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Finance Concepts Videos 809 videos

Finance: What's the Difference Between Federal and State Taxes?
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Finance: What's the Difference Between Stocks and Bonds?
186 Views

What is the difference between stocks and bonds? Stocks are ownership. They control the election of the board of directors, who hires the CEO, who...

Finance: What Rights Does a Public Stockholder Have?
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What rights does a public stockholder have? Common shareholders elect the board of directors. They vote. They have the right to quarterly financial...

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Finance: Who Invests in Stocks? 141 Views


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Description:

Who invests in stocks? 401k plans, pension funds, institutional investors, banks, traders, clients of Schwab, Fidelity, and Franklin. Joe Blow buys stocks. It's likely you own stocks. They are the retirement investment vehicle of the masses.

Language:
English Language

Transcript

00:00

Finance a la shmoop. who invest in stocks? and that's not like horton

00:06

hearing who . the answer everyone. almost everyone. fancy-pants

00:13

corporate CEOs, yoga teachers, schoolteachers ,teenagers who mowed the [kid sits in a big chair and smiles]

00:19

lawn for a summer and are already dreaming of owning a home someday.

00:22

yep well the fancy-pants corporate CEOs can likely put more money into stocks, but

00:27

for most normal people even a hundred shares of whatever.com that starts at

00:32

12 bucks and compounds at 10 percent for 20 years ends up being worth a

00:36

meaningful sum. yeah like that. eight grand and change. it's kind of cool. so you

00:42

can buy stocks. it's not hard it won't hurt. much. yeah. stick good ones in water.

00:48

well logistics are simple save a grand or three go down to your local Schwab

00:53

store or log into fidelity .com or a host of others, each raise a good one. set

00:59

up an account and then just click to buy whatever stocks do you think you want to

01:03

own. only you'd then just check your progress or lack thereof by going to

01:07

Google Finance Yahoo Finance e-trade and whoever else provides legit stock price

01:12

info for the masses. that's how most of America does it, and believe it or not [stock prices example shown]

01:16

most of America actually owns stocks. from the whitest white shirted CEO to the

01:22

bluest of blue collar workers. for many union workers stocks represent almost

01:28

all of their net savings whether they realize it or not, and their stock

01:32

ownership has produced some really perverse outcomes. take profit Co vastly

01:38

over staffed. it had an awesome union negotiator who got the corporation's

01:43

weak-kneed CEO to hire twice as many workers as the company actually needed.

01:49

that over employment scenario was great for the fatten happy employees who would

01:55

otherwise be out of work, but it was bad for the company that now had to find the

02:00

financial resources to cut double the number of paychecks. as a result company

02:05

earned 50 cents a share instead of the dollar they would have earned if they

02:09

had right-sized the labor force. but typical union worker in the

02:13

factory had essentially all of her wealth tied up in this company. well as

02:16

part of her pension plan she had been forced to buy the company's stock. about

02:22

five thousand dollars worth of stock every year for decades. well the company

02:27

moved on and grind it away and did reasonably ,well she suddenly found

02:31

herself nearing retirement with a hundred thousand shares in the company [woman nears finish line with a banner called "retirement" above it]

02:36

whose stock was trading at five bucks a share or about ten times earnings. right

02:40

in time and $5 right? well. that's half a million dollars of savings

02:45

fully invested in one stock. our own company .lots of risk owning just one

02:51

stock see our video on diversity if you want to argue. but all that money was

02:55

invested in a stock that pretty much everyone thinks is undervalued and

02:59

underappreciated by Wall Street so it trades at a very low multiple of

03:04

earnings .that's at ten times things. well why only ten times? because the CEO was a

03:09

pushover. well lunatics ran the asylum and now the

03:12

lunatics are suffering under a very low stock price. and many need cash from

03:17

sales of that stock for retirement. you know winnebago home buying and high

03:22

stakes antiquing and golf and stuff. so along comes a new CEO. Tuffy MacTuff who

03:29

wants to fire two-thirds of the union workers and close right-size the company

03:35

deploying robots at the same time. well if Tuffy has his way the company will

03:39

earn $1 a share this year unlikely $2 a share in two years, you know since he

03:46

fixed the bad low profit margin structure of the company by getting rid

03:49

of all those employees .Wall Street he knows will love this and they'll bid up [chart showing stock prices rise]

03:55

the stock. so strangely but logically Peggy in accounting cheers when she is

04:01

actually fired by Tuffy. why? well all her wealth a hundred thousand shares of

04:07

stock she owned has now been bid up big-time shares go from trading at ten

04:13

times earnings of 50 cents to trading at 20 times earnings of the projected $2 a

04:19

share their going to earn in a couple of years or $40 a share and it's a huge

04:24

wealth swing. she went from looking at retiring

04:26

in Prius style on a half a million bucks to shopping for a hot new 23 year old pool

04:32

boy named Bjorn with her 4 million dollars in stock wealth. and it can be

04:37

the same story for Martha the tennis instructor or Barry, the pastry chef or

04:41

Samantha the bed pan maker. to move those things. well their stories might not

04:46

follow the same trajectory but as long as you own shares of a stock you have

04:50

the potential to reap major rewards and suffer major losses. you know so that [people of different occupations line up]

04:55

you've to have a chance to retire in an early age from bed pan making yeah. we

05:02

want to do that.

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