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Excerpt from the Book

THE WORLD’S GREATEST OPPORTUNITY MACHINE

I believe the stock market is the greatest opportunity machine ever created. Everyone should have access to it, not just the wealthy and privileged. That’s why I wrote this book.

There’s a place for everyone and every strategy in the stock market. You can invest in stocks for the long term, hold them, and earn dividends. Alternatively, you might choose to trade stocks—whether through day trading, swing trading, or short selling (betting that a stock will decline).

Don’t let anyone dictate what you can or cannot do with stocks. After reading this book, you might even discover your own unique way to profit from the market.

In this book, I’ll give you an overview of various approaches to the stock market. When you’re starting out, try different trading and investing strategies to see what works best for you.

Each of us has a different mindset and risk tolerance. Some people thrive on the fast-paced excitement of trading, while others prefer a slower, more relaxed approach to building wealth. There’s room for both in the stock market.

I urge you to learn how the stock market truly works. Many people skip this step and end up frustrated. Instead of blaming the market, take the time to understand it.

The stock market is a complex system that doesn’t respond to your wishes or anyone else’s. It operates like the weather— it just follows its own course, so you need to accept that. Make sure you take the time to understand how the stock market really functions.

This knowledge is crucial because financial markets drive much of the world we live in. Even a basic understanding of how they work can give you a significant edge in life.

To reiterate what I mentioned at the start of this book The stock market is the greatest opportunity machine ever created.

So Let’s Get Started!

What exactly is a stock? A stock represents a share of ownership in a company. For example, if I buy 100 shares of McDonald’s, I become a partial owner of the company and am known as a shareholder. If I had enough money, I could buy every share of McDonald’s and own the entire company—imagine being the emperor of burgers!

Think of McDonald’s as a pie with 765,317,332 slices (shares). As of now, each slice is valued at $187.62, which is the stock price. To find the total value of the pie, we multiply the number of slices by the price per slice, giving us about $143.58 billion. This total value is known as the “market cap” or “market capitalization.”

When we say that Apple is the biggest company in the world, we’re usually referring to its market cap. For instance, on October 3, 2018, Apple’s market cap was $1.103 trillion. By May 20, 2019, it had dropped to $840 billion.

Stock prices and market caps fluctuate because smart minds and computers are constantly assessing and updating the value of companies based on new information. When investors buy or sell stocks, they adjust the price to reflect what they believe the company is worth.

Sometimes the market gets it wrong. For instance, Pets.com was worth $300 million in 1999 but was valued at zero a year later when it went out of business. Conversely, Apple’s stock was valued at less than $3 billion in 1996. When Steve Jobs returned and introduced successful products like the iPod and iPhone, Apple’s stock price and market cap rose significantly as the market recognized the company’s potential.

The stock market adjusts to new information, which causes stock prices to fluctuate. Prices also move based on supply and demand. If many people want to buy a stock, its price will go up. Conversely, if a large investor starts selling their shares, the price will drop.

Sometimes, it’s unclear why a stock price is rising or falling, but eventually, the reason becomes clear. Legendary hockey player Wayne Gretzky famously said, “I skate to where the puck is going to be, not to where it has been.” Similarly, the stock market tries to anticipate future events and adjust stock prices accordingly.

For example, in early 2009, even though the U.S. economy was struggling, the stock market began to rise because it was anticipating an economic recovery, which later proved accurate. Similarly, if a company reports strong earnings but the stock drops, it may be reacting to other details or future outlooks from the earnings report.

An inexperienced trader might buy a stock that’s falling after a good earnings report, but this can be risky, as the stock may continue to decline until new information is fully reflected in the price. Conversely, if a company reports better-than-expected earnings, the stock might jump up as institutional investors buy shares, moving the stock closer to its new fair value.

In future chapters, I’ll explain how you can profit from these market movements. But for now, let’s stick to the basics. Next, I’ll guide you through opening a brokerage account and buying your first stock.

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