of getting involved with

[09:58] someone you don't want want them to be

[09:59] 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