What is Stock Market Investing? The basics.

Video Transcript: 0:00 - "Okay, what is investing and what does it mean to invest? So before we continue on the series, I want to take a minute to talk about what it means to invest. And so here we go. The stock market is scary for a lot of people, and you know, if we break it down to its basic components, the stock market is simply made up of very large companies, and you know, we want to invest in those ultimately to grow our money over time. If we took a scenario similar to(that).

0:30 - "If you were to say buy a local laundry bag, right? So every time someone comes in, they put their money in, they do a load of laundry, you as the owner would set the price high enough so that there is enough money to cover overhead for those laundry machines, and that there's a built-in profit margin so that you as the owner are able to make money. Now, sometimes people have an issue with that, but the idea of profit is simply getting compensated for the risk that you're taking on."

0:59 - "As a business owner. If you are if you're putting your capital at risk, that anytime you invest, that money could go away and you don't ever get it back. Right? The laundry mat could go out of business, a bigger company you invest in goes bankrupt. You always have some sort of risk. So the profit that we're making in ways is compensating us for that risk that we're taking. So it's not just in a vacuum. Bad things can happen. And so..."

1:27 - "Profit is good and it's a it's a way to compensate you for taking that risk to incentivize people to take those risks. Because if you're not able to make a profit, no one would ever start a business and take on that risk and stress if you can't ever make a profit. So if we can understand that as a small business, we can think about that on bigger businesses. There's very large publicly traded companies out there that there's shares of stocks that you can buy. And so instead of owning the entire laundromat, we're owning a piece of a very large company."

1:57 - "And those companies have profits, right? So they provide a lot a lot of goods and services to people that need them for whatever business that they're in. And they price their services at a point that have profits. And when that company has a profit, that is reflected in their share price and also dividends that they pay out. So you, as a person that owns a piece of that business, your money will grow in value because that company is becoming more valuable as it provides more goods and services to people."

2:27 - "I think we lose a lot of that connection with all these index fund investments that we're doing. We don't really think that we're owning pieces of specific companies because it's all wrapped up in a fund and we don't really have any sort of direct tie to the companies we're investing in. But at the end of the day, we're investing in companies. Sometimes mutual funds and index funds will pool a whole bunch of them together so you get diversification within one fund. But the baseline unit of stock market investing is companies that are providing goods and services that people use every single day."