Wall Street Basics & Terms

What is a Stock & How YOU Make Money…

December 27th, 2016

Today I want to share with you what is a stock and how do you personally make money from it.

It's a straightforward and basic concept. If you're just getting started, you don't know what a stock is, and you don't see how the stock market works this is the post for you.

I want to give you a quick little insight into the whole process behind a stock and the stock market. Also, I want to show you how to make money as an investor.

Disclaimer

Keep in mind that none of the trade examples here that we use our recommendations to buy or sell any stock or security. It's strictly for educational purposes.

This Is How Market Works

The way that the market works or the reason that these companies have stock is that they are looking to raise funding from investors. That's the whole point.

If you're looking to start a business, but you don't have any money where do you get that money?

Well, it's typically from other people and other investors. Here's what I do.

For example, I'm looking to start a business. Here's the total value of my company. What happens is half of this is my company. I'll say that the full value of this is $1,000.

If you're looking to sell a larger company, this could be $1,000,000 or $100,000. The value of it is irrelevant. Use this as a guideline.

Let's say I plan to keep 51% to be sure that I'm a controlling shareholder. So this would be you. You're starting the company, and this would be $500 worth of the company.

The next step is that you want to raise more money for:

  • advertising
  • acquiring customer
  • product development

To raise more money you might sell parts of your company. You're giving them a piece of that company. Here you have Joe who will get $200 worth of that company.

Then here you might have Sue that also gets $200 worth of the company. And then over here you got Bobby that gets $100 worth of the company.

Why does he only get $100?

Well, because Joe, Sue, and Bobby together make $500.

If you break this down on a share level or percentage basis this would be:

  • Two shares - Joe
  • Two shares - Sue
  • One share - Bobby
  • Five shares - you

Overall you have ten shares total. The whole company has only ten shares total that it has within that $1,000 value.

How Things Works From That Point?

Since the market is based on a last price sequence meaning as the value of those shares go up, your value of that investment also goes up.

Here initially we put in $500. Sue put in $200, Bobby put in $100, and Joe put in $200. These were our prices. And per share on a shared basis, you can see that per share it's $100. Two shares they had got $200. One share is $100.

This is our initial offer for our basic investors. Time moves forward, and the value of this company started to increase. That means that instead of $1,000 the value of the whole company might go up to $2,000.

What happens to this whole value of this company?

Well, your shares increased to $1,000. Shares that Joe and Sue have grown to $400. And share that Bobby has risen to $200.

For example, if Bobby wanted to get out and he wants to sell his share the value of his share is $200. Maybe he said that he doesn't want to be an investor in this company anymore. He wants to get out and spend more time with his family or something like that. That is how things work.

That's how it works on the last price sequence. In the stock market as you sell your shares the value of that stock price either goes up or down.

The initial company gives out part of their company to raise money. That way they can use it for advertising, marketing material, they can build products or something else. They're using that money to grow the company, and that's ultimately how the baseline of it worked.

Great Real-Life Examples

If you look in the stock market of any company (Disney, Apple) out there, you have a lot of shares out there, and there are hundreds of millions of shares depending on the company.

Everybody has a piece of that company. There's a lot of people that have different pieces of that company. It's not 5 or 6 people that we discussed or talked about earlier.

There's a lot of people that have different fractions and different amounts of those shares.

In real life, you're taking a small little sliver. Let's say you have 100 or 200 shares. That way as the value of Disney, Apple or Amazon goes up then the value of each one of those shares goes up.

Possible scenario:

If you had 100 shares of Disney and the current price of Disney shares is $97,95. That means that you have to spend of $9,795 to acquire those 100 shares of Disney.

This is what you pay or invest in Disney to get 100 shares. Now the price of that stock can increase $2,05. That means that stock price goes up to $100. The value of the company went up to $2,05 from where you got in on it.

Everybody's getting in at different times. That's the whole thing. Some people are getting in earlier because they have more money to invest. Other people are getting in later because that's the time when they have some money.

Those hundred shares that you own are worth more by $2,05. All you need to do is multiply 100 by 2,05, and you make $205. It's pretty simple math.

The other approach that you could take is saying you have a hundred shares. Then you take these hundred shares and multiply it times $100 stock price. And now your value is $10,000. That's your value now of your shares.

Be Aware of The Value of Company

Nevertheless, that's how a company issues stock, and that's how you make money from investing in stocks.

A company issue stock because that way they can raise more money for a product enhancement, growing their customer base, for advertising and other things.

They're raising money for this, and you are giving them money in exchange for a piece or a little fraction of that company. As that value of that company grows so does the value of your piece of that company. And later you can sell it when you want to, and typically if you're trading a very public company, it's effortless to get in and out of the company.

You're getting a piece of that company whether you get 50 shares, ten shares or a 1000 shares 10,000 shares. It's all depending on how much money you have, on the value of the company and of that stock price.

And then eventually you're looking to sell it. If the company value drops, you're going to lose money, and you do the calculation in reverse.

Conclusion

I hope you learned how the stock market works. Remember that it's based on that last price sequence. And that's why stock prices constantly move up and down.

Because as a new person buys or trades or sells his shares or their shares now, that is the new price. That's how it works.

As it goes up twice or three times the value that's the new price. It's always moving and shifting around all the time.

Ep 90: Trading Around Events, Brexit, Fed, Earnings

June 23rd, 2016

Listen to the Podcast


Hey, this is Sasha Evdakov and welcome to another episode of let’s talk stocks, and in today’s episode, I’d like to talk a little bit about the events, different kinds of events, there’s a lot of discussions about Brexit.
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Ep 80: Wake Up: Manipulation, Negativity, & Scams in the Market

April 14th, 2016

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Hey, this is Sasha Evdakov and welcome to another episode of let’s talk stocks.

In this episode what I’d like to do is share with you some emotional roadblocks that happen with you mentally and getting you to wake up. That is the end goal, I want you to wake up, and by waking up, I’m not talking about waking up like getting out of bed and just seeing things a little bit differently.
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Ep 77: Trading During Pre-Market & After Hours Sessions

March 24th, 2016

Listen to the Podcast

Hey this is Sasha Evdakov, welcome to another episode of let’s talk stocks, episode number 77, and in this week’s episode, what I’d like to do is share with you some insight about trading during pre-market and after-market hours.

I’m going to give you some insight about pre-market, after-market, trading in them, what is it that I do, what I don’t’ do, and that way you just get some insight if you want to trade pre-market or post-market.

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Ep 74: Economic Indicators: Jobs Report / Labor Report

March 3rd, 2016

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Hey this is Sasha Evdakov, it is March 3rd 2016, welcome to episode number 74 of let’s talk stocks.

In this week’s episode what I’d like to do is share with you some insight about economic indicators and more importantly the Jobs report or the labor report.

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What is “Beta”? [Stock Market Terms] + Using Beta for Trading Decisions

January 26th, 2016

Hey this is Sasha Evdakov and thanks for joining me here at Tradersfly.com, where I share with you some insight about trading and investing in the stock market.

In this week's episode what I'd like to do with you share with you What is Beta and How Can You Use Beta on the Stock Market Tables to make trading decisions or investing decisions for your personal portfolio.

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What is Window Dressing? – Stock Market Terms Explained

December 22nd, 2015

Hey, it’s Sasha Evdakov and thanks for joining me here at tradersfly.com where I share with you some insight about trading, investing and the stock market.

This week’s lesson is all about window dressing and what is window dressing? So I want to explain what window dressing is, how it happens, why it happens, but more importantly how does it affect you either as a trader or an investor? Even if you’re a regular investor. Not even if you’re a trader, just as a regular investor.

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Ep 65: Cause & Effect Ripples in the Stock Market: Oil, the Federal Reserve, and the Dollar

December 17th, 2015

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Hey this is Sasha Evdakov, it is December 17th, 2015 and welcome to another episode of let’s talk stocks, where I share with you how to evolve and transform as a trader and within your trading.

In this week’s episode, the core focus is about cause and effect ripples in the stock market. Basically it’s how the market moves, what is the cause and what is the effect and how that pertains to everything that’s happening within your stocks.

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10 Bagger Rule – Stock Market Terms Explained

December 15th, 2015

Hey it’s Sasha Evdakov and thanks for joining me here on Tradersfly.com where I share with you some insight about trading and investing in the stock market. Now in this week's video what I'd like to share with you is a stock market term and that term is called the 10 bagger or the 10 bagger rule.

Now if you've never heard about this term it was really coined up by Peter Lynch in his book One Up On Wall Street. This book really defines the 10 bagger really associated to baseball bag being a base and then when you add up doing two home runs and it double you get 10.

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Stock Market Terms Explained: Odd Lot vs. Round Lot of Shares

November 3rd, 2015

Hey it’s Sasha Evdakov and welcome to Tradersfly.com where I share with you some insight about investing and trading in the stock market. This week's video what I'd like to do is share with you some insight about Round Lots and Odd Lots when it comes to trading your group or group of shares.

What I’m talking about a lot, really referring to a group or the amount of shares that you’re trading not in terms of trading a huge bunch of lots of quantity, I'm talking about the group of shares. In this video what I'd like to do is really dissect a Round Lot and an Odd Lot and the appropriate way that you should be trading so first off what is an Odd Lot and a Round Lot.

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I'm Sasha, an educational entrepreneur and a stock trader. In addition to running my own online businesses, I also enjoy trading stocks and helping the individual investor understand the stock market. Let me share with you some techniques & concepts that I used over the last 10+ years to give you that edge in the market. Learn More

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