Introduction to Investing in Stocks and 4 CRUCIAL Stock Investing Rules

Chris Haroun
A free video tutorial from Chris Haroun
Award Winning MBA Professor, Venture Capitalist and Author.
4.5 instructor rating • 54 courses • 1,025,556 students

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The Complete Personal Finance Course: Save,Protect,Make More

3 Courses in 1! Save,Protect & Make More! By an Award Winning MBA Professor, VC & Best Selling Online Business Teacher.

15:46:12 of on-demand video • Updated April 2021

  • Upon completion of this course, students will be able to save, protect and make much more so that their net worth is significantly higher in the long run. You will be a personal finance expert by the end of this course!
  • How to profit from the INCREDIBLE Power of Compound Interest
  • 100+ Ways to Save More…Including the following ways:
  • 14 Ways to Save More on Taxes
  • 16 Ways to Save More on Shopping Expenses
  • 13 Ways to Save More on Car/Transportation Expenses
  • 10 Ways to Save More on Housing Expenses
  • 5 Ways to Save More on Vacation Expenses
  • 4 Ways to Save More on Gifts & Donation Expenses
  • 6 Ways to Save More on Phone/Computer Expenses
  • 13 Ways to Save More on Food & Drinks Expenses
  • 7 Ways to Save More on Debt Expenses
  • 4 Ways to Save More on Education Expenses
  • 7 Ways to Save More on Entertainment Expenses
  • 6 Ways to Save More on Fees Expenses
  • 5 Ways to Save More on Child/Child Care Expenses
  • 4 Ways to Save More on Health Expenses
  • 5 Ways to Save More on Personal Care Expenses
  • 5 Ways to Save More on Pet Related Expenses
  • How to Change Your Perception of Money
  • How to Teach Your Children About Saving
  • How to Protect Your Money by Understanding Your Net Worth (Creating and Understanding Your Balance Sheet….Meaning “What You Own and What You Owe”)
  • Understand if You Should Hire a Financial Advisor to Help Protect Your Money
  • Understand Why Hiring an Accountant Might be the Best Investment You Might Ever Make
  • How Taxes + Retirement Accounts Work & Why We Need to Minimize How Much Tax We Pay
  • How Much You Need to Retire
  • Understand and Taking Advantage of Tax Incentives, which Help You Save BIG TIME for Education/School Expenses
  • How Much You Need for Education Expenses (for You or Your Kids)
  • How to Create Your NEW & IMPROVED Income Statement (Meaning Understanding Money In and Money Out)
  • Understand Your Company Sponsored Tax Savings Plans (if Applicable)
  • Use a Simple & Effective Money, Taxes, Receipts and Statements Filing System
  • Understand What are the Best Websites & Apps to Help You Track and Manage Your Spending
  • Use Quicken on a PC to Manage Your Money
  • Use Quicken on a Mac to Manage Your Money
  • Protect Your Money by Making a Monthly Budget
  • Avoid Getting Ripped off on Fees
  • Understanding Wills and Trusts
  • View, Understand and Fix Your Credit Score/Rating (So You Can Get a Loan or Mortgage)
  • Understand Life Insurance
  • Understand Auto Insurance
  • How to Pay Less Tax Strategies
  • Understand Home and Property Insurance
  • Understand Health Insurance
  • Prevent Identity Theft
  • Understand Credit Cards
  • Understand Loans
  • Understand Leases
  • What Are the Qualities of Billionaires (5 Characteristics of Billionaires I Have Worked For)
  • Understand the Damage that High Investment Fees Can do to Our Net Worth!
  • Make More by Learning How to Avoid Paying High Investment Fees
  • Understand Why and How to Pick Investments from Index Funds
  • Manage Your Investments with Your Investment Portfolio Management System (Included in the Course)
  • Populate Your Investment Portfolio Management System (meaning Your Portfolio)
  • How to Invest in Stocks and 4 CRUCIAL Stock Investing Rules
  • Investment Data Basics
  • Understand Risk Management
  • Understand What Makes Stocks, Bonds, Commodities and Real Estate Investments Go Up or Down
  • How to Do Your Own Investment Research (and Never Rely on the “Pros”)
  • Understand Mutual Funds
  • Know What Warren Buffett’s Favorite Types of Investments Are
  • Understand Interest Rates, Bonds and “The Bigger Picture”
  • Know How Global Economics Works and Why this Matters to Personal Investors
  • How & Why Do Interest Rates Change & Why this is Important for Investors to Understand?
  • Understand Foreign Exchange Currency Movements
  • How Bonds Work and How Can Governments Stimulate the Economy?
  • Understand Real Bonds - No Theory! (With Real Corporate and International Government Bond Investment Examples)
  • How to Invest in Bonds
  • Add Bond Investments to Your Portfolio
  • How to Invest in Commodities
  • Add Commodity Investments to Your Portfolio
  • Introduction to Your Most Important Personal Investment & How Much Should to Spend on a House
  • How Mortgages Work & How to Calculate Payments (Fixed Rates Versus Interest Only Rates & More)
  • How to Calculate Mortgage Payments and Know What Happens When Rates Change
  • What You Need to Know if Considering Investment Properties
  • How Much to Spend on an Investment Property
  • Understanding Real Estate Investment Trusts
  • Adding Real Estate Investment Trust Investments to Your Portfolio
  • Investment Types to Consider Avoiding Given Liquidity Risks
  • Diversification Strategies and Your Diversified “Model Portfolio”
  • Should You Start Your Own Business & Have >1 Income Stream? 100% YES!
  • Customize Your Own Complete Personal Finance Excel Dashboard (I Will Teach You How to Customize and Create Your Own Version of the Excel Dashboard Document Used for ALL 25 Exercises in this Course)
English -: Remember when we spoke about your balance sheet in exercise number seven, and how all of the stuff in your possession, meaning assets, is either owned by a bank or owned by you, you meaning equity. So companies can raise money in two similar ways. One way is by getting a loan, meaning a liability, which in many cases is a bond, and they will have to pay back this loan, meaning the bond, because of the loan, and the other way companies raise money by selling part of their company to you and I, right? And that means they sell stocks, meaning they sell equity in their company to us. Now governments cannot sell parts of themselves to us or other governments or other companies. Governments don't issue stocks. Governments issue bonds, meaning loans, so they can pay for stuff like building bridges or roads or parks or airports, etc. And so stocks have had an annual average return since the 1920s of about 10%. Government bonds, however, have had an annual average return of 5%, and we're gonna talk about stocks now and we will discuss bonds a little bit later. Stocks are riskier, so please own more stocks when you are younger, and we'll talk about diversification soon, okay? Bonds are less risky than stocks, so please own more bonds when you're older. And so we're gonna talk about how to diversify your investments later as I mentioned, but for now, we're gonna tweak this, but I'm want to give you a simple risk management-based rule for you to understand how much in terms of stocks you should own and how much bonds, and I'm gonna build on this a lot later and change this a bit but here's what we're gonna do, okay? I want you to take 100 minus your age, and that is the percent of your investments that should be in riskier investments, okay? For example, if you are 70 years old, then 100 minus 70 equals 30, and this is how much as a percent of your portfolio to think about investing in riskier investments like stocks, okay? The other 70% of your portfolio should probably be in lower-risk investments with lower return potential as we can't recover quickly enough if we lose money when we get older, okay? So again, I'm gonna tweak this 100 minus your age diversification strategy soon and build more logic on top of it. Okay, no more talk about diversification for a little while now. Let's just focus on individual investments. And as you know, I designed your investment portfolio management system, meaning your portfolio gray button here, I designed it so that it can account for stocks, commodities, bonds, and real estate investment trusts and more. What I'm going to do in a minute is I'm gonna go through your investment portfolio management system in a lot of detail, meaning I am going to explain all of the columns of data in your portfolio. But before I do that, I want to discuss four stock market investing best practices, or four rules that I've learned in my many years of making mistakes from investing and some successes too. Okay, stock picking rule number one is we don't ever trade. We don't ever trade or else investing in stocks is like a casino and you can't accumulate wealth, and Warren Buffett said, "The longer the view, the wiser the intention." So before buying any stock, again we'll ask ourselves that simple question. In five years, is this company going to be more relevant or less relevant than it is today? Most Wall Street investors are fooled by randomness and they're not long-term focused enough, and this is why 95% of mutual funds cannot outperform indexes. And you will beat these mutual funds as well. Number two, rule number two. Do your own research always. We need to always, always, always please form our own opinions as the opinions of other people, especially when it involves money is biased. People are biased, okay? I'm not saying they're unethical but hear me out here. When you go to a clothing store, and the salesperson at the clothing store works on commission, they'll often influence you to buy certain items because of the fact that they get commissions, and it gets absolutely worse as you know when buying real estate or a car, as they are often, these salespeople are thinking with their wallet. They don't have your best interest in mind. Also, please never, ever, ever, ever, ever, please, never rely on the media for investment advice, okay? Why? Because they're biased and because the people they interview on television are almost always biased as well, and I'm not saying the people they interview are unethical at all, but the people they interview are investment professionals that already own stocks and of course, they're gonna say positive things about the stocks they own. Also, if a financial journalist interviews a CEO of a company, of course the CEO's gonna say great things about that company. You know, they're great salespeople. That's how they became CEO, right? It's not just because they're smarter than us. You know, they're just great salespeople, and CEOs are probably the best salespeople in the world so just be careful, and I want you to question everything. Always do your own research. Protect yourself and your family, and just don't watch finance programs because they're very biased. You know that the media can really mess with your head, and if a friend of yours one day comes up to you offering you the chance to invest in their company, I want you to ask yourself one basic question in your head. Why am I so lucky to be given this opportunity? Okay, just question everything please. Okay, I think you know what I'm getting at. And so I'm gonna show you more information on how to do your own research in the next lesson when you go through your investment portfolio management system. And if you get a chance, I want you to please watch this video on the awful impact that the media had on many people's life savings in 2008. -: The president and I talked to earlier in the day yesterday about watching it. I enjoyed it thoroughly. Narrator: What was it? A major speech, a legislative breakthrough? -: How the hell did we end up here, Mr. Kramer? Narrator: No, it was Thursday night's Daily Show where host Jon Stewart skewered CNBC financial pundit Jim Kramer. -: I can't reconcile the brilliance and knowledge that you have in the intricacies of the market with the crazy bull(bleep) I see you do every night. -: There's a market for it and you give it to 'em and I think we do-- -: There's a market for cocaine and --. You knew what the banks were doing, and yet, were touting it for months and months. The entire network was, and so now to pretend that this was some sort of crazy, once-in-a-lifetime tsunami that nobody could have seen coming, is disingenuous at best and criminal at worst. Narrator: Like a prosecutor bearing down on a decidedly uncomfortable witness, Stewart argued that the financial network and by extension much of the business press had given the public a false sense of financial security. Announcer: And the Bulls and the Bears are duking it out. Narrator: But as Stewart himself said, Jim Kramer was not the real target of his anger. Promoter: The voice of experience you can trust. Narrator: And CNBC is at root a symptom of what was happened over the last year and a half. It's a network with a very small audience of about 300,000 but a very affluent one, with a relentless, at times hypercaffeinated intensity that's focused on the day-to-day movement of the markets. -: It's been another one of those days, up and down and up and down and-- -: The reason they exist is to do this moment by moment. What's gonna happen tomorrow, and you know, I think that's pretty much a mug's game in terms of what it can actually tell ordinary people. -: And you guys knew that that was going on. Narrator: The core of Stewart's anger is his belief that in its coverage, and in its lack of skepticism, much of the press was painting one picture to the public while knowing full well that the reality was very different. -: And that it is a game that you know, that you know is going on, but that you go on television as a financial network and pretend isn't happening. Narrator: Actually, says New Yorker financial writer Jim Surowiecki, much of Wall Street's problem was that it fooled itself. -: A lot of guys on Wall Street, one way or another, drank their own Kool-Aid. Narrator: Now, with the disappearance of $50 trillion, four-and-a-half million jobs and an immeasurable loss of financial well-being, the anger at what has happened is showing up across the media universe. It reaches from ABC News, which followed the corporate jet travels of Bank of America's CEO like OJ-like focus, to a piece on a lavish weekend party thrown by a Chicago bank. That aired on TMZ, a site mostly featuring the misbehavior of celebrities. -: But the real issue is this. How do we get the hard questions asked before things go wrong? That is the very serious question the late-night comedian was raising. Katie. -: All right, Jeff Greenfield. Jeff, thank you for your perspective on that. -: Okay, moving on. In terms of what to read, aside from annual reports, I'd recommend reading The Wall Street Journal, not the editorials in it, but just kind of like what happened and why. You'll understand why bonds are issued or why stocks go up or why stocks go down. Don't read someone else's opinion on what to buy, okay? Aside from The Wall Street Journal, I also like the Financial Times, ft.com, just to understand sectors from a high-level market perspective and just to stay informed with how the world works, the world of finance works, okay? And if you ever have questions about finance concepts, or how the world of finance works, just ask me in the course and I'll humbly do my best to answer, and if I don't have an answer for you right away, I'll do research for you, okay? Okay, and when you do your own research, if you can't understand the company, then don't invest in it. And when I used to work at a big hedge fund, we had portfolio meetings and we had to discuss what stocks to buy and why and my boss would always tell me, "Chris, if you can't explain it, you don't understand it." It's so true, it's so true, okay? And I remember when I was in business school in 1999, I am dating myself again here, but back in 1999, at business school, Warren Buffett came and taught one of my classes, and I remember a classmate of mine was pitching a tech stock to him during class, and after about 30 seconds into the stock pitch, Warren Buffett very nicely interrupted and said, "Son, I'm gonna interrupt you. "I'm gonna interrupt you there because I don't understand "where this company will be in two, three, four, "or five years product cycle-wise," right? And then he went on, Warren Buffett then went on to say that he didn't like to invest much in technology as he didn't really understand the sector as well as other sectors, and he was dead right, as this was December of 1999 and I think it was three months later, in March of 2000, when the tech market crash started. So just keep it simple when you do your own research as well. I remember another time, Warren Buffett was on a panel years ago, and the topic of this panel was Can Newspapers Stay Relevant in the Long Run, and everybody was arguing their points, and of course, there was a lot of bias on this panel because these people worked at big newspaper companies, and Warren Buffett then said something which caused everybody to remain silent for a while. And I love Buffett because he keeps things so simple, and that's why he's so successful, in his long-term focus. Warren Buffett said this. If the internet was invented before newspapers were, would newspapers even exist? It's pretty smart, simple but smart, right? Just keep it simple when you do your own research, and Buffett years ago, I remember he, when he was talking about Coca-Cola as a great investment many, many, many years ago, he basically said, "I think people are gonna drink more Coke "in the future than they do today," right? Anyway, that was interesting. Number three, be a contrarian. Warren Buffett famously said, "Be fearful when others are greedy, "and be greedy when others are fearful." You want to buy when other people are not buying and vice versa. And just be unemotional about investing as well. You know, if everybody loves a stock, then who is the incremental investor? Be a contrarian, especially when you want to start buying a new stock position in your portfolio. I want you to patiently wait for a big pullback. And Wall Street has done a lot of, Wall Street has a lot of extreme sayings, and one of them is to buy when there is blood in the streets, and I know that's very, that's very extreme, but when it feels really uncomfortable to buy, sometimes that's the right time to buy. Okay, number four. Never ever, ever, ever, ever use margin. Many hedge funds and investment firms went bankrupt in 2008 as they used loans to invest, meaning margins. And never do that, okay? And just to quote Warren Buffett, these margin investments or getting a loan to invest are financial weapons of mass destruction and a quick side note. What is a hedge fund? A hedge is the same thing as a mutual fund except instead of just buying stocks that are gonna go up, they bet against stocks that are gonna go down, and they call it a hedge fund because in your backyard you have hedges, protecting, anyway, your backyard, okay. So in the next few lessons, we're gonna discuss researching stocks in more detail. And as we go through your investment management portfolio system in Excel in a lot of detail, I really want you to understand the concepts, and if you don't, just let me know right away but I think the best way to learn this stuff is to dive right in right now. We'll talk about real-life examples, no theory in this course. Thank you.