both: hey! mike: so emma, you and i are pretty savvyinvestors emma: you mean how we bought stock in newunlimited timetravel megacorp before they released the chronocopter? mike: right on the money. so do you thinkwe should share some our stock knowledge?
how much are apple shares worth, emma: i think we should! part one: what isstock? a stock is a part ownership in a company. if a company has 100 shares of stock availableand you buy one stock, you essentially own 1% of that company. most publicly traded companieshave millions of shares, so average investors own only tiny portions.
mike: companies typically offer stock in orderto expand their business without taking on traditional debt. when they start sellingthose shares to anybody who wants one, they become known as a publicly traded company. emma: of course, unless you're warren "thebuffetator" buffett, most people aren't buying stocks for ownership rights. most stocks arepurchased with the intent to grow your money over time. you can make money with stocksin two ways. mike: first way: a stock's value may increaseover time as the company grows, so your share is going to become more valuable. emma: second way: a company may issue dividendto shareholders. now let's dive into both.
mike: (record scratch sound) big e, i gottaadmit, 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 chronocopterready, 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 increasingin value after you've bought it. a stock can go up for many reasons, maybe a company hasa new product that seems to be a hit with the public- mike: copter's almost ready. okay, just acouple of things before we go. desirability
of a stock will drive up two things, the askprice and the bid price. this stuff is mostly handled by computers and when the ask andthe 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 justgonna 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 whathappens 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 thatmy $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 thesavings account. it looks like there was an interest rate of .06% per year which meansthat $100 is now $103.04 mike: which i think can almost buy a gallonof gas today. both: whoa! mike: that was a jet-pack crash. let's getout of here, okay? emma: okay, okay.
mike: so emma, i think we just learned a veryvaluable 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 abad product. but if the market is down 30% one year but up 60% the next year, you'restill 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 itsstockholders 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 thesole purpose of paying dividends. for example, reits which stands for real estate investmenttrust, info in the doobly-doo. which takes us to part four: how do i invest? mike: you can invest by contributing to yourcompany's retirement funds and/or you can do it privately a through brokerage. onlinebrokerages are very popular these days, and once you get the hang of it, it's like, aseasy as making any other online transaction. emma: stocks of course are just one financialtool. 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 thechronocopter 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 ofour 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 becomeour 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.
