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Duration:05:22
Uploaded:2015-06-26
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IMPORTANT INFO BELOW -- PLEASE READ.
Understanding the stock market is super important! Let's discuss what the stock market is, how to invest in stocks, and how the heck stocks (and dividends) can make you money. Also we time travel to the future to show you why, if you do it right, putting money in the stock market can be WAY better than putting it in a savings account. So, there's that.

Ahoy! This video is a "basics" primer for more detailed episodes in the future. (For instance, we hope to cover preferred vs common stocks, index and mutual funds, bonds, and others.)

In the meantime, remember: Only invest money you won't need for a few years, and the key to success is diversification.

Thanks, and DFTBA!

- The How to Adult Crew

Support How to Adult on Patreon at http://www.patreon.com/howtoadult

VIDEO LINKS:
Our video on retirement accounts: https://www.youtube.com/watch?v=H73v5vh0P_o&list=PLvdeRYvP0yPWuDfZOPMorvnCB7ez69Y83&index=14
How REITs Work: http://www.investopedia.com/terms/r/reit.asp

HOW TO ADULT Posters Now Available from DFTBA Records!
http://store.dftba.com/collections/how-to-adult

Merchandise from Mike (including "Reading Changes Us" and "Everything Not Saved Will Be Lost" posters!):
http://store.dftba.com/collections/t-michael-martin

"How to Adult" is a "life skills" edutainment channel brought to you by Executive Producers Hank Green and John Green. Subscribe for new videos every week!

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Created by:
Emma Mills & T. Michael (Mike) Martin
http://www.youtube.com/elmify
http://www.youtube.com/tmikemartin
Mike is also a Young Adult novelist. His book, THE END GAMES, is available at all online booksellers, including
Indiebound (http://www.indiebound.org/book/9780062201812?aff=tmichaelmartin ) and Amazon: (http://www.amazon.com/gp/product/0062201816/ref=as_li_tl?ie=UTF8&camp=1789&creative=390957&creativeASIN=0062201816&linkCode=as2&tag=tmicmar-20&linkId=CF4ULRBEW6LATV3C)

Directed by:
T. Michael Martin

Written by:
Alan Lastufka (http://alandistro.tumblr.com)
& T. Michael Martin

Edited by:
Nathan Talbott
(http://www.youtube.com/nathantalbott)

Executive Producers:
Hank & John Green
http://www.youtube.com/vlogbrothers
(Theme tune plays)

Both: Hey!

Mike: So Emma, you and I are pretty savvy investors

Emma: You mean how we bought stock in New Unlimited Timetravel Megacorp before they released the chronocopter?

Mike: Right on the money. So do you think we should share some our stock knowledge?

Emma: I think we should! Part one: what is stock? A stock is a part ownership in a company. If a company has 100 shares of stock available and you buy one stock, you essentially own 1% of that company. Most publicly traded companies have millions of shares, so average investors own only tiny portions.

Mike: Companies typically offer stock in order to expand their business without taking on traditional debt. When they start selling those shares to anybody who wants one, they become known as a publicly traded company. 

Emma: Of course, unless you're Warren "The Buffetator" Buffett, most people aren't buying stocks for ownership rights. Most stocks are purchased with the intent to grow your money over time. You can make money with stocks in two ways.

Mike: First way: a stock's value may increase over time as the company grows, so your share is going to become more valuable.

Emma: Second way: a company may issue dividend to shareholders. Now let's dive into both.

Mike: (record scratch sound) Big E, I gotta admit, I'm not really feeling that thrill-a-minute, how to adult experience right now. 

Emma: You want to time travel don't you?

Mike: absolutely. I'm gonna go get the chronocopter ready, I'll be right back.

Emma: While Mike preps our incredible journey, let's talk about part 2, how stocks make you money. As we mentioned, one way is by increasing in value after you've bought it. A stock can go up for many reasons, maybe a company has a new product that seems to be a hit with the public-

Mike: Copter's almost ready. Okay, just a couple of things before we go. Desirability of a stock will drive up two things, the ask price and the bid price. This stuff is mostly handled by computers and when the ask and the bid prices line up, ba-da-bing, that is a sale.

Chronocopter: Your chronocopter is ready.

Mike: Nice! Okay, so before we go, I'm just gonna do two things really fast. I'm going to put $100 in a saving account and another $100 in the stock market.

Emma: Let's go to the future and see what happens to the money!

(chronocopter music)

Emma: Welcome to the year 2065. Robot!

Mike: So Emma, let's check those numbers, eh. Bup-boop-beep-bup-boop. Oh, look at that. Future. Uh, right, Emma, it would appear that my $100 invested 50 years ago has gotten an average return of 10% and it has become $11,739.09

Emma: Now let's check out the money in the savings account. It looks like there was an interest rate of .06% per year which means that $100 is now $103.04

Mike: Which I think can almost buy a gallon of gas today.

Both: Whoa!

Mike: That was a jet-pack crash. Let's get out of here, okay?

Emma: Okay, okay.

Mike: So Emma, I think we just learned a very valuable lesson: don't drink and jet-pack.

Emma: Also investing can be super helpful. Although 10% is the average, there will be down years, say when a company releases a bad product. But if the market is down 30% one year but up 60% the next year, you're still better off than when you started. That is, assuming you are diversified.

Mike: The other way a stock can help you: part three: show me the dividends. A dividend is a payment that a company will pay to its stockholders from its reserves or profits. When a company does well and has excess cash, they will typically either reinvest it to grow their business or- and- and/or (beep) and/or they will pay out a portion of it to shareholders.

Emma: Some companies started out with the sole purpose of paying dividends. For example, REITs which stands for Real Estate Investment Trust, info in the doobly-doo. Which takes us to part four: how do I invest?

Mike: You can invest by contributing to your company's retirement funds and/or you can do it privately a through brokerage. Online brokerages are very popular these days, and once you get the hang of it, it's like, as easy as making any other online transaction.

Emma: Stocks of course are just one financial tool. If you'd like to hear about others please let us know in the comment section below. We would love to hear from you.

Mike: In the meantime, I just programmed the chronocopter to take us to the day when we're going to reveal the catchphrase.

Emma: And when will that be, exactly?

chronocopter: Date unknown

(X files theme plays)

Mike: By the way we wanted to thank one of our Patreon patrons, who is our awesome person of the week. Her name is Mel Harch.

Emma: Hi Mel!

Mike: HI Mel! Thank you so much for your h- awesomeness. Uhm. This is a picture of Mel.

Emma: (excited noises) Yay!

Mike: Yay! Thank you!

Emma: Thank you.

Mike: If other people would like to become our awesome person of the week, what do they do?

Emma: Go to Patreon.

Mike: Yeah

Emma: Patreon.com/howtoadult

Mike: Excellent.

Emma: Is that our URL?

Mike: It is, yes.

Emma: Awesome, yes, that is the place.