Beginner investing in stock market
Beginners investing in stocks here the first thing that comes to mind is this complicated world of the stock market. With so many charts and numbers, it’s easy to get confused, so let’s break it down and try to make sense of it.
Let’s say you’ve built a business, but now you need some more money to expand, or maybe you just want a private jet. Where do you get the money from? Here’s an idea for you, why not break down your business and sell some of it while keeping the majority to stay in charge? That’s what the stock market is for and this process is known as the Initial Public Offering (IPO). But how much money can you earn?
Read More: 7 interesting facts about stock market
How share market works-Beginners Investing in Stocks
Beginners investing in stocks, Let’s take an example of Mark Zuckerberg’s little toy: Facebook. It went public in 2012 with 337 million shares at a price of $ 38 a share. Not bad, right? But, when he realized that there were many more people who wanted a piece of his cake, he added another 84 million shares (421 million). And guess what? He sold each and every one of them. And it raised $ 16 billion.
He literally became a billionaire in a few hours. In fact, the stock price rose to $ 45 within the first trading day. It seems like Facebook was doing really well, but it was too early to celebrate because at the end of the day it looked like I was 38 years old, and that was just the beginning. The bad news was just beginning. In the next few weeks, the shares tumbled to $ 20.
Know More: What Is Mutual Funds
Twice less than the original price Now, to understand what’s going on here, we need to get to the root of the stock market. In the past, shares were mainly bought for dividends. Theoretically, when you buy a stock, you become the owner of that company.
Which means you like any other owner is entitled to the company’s profit. Congratulations, you bought 10 Facebook shares in January 2020 and now you own Facebook just like Mark, and I’m not kidding. So, your company (Facebook) earns $ 15.934 billion, how much does it belong to you ?! At the end of the day, you spent $ 1300 to buy your 10 shares. (Facebook stock price as of January 2020) But first let’s take a look at how many stocks there are in total. It turns out that there are nearly 3 billion (2.956 billion). I doubt your 10 actions matter now.
we are optimistic Because, if we divide the net income by the number of shares, each share should earn just over $ 5 (5.39 = 15.934 billion / 2.956 billion), by the way, this is known as EPS (earnings per share). In other words, your stock 10 is supposed to make you nearly $ 54 (53.9). Not bad, right? But it’s just hypothetically, in practice, you get absolutely nothing!
The board of directors is the one who will decide what to do with this money. And your first priority is to line your pockets and expand the company, so no one really cares about your 10 stocks. But don’t worry, not everyone is a scammer like Mark Zuckerberg. For example, last year Apple paid out $ 13 billion in dividends (12,769 B) or $ 2.5 for each share (2.46). Of course, it is not much for a stock that costs $ 170, but something is always better than nothing. However, today, it does not matter how much the company pays as much as the share price.
Apple shareholders saw a 33% profit in a single year! That is much better than the market average. ($ 120 to $ 160) You’ve probably heard by now that Apple is the first company to cross a trillion dollar valuation because its stock price crossed $ 200. But what if I told you that as of June 2014, Apple’s stock price was $ 645. Does that mean the company was already valued at more than $ 3 trillion? Oh my, this stock market is so fucking complicated. Let me explain. There’s something called a stock split
Each stock was divided into 7 pieces, and prices were reduced proportionally ($ 92.7). Technically, nothing really changed, but now more people can pay for the stock and join the Apple investor community. Since the stock now costs $ 92. But not all companies do that, some prefer to work only with serious people like Warren Buffett. His Berkshire Hathaway company has never divided its shares. that’s why it only has 1.68 million shares, compared to Apple’s 5 billion (4.91 billion).
Know More: Investing In Real Estate
That’s why the shares of a single buffet (Berkshire Hathaway) cost more than $ 300,000. I guess most of us will never join the secret investor society buffets. But don’t worry, Buffett wouldn’t mind taking your money either. That is why he created class B shares that are more affordable (200usd).
The stock market topic never ends, but this article has to. As always, press the share button next to it.
Beginners Investing in Stocks and other investing methods are never ending and Thanks for reading and see you next time