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These are the user uploaded subtitles that are being translated: 1 00:00:00,450 --> 00:00:05,130 Well if I was taking a course on Psych investing probably the first question I would have is hey can 2 00:00:05,130 --> 00:00:09,370 I make money in stocks and if so how much that would be pretty important to me. 3 00:00:09,370 --> 00:00:10,520 I'm sure it is to you. 4 00:00:10,680 --> 00:00:16,050 And the good news is yes you can make money in stocks in fact stocks outperform things like bonds and 5 00:00:16,050 --> 00:00:19,510 cash and other asset categories so they're a great way to grow your money. 6 00:00:19,580 --> 00:00:23,620 I souces a pretty pretty short lousy class where he said no you can't. 7 00:00:23,670 --> 00:00:26,520 So you know there's a good long course. 8 00:00:26,580 --> 00:00:28,080 The good news is that you can. 9 00:00:28,110 --> 00:00:33,120 The key is historically you can make stocks that doesn't mislaying you can the future or the past predicts 10 00:00:33,120 --> 00:00:36,120 the future but we have over 100 years of information. 11 00:00:36,120 --> 00:00:39,610 So yes stocks can make money in the future here I believe. 12 00:00:39,660 --> 00:00:42,650 Certainly over the long term stocks make money in the short term. 13 00:00:42,750 --> 00:00:45,260 They can be really risky commodities go up and down quickly. 14 00:00:45,270 --> 00:00:49,950 But over the long term they do make money and I'll show you some charts and things in a second here 15 00:00:50,190 --> 00:00:51,120 and that shows that. 16 00:00:51,120 --> 00:00:54,150 And they do tend to go up once again over the long term. 17 00:00:54,150 --> 00:00:58,600 Individual stocks might go down and never recover certainly but if you have a diversified portfolio 18 00:00:58,600 --> 00:01:01,730 of stocks and apply the principles you can learn the course here. 19 00:01:01,800 --> 00:01:05,340 You know you're going to be in a much better place than somebody is buying stocks without really much 20 00:01:05,370 --> 00:01:06,060 education. 21 00:01:06,060 --> 00:01:07,570 So historically they go up. 22 00:01:07,570 --> 00:01:10,770 There's a long term investment and they tend to go up over that long term. 23 00:01:10,770 --> 00:01:15,120 So how much should take a look at some charts and some numbers to you get a feel for how the stock market 24 00:01:15,120 --> 00:01:17,560 kind of works as far as returns. 25 00:01:17,610 --> 00:01:23,280 This chart here just shows some stark market returns looking at the Dow Jones it's a smaller basket 26 00:01:23,280 --> 00:01:28,280 of stocks only 30 of the largest U.S. companies like that are representative of a variety of industries. 27 00:01:28,410 --> 00:01:31,710 Been around for since 1896 and I want to use this. 28 00:01:31,710 --> 00:01:36,750 Those that truly represented it really does follow the rest of the larger type of stock market generally. 29 00:01:36,750 --> 00:01:42,030 And as you can see over this chart if you start over in the hundreds you know stocks go up and over 30 00:01:42,030 --> 00:01:46,650 the long term as we get it today you can see that stocks have gone up by falling the upward motion of 31 00:01:46,650 --> 00:01:48,360 that chart the whole time. 32 00:01:48,360 --> 00:01:49,380 That's the good news. 33 00:01:49,380 --> 00:01:54,030 Now challenging news you can see there are some drop offs in there as it's not just a straight line 34 00:01:54,030 --> 00:01:54,480 going up. 35 00:01:54,480 --> 00:01:58,830 There are up and downs peaks and valleys and when it's going down that means your investments your stock 36 00:01:58,830 --> 00:01:59,720 has gone down. 37 00:01:59,730 --> 00:02:01,990 I mean that's a great time to buy some new stocks actually. 38 00:02:02,010 --> 00:02:04,700 You're buying low with the idea of eventually something high. 39 00:02:04,710 --> 00:02:05,160 Right. 40 00:02:05,160 --> 00:02:06,900 Stock Investing 101. 41 00:02:06,900 --> 00:02:12,100 If you look at here like look we all look at the end of 1929 here already beginning in 1930. 42 00:02:12,270 --> 00:02:14,330 You know what happened then all of sudden stocks went plummeting. 43 00:02:14,340 --> 00:02:16,200 Well that was the Great Depression right. 44 00:02:16,200 --> 00:02:18,610 That was the Great Depression of the thirties. 45 00:02:18,630 --> 00:02:20,570 And you can see how the Great Depression. 46 00:02:20,580 --> 00:02:25,380 Stocks went down pretty quickly very quickly but they rebound and they overcame the Great Depression 47 00:02:25,380 --> 00:02:30,420 they overcame World War Two in the 40s and they overcame all these things are these obstacles to stocks 48 00:02:30,420 --> 00:02:36,630 in the world challenges overall and have continued rise over a long period of time outperforming things 49 00:02:36,630 --> 00:02:39,650 like bonds and cash in their peers so long term investment. 50 00:02:39,660 --> 00:02:43,460 It can be really really good as far as investing in stocks. 51 00:02:43,500 --> 00:02:49,860 We want to see how much return that would be looking at this chart here I pulled this out of a vanguard 52 00:02:49,860 --> 00:02:51,900 Vanguard has some sample portfolio also. 53 00:02:51,990 --> 00:02:57,330 They did a more broader base look at stocks from you know a larger amount of stocks that just the Dow 54 00:02:57,330 --> 00:03:01,630 Jones so they can give you a feel for average annual return over a long period of time. 55 00:03:01,630 --> 00:03:08,040 So looking from 1926 right before the beginning of the Great Depression happening in October 1929 all 56 00:03:08,040 --> 00:03:13,670 the way up to 2015 not too far too thought too far in the rearview mirror here for us. 57 00:03:14,010 --> 00:03:19,290 And this is a portfolio of 100 percent stocks broad based stocks and you can see the average annual 58 00:03:19,290 --> 00:03:22,050 return is ten point one percent. 59 00:03:22,050 --> 00:03:24,710 So some of this is all the average returns stocks is 10 percent. 60 00:03:24,810 --> 00:03:28,970 That's kind of where they're getting that number from it's not totally the total story on that. 61 00:03:28,980 --> 00:03:31,370 But you know that's at least the starting point number to say yes. 62 00:03:31,370 --> 00:03:34,620 Only one or two percent or it's not keeping up with inflation. 63 00:03:34,770 --> 00:03:39,510 Well if so it's nearly a 10 percent but that could be you know it's been less than recent years maybe 64 00:03:39,510 --> 00:03:45,030 more in other years and you can see the range the best year and the worst year best year overall stocks 65 00:03:45,030 --> 00:03:46,120 up 54 percent. 66 00:03:46,140 --> 00:03:46,480 Wow. 67 00:03:46,480 --> 00:03:49,480 Who re worse year down 43 percent. 68 00:03:49,500 --> 00:03:50,160 Oh my God. 69 00:03:50,220 --> 00:03:51,600 That's no fun at all right. 70 00:03:51,600 --> 00:03:55,740 So you can see that broad range and the interest in the one that broad range that's right in the middle 71 00:03:55,740 --> 00:03:56,640 of the 30s right. 72 00:03:56,640 --> 00:04:01,110 You've got the Great Depression and stocks went way down and then they went way back up and they went 73 00:04:01,110 --> 00:04:04,520 down and in all that you can see that was a very volatile time. 74 00:04:04,590 --> 00:04:08,720 And we got some volatility now but not like that years with a loss. 75 00:04:08,730 --> 00:04:14,460 So this is saying that out of 90 years of investing in stocks or this 1926 the 2015 time period. 76 00:04:14,570 --> 00:04:18,420 Twenty five years you're going to have a loss it might be only one or two percent. 77 00:04:18,450 --> 00:04:23,510 It might be as high as 40 percent but 25 of the 90 times you're going to have a loss. 78 00:04:23,520 --> 00:04:30,480 The good news is the other the other times the other 65 times you've got to gain or at least breaking 79 00:04:30,480 --> 00:04:30,830 even. 80 00:04:30,870 --> 00:04:31,590 You've got to gain. 81 00:04:31,590 --> 00:04:32,970 You don't have a loss. 82 00:04:32,970 --> 00:04:36,020 And so that's some good news as far as investing in stocks. 83 00:04:36,060 --> 00:04:40,140 If we looked at it by another chart here just to give you a feel for and get you comfortable with it. 84 00:04:40,220 --> 00:04:46,140 If we looked at stock market historical returns by decade you can kind of see where they're at as far 85 00:04:46,140 --> 00:04:49,530 as that two and you can see some of these early numbers here. 86 00:04:49,620 --> 00:04:56,520 You'll know you get 10 1910s 1920s 1930s all that even the 30s with the great depression you can see 87 00:04:56,520 --> 00:05:01,410 at the end if you start at the beginning and then at the end you'll last like 6:03 Yeah it was 10 years 88 00:05:01,410 --> 00:05:06,140 of misery but it wasn't like you were down 40 percent for a whole decade. 89 00:05:06,310 --> 00:05:10,490 And if you kept investing you were buying low actually during that period than most recent times. 90 00:05:10,490 --> 00:05:16,400 You can see we have the 1980s and certainly the 1990s with the Internet boom and bust. 91 00:05:16,410 --> 00:05:19,760 So you had that you had the 2000s where it was pretty flat. 92 00:05:19,770 --> 00:05:24,090 I was kind of considered you know kind of a flat time period this is once again looking at overall stocks 93 00:05:24,090 --> 00:05:25,840 more U.S. based stocks for this number. 94 00:05:25,850 --> 00:05:28,500 You know so overall but worldwide that will fall a little bit too. 95 00:05:28,500 --> 00:05:32,230 But just to give you a feel and then more recent time some better returns. 96 00:05:32,310 --> 00:05:36,120 But that can be up and down too as well as very very recent type numbers. 97 00:05:36,120 --> 00:05:40,880 So the thing to take from this is that yeah there's going up times and there's going to be downtimes 98 00:05:40,890 --> 00:05:46,140 that overall there's some up times and particularly if you continue to invest and continue to pick a 99 00:05:46,140 --> 00:05:53,040 portion of your income invest in the stock market you're going to do do very very well in a broad diversification 100 00:05:53,040 --> 00:05:53,310 thing. 101 00:05:53,310 --> 00:05:58,920 I certainly advocate investing in things like bonds and and can live in cash possibly you know depending 102 00:05:58,920 --> 00:06:00,900 on your investing goals and all that. 103 00:06:00,900 --> 00:06:02,670 But you can see some returns here too. 104 00:06:02,990 --> 00:06:06,810 Let's finish this Celeste and here with one other thing we're going to do a demonstration here and we're 105 00:06:06,810 --> 00:06:12,210 going to look at one other thing here as far as well what if I continue to invest in stocks and how 106 00:06:12,210 --> 00:06:13,920 does my money grow over time. 107 00:06:13,920 --> 00:06:15,260 I mean I'm taking on some risk. 108 00:06:15,310 --> 00:06:16,960 Yeah the returns look pretty good. 109 00:06:17,010 --> 00:06:18,930 What will I look like in the future for me. 110 00:06:18,930 --> 00:06:20,740 So let's do a demonstration of that. 111 00:06:20,760 --> 00:06:22,470 It really really goes to money chump. 112 00:06:22,470 --> 00:06:26,640 You go to money to him to go to compound interest calculator and you will find it. 113 00:06:26,640 --> 00:06:29,070 So let's go take a look and do some demonstrations. 114 00:06:29,220 --> 00:06:29,590 OK. 115 00:06:29,610 --> 00:06:32,580 We're here in money chimp Time.com I think that's kind of funny. 116 00:06:32,610 --> 00:06:32,790 Right. 117 00:06:32,790 --> 00:06:33,830 Money chimp dot.com. 118 00:06:33,840 --> 00:06:37,800 You can see in that Buraidah when the compound interest calculator we just go into their calculators 119 00:06:37,800 --> 00:06:43,410 or Kelkar backflush compound interest you'll find three simple calculators show how your money grows 120 00:06:43,410 --> 00:06:47,340 over time and we'll do a demonstration here with this and you can go to this and play with it yourself 121 00:06:47,340 --> 00:06:53,010 and put in your own numbers based on you know how much you have to invest in a particular time and how 122 00:06:53,010 --> 00:06:54,910 much returns and things you might expect. 123 00:06:55,110 --> 00:06:58,440 So let's say we start with zero or we're going to walk through this different calculator and that's 124 00:06:58,440 --> 00:07:02,910 going to tell us at the end what does our future value what is that what are we going to end up with 125 00:07:02,910 --> 00:07:04,060 after a certain time period. 126 00:07:04,080 --> 00:07:05,740 Let's walk through this real quick here. 127 00:07:05,760 --> 00:07:09,750 So let's say my current principal our money that I have right now is zero. 128 00:07:09,750 --> 00:07:11,970 I don't have anything invested at all zero. 129 00:07:12,100 --> 00:07:14,580 And let's say that every year annual dition. 130 00:07:14,730 --> 00:07:15,920 Let's pick a number here. 131 00:07:15,960 --> 00:07:22,290 I'll use U.S. dollars from us so you'll bear with me you could use rupees you could use Pound's he could 132 00:07:22,290 --> 00:07:27,810 use euros whatever your currency might be but literally it will lose a dollar. 133 00:07:27,810 --> 00:07:33,720 In this case and let's say every year let's say I'm doing well in Iowa and contribute ten thousand dollars 134 00:07:34,020 --> 00:07:34,490 a year. 135 00:07:34,500 --> 00:07:36,790 You know maybe it's less than that let's say I'm just doing. 136 00:07:36,830 --> 00:07:41,880 Let's do a little less let's say six thousand a year savings investing in the stock market right. 137 00:07:41,900 --> 00:07:46,340 Once again you just had a higher level or whatever you want to do and let's say we do this over 30 years 138 00:07:46,350 --> 00:07:46,520 right. 139 00:07:46,530 --> 00:07:52,110 So I started twenty five would say that put me at 55 years old not even 40 years that may get me closer 140 00:07:52,110 --> 00:07:57,930 to a traditional retirement age as we saw in stocks that we could get around a 10 percent return on 141 00:07:57,930 --> 00:07:59,660 a rate that moved me a little bit longer. 142 00:07:59,670 --> 00:08:04,800 Suddenly we don't know what the near term future is so let's go real low let's say know we can get 7 143 00:08:04,800 --> 00:08:05,750 percent on our stocks. 144 00:08:05,760 --> 00:08:07,260 We're not going to a 10 or nine. 145 00:08:07,320 --> 00:08:12,300 Let's be pretty conservative on it and if we have overall diversified portfolio of stocks and bonds 146 00:08:12,300 --> 00:08:16,230 and cash we might even put a little bit lower number on that but let's start with 7 just to see what 147 00:08:16,240 --> 00:08:21,820 is make additions at the end of each period so that means at the end of every year you'd add six thousand 148 00:08:21,820 --> 00:08:25,950 dollars you could be investing every month to us while it's actually a better strategy. 149 00:08:25,950 --> 00:08:28,800 But for the purposes of the calculation Here's our numbers. 150 00:08:28,800 --> 00:08:29,830 We started with nothing. 151 00:08:29,910 --> 00:08:36,300 We're investing $6000 a year over 30 years 7 percent annual return let's see what our number ends up 152 00:08:36,540 --> 00:08:41,320 at the end and by investing if we can get a 7 percent return on our stock market portfolio. 153 00:08:41,520 --> 00:08:46,140 And you can see we're at five hundred sixty six thousand dollars so you know just by investing that 154 00:08:46,140 --> 00:08:50,120 every year and how it grows and compounds were almost well over a half a million dollars. 155 00:08:50,250 --> 00:08:54,360 If we let that grow to maybe a more full retirement age let's say 40 years. 156 00:08:54,480 --> 00:08:58,500 And as we got promoted and did things at work or in our careers and we were able to put away a little 157 00:08:58,500 --> 00:09:01,440 bit more meat we were able to do $9000. 158 00:09:01,440 --> 00:09:03,980 Still 7 percent interest how would we do then. 159 00:09:04,140 --> 00:09:04,430 Wow. 160 00:09:04,440 --> 00:09:06,920 That's like 1.7 million dollars. 161 00:09:06,990 --> 00:09:07,830 You know that's pretty good. 162 00:09:07,830 --> 00:09:09,460 Over a 40 year period. 163 00:09:09,690 --> 00:09:11,820 I mean so you can see how stocks and things grow. 164 00:09:11,820 --> 00:09:17,670 Let's go back down to our our six thousand just over a longer period and you can see it was six thousand 165 00:09:17,670 --> 00:09:19,850 a year over a long period 40 years. 166 00:09:19,920 --> 00:09:25,600 It'll grow and you're over one point almost $1.2 billion and of your culture your retirement age or 167 00:09:25,620 --> 00:09:28,210 close to things you just adjust these numbers down. 168 00:09:28,320 --> 00:09:32,520 Maybe you need to put on a little bit more and take out a little less year to grow. 169 00:09:32,520 --> 00:09:39,660 The point of all this is that by investing investing in an asset class like stocks which will be riskier 170 00:09:39,810 --> 00:09:45,120 but outgrow the market you can see you can get some pretty good returns here over time and that's what 171 00:09:45,120 --> 00:09:48,420 helps fund your future goals and your future dream. 172 00:09:48,420 --> 00:09:50,600 So can you make money in the stock market. 173 00:09:50,610 --> 00:09:51,420 Yes. 174 00:09:51,420 --> 00:09:52,500 Now is it risky. 175 00:09:52,590 --> 00:09:53,050 Yeah. 176 00:09:53,070 --> 00:09:56,610 And that's why we're going talk about the next lesson here and we're going to look at the worst case 177 00:09:56,610 --> 00:09:57,520 scenario. 178 00:09:57,600 --> 00:09:58,800 And I think that would be pretty interesting. 179 00:09:58,800 --> 00:10:00,750 Well what's the that can happen. 180 00:10:00,870 --> 00:10:02,450 And that's coming up next. 19381