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Tyrone begins by breaking down some stock market terminology for those who are new:
A Bullish market: a market in which the stocks are generally rising as a whole
A Bearish market: a market in which the stocks are falling as a whole
A Neutral market: a market in which the stocks are fluctuating day to day but not moving in big increments
Covered Call Writing: an options strategy used for generating guaranteed income in which you sell the option to someone you don’t know to buy a stock away from you
Revenue: a company’s income, which is what makes stocks rise
Top line revenue: a company’s gross income
Cost of revenue: amount of money spent
Float: The amount of shares that are in the public domain for the industry to trade
Small float: a fewer number of shares available in the public domain, which causes the stock to rise faster when revenue increases
Large float: over a billion shares in the public domain, which means traders that are moving 50 – 10,000 shares are not causing the stock to rise or fall
Case Study: Verizon
We like Verizon because it is a component of the DOW Jones Industrial average and it has a large float; there’s a lot of institutional money in this stock. Five years ago if you had bought $1,000 worth of this stock, it would now be worth $2,000. While waiting for that stock to rise, you also would have been collecting the dividend, which is $2.20 annually per share. For 1,000 shares, you would have collected $2,200 per year.
5 Year Chart:
Real estate can be a good investment, but it has a much larger barrier to entry. To even get started on buying real estate property you have do a to title search, do a credit check, find the right attorney, get a contract, negotiate and so on. Then you might be approved for a mortgage, but there still might be conditions. Then if you finally own the property, there will be repairs and upkeep to the property. The list goes on.
Now, with the Internet, to start trading stocks all you have to do is open a trading account with a discount brokerage house such as TD Ameritrade. You can then sign into your account on your laptop or hand held device. To buy and sell stocks it costs a mere $9.95 and that is tax deductible. You can get started with as little as $500 in capital.
Not only can the stock market help you grow your money, but also your stocks become assets for you. You can leverage assets to get loans, to rent a car, or to make that real estate process much smoother if you do choose to buy a home.
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