Today's Stock Market Will Make Normal People Millionaires (Do This Now!)

If you think the stock market is just a place where stock prices go up and down, you are playing the wrong game. Until you understand what you're actually buying, which is a piece of a business, you're not investing. You're guessing. We're here to fix that. This is how millionaires are made. By understanding what the market really is and using that to your advantage. Guys, in this video, I'm going to show you how the greatest investors ever really think. Now, what's great about it is you need to repeat these things over and over. I've been investing for 30 years and I still repeat these things every single time I buy something. Whether it's a stock, whether it's a piece of real estate, or whether I'm investing in one of my businesses. The best investors don't chase hype. They chase value. Our goal is to buy when price is below value. That is the ultimate goal of every investor. Just like your goal when you go to the store is to get a good deal on whatever you're buying. No different here. By the end of this video, this will be either the first time you've heard it or a reiteration of something you need to have going on in your head constantly. Now listen, like I said earlier, when you buy a stock, you're not buying some magic lottery ticket that goes up and down, might shoot to the moon, any of those things. You're buying part of a real business. What that means is when you click the buy button, you become part owner. In fact, there was an ongoing joke on where somebody on LinkedIn literally sarcastically put partner in every company they own stock in as a joke. The funny part is it's not a joke. He owned Tesla stocks. He said partner in Tesla 2017 to today. It's funny because it got a lot of attention, but it's absolutely true. You are the part owner of that business, but I get it. People sit there and say, yeah, but I can't go to the company's bank account and take my share out. No, you can't, but that bank account, you still have an ownership piece in. And someday when they put that money and put it into the dividends of the investors, you get that piece. When they take that money to go invest it in another factory, another expansion of the company, you get a piece of that growth. But what most people do is this. They stare at the price jumping up and around on the screen. They freak out. Oh my God, it went down 2%. Oh my God, it went down 20%. I'm ruined. Relax. Businesses don't suddenly get terrible overnight just because the stock price dipped. Value investing is about asking a very simple question. What is this business actually worth? And once you've determined that you have to ask the question, can I buy it for less than that? It's no different than shopping. Like I said earlier, no different than buying a car. Now, the differences with the stock market, you can't go to Microsoft and say, can I buy your stock cheaper? But better yet, the emotional market can act crazy and give you that cheap price immediately. Cheap doesn't necessarily mean good and good doesn't mean you should overpay. The key is to find when good is priced cheap. That's what we want. Don't treat stocks like scratch off tickets. Treat them like your neighbor walked over and said, can you buy a piece of my business? If you'd never want to own the whole business, why would you even want a piece of it? If you couldn't understand what you're buying, why are you wasting your time? Because in the end, we are not here to gamble. We're here to build wealth. When I hear people say the stock market's a gamble, what I hear is somebody saying, I don't understand what's going on in the stock market. Guys, no one on YouTube talks about this. Yeah, a few channels here and there brush up on the numbers, but they don't talk about the emotion of it. That's what's important here. That's why you're so fortunate to have caught this video. And no matter where you are in your investing journey, whether you're brand new or more advanced, I will tell you that there's a reason why I listen to these things all the time. I'm not new to investing, but I want to repeat these mantras to myself so it establishes and repeats over and over what I'm doing. The thing about stock prices are, they're not grocery store prices. At the store, a gallon of milk costs $3.99. Take it or leave it. Nobody's yelling $4. Who's got $4.10, $4.20 an ounce? Although I will say this, there's a great bar I've heard about where the price of drinks go up and down based on demand. The more one drink is bought, the price goes up. That is the stock market. At the end of the day, an auction does not work very well because it's about getting a lot of people together to act emotionally. And that's what happens in the stock market. One person's panic, one person's greed, one just had too much coffee, and the price jumps up all over the place. Guys, we've all seen it. A company will report something bad or have some news and the price jumps or falls 20%. Why? Not because the business is suddenly 20% better. We're sitting on NVIDIA right now, which is one of the most valuable companies in the world and leading the charge. In the last year, NVIDIA's stock price has gone from $150 to $86 and back up to $180 or $190 in less than one year. This is a multi-trillion dollar business. And guess what? Their revenue hasn't gone down 50% and doubled. It just keeps going up. Its profit just keeps going up. So if you believe that $150 is right and $86 is right, all within a six-month period, you're not understanding the market. But I'm sure what you're hearing right now is, oh, that kind of makes sense. And it does. And here's where most people mess this up. They think that the auction price equals the business's actual value. Wrong. They're not assessing the business's value. Let's say you have your house and it's worth $400,000. And tomorrow, somebody offered you $500,000 for it. The next day, $300,000. The next day, $450,000. The next day, $350,000. Did your house's value really change that much that quickly? Of course not. The auction just got crazy. Now you might sit there and say, well, Paul, house prices don't change that much. You're right. You know why? Because we don't have that ticker above our houses every single day saying how much it's worth. If we did, then guess what? The price would probably change a lot more often. But this is exactly why value investing works. Our job isn't to change the noise in the auction. Our job is to take a step back, look at the business, figure out what is this business really worth? And then can I buy it at a discount while everyone else is yelling like maniacs? While everyone else is screaming and crying and selling? Don't treat stocks like that grocery store item list with fixed prices. Treat them like auction items where the price can be completely irrational, but the underlying value is steady. If you focus on that difference of price versus value, you're going to stop being the panic bidder and start being the disciplined buyer. Now guys, I tell this story all the time. Back in the late 90s, 2000, even though I was more of a value buyer than people back then, I still wasn't truly there yet. I still bought crazy companies thinking, well, somebody said, somebody I know who's really smart said this. And guess what? It didn't work out very well. And the other hard part about value investing is people think you're wrong pretty much all the time because when stocks are irrational, you're wrong for not buying them. When stocks are plummeting and stupidly priced on the low side, you're dumb for buying them. That's the hard part. And you watch this channel enough, you'll see enough of that. But at the end of the day, I think from a 2030 year outlook. Now, do I think it's going to take 20 or 30 years for companies to do well? No. But I think to myself, if this company is around for 20 or 30 years, will they make a lot more money in 2030 years from now than they do today? If the answer is yes, it's very simple. Can I pay a reasonable price for that value today? Everyone talks about the smart money on Wall Street. They're not the smart money. Those guys think in terms of weeks, months, and quarters. Value investors think in terms of multiple, multiple years, and even decades. That Wall Street so-called smart money is obsessed with the short run. They claim they're not. And every single person in the world says they're a long term investor, but yet they get in and out of stocks like crazy. Did earnings beat this quarter? Did the CEO say the right buzzwords in the call? They trade stocks like kids trade Pokemon cards and baseball cards. But with value investors, we don't think in terms of quarters. In fact, on our other channel, we do called Everything Money Plus, we do quarterly results. But you know what we always say? We don't care what happens in the quarter. I need people being irrational so that I can make more money. Because if I think in terms of decades, there will be times when I'm able to buy amazing companies. Guys, the seven magnificent companies today, I assure you, at some point in the next 10 or 15 years, those companies will be written off as dead companies. No company stays the star forever. Business takes a long time to play out. Coca-Cola doesn't live and die by one quarter. Microsoft didn't become a multi-trillion dollar company because of what happened between April and June of 2005. What happened then, by the way? Do you remember? Neither do I. That's the point. But I guarantee you, between April and June of 2005, something bad happened at Microsoft. In fact, the story I always tell is the tech CEO in 2011 and 12 telling me Microsoft was a dead company. And I said, but wait, the revenue goes up 7%, 8% a year. The profit goes up 10%, 11% a year. How is it dead? Paul, you don't get it. It's tech. They're dead. Oh, okay. I guarantee that person right now would deny he ever said that and would now say Microsoft's one of the best businesses of all time. Great businesses don't care about the stock price. They care about the fundamentals. They care about making their business better, growing revenue, growing cashflow, growing profit, making their balance sheet better. In the long run, that's what will pay off. Because in the short run, stocks are a voting machine. In the long run, they're a weighing machine. The so-called smart money says, what's the stock going to do next quarter? A value investor says, what's this company going to be worth 10, 20, 30 years from now if it keeps growing its cashflow? That's what matters. And here's the secret. Because most people are focused on the next three months, they panic when the stock dips. They panic when it's not sprouting exactly like it was supposed to. And that's when disciplined, patient investors scoop up shares on sale. Let time do the lifting. Let time compound. So I want you to ask yourself a very simple question. Do you want to chase quarter to quarter results? Or do you want to own for decades? Now, don't get me wrong. I am assuring you that you're probably saying decades. And if you're saying that, great. It's a great start. But saying it and doing it are very different things. And that's exactly why I created this channel. I used to think it was about, Paul, you got to teach people the numbers. And as time went on, being in a channel like this that's grown so much, you see all the emotions play out. How many stocks I have bought that have now rebounded that people said, you're so dumb for buying. I realized it's not about the numbers. Because the numbers made sense when I was buying those companies where the stock was down, but the fundamentals were getting better. It's hard to do that. But it's much easier with a community like on YouTube. Here's one of my favorite investing truths. And it's the fourth tenet of our principle-driven investing. In the short run, stocks are a voting machine. In the long run, they're a weighing machine. What does that mean? Well, in the short run, stock price is based on popularity. Who's the coolest kid in school this week? Stock goes up. Who's the loser dweeb? Stock goes down. It's all emotions. It's all hype. It's all noise. But none of that says anything about the quality of the business, about the fundamentals of the business, about what's going on underneath the hood. Take Tesla a few years back. Everyone screams it's the future. It's going to change the world. Elon's brilliant. The votes were in. And guys, the stock is up as of late. But if you look at the stock price in the last four or five years, it's pretty much flat. The interesting part is revenue is up 3x. Profit's up 10x. But the stock is flat. Why? Because along the way somewhere, the voting machine stopped, and it was based on fundamentals. You can hype up a bag of feathers all you want. But put it on a scale, and it weighs what it weighs. Businesses are exactly the same. Over years, their stock prices eventually weigh the reality of the profits, the cash flow, and the value. If the company grows and makes money, the stock will follow. If I told you right now that a stock should sell for 20 times earnings, and it makes $1 today, and 10 years from now, I told you it was going to make $10, it's probably going to go from around $20 to around $200. Is that exact? No. We don't know the hype and hysteria where we are in the cycle. But I do know that 10 years from now, it's going to be worth a lot more money than it is today. Look at Enron. For years, the votes said it was brilliant. And for those who don't know what Enron is, Google it. It's a wonderful story. But guess what happened? When the truth came out, it was worth zero because the fraud was flipped upside down. The votes don't matter in the long run. The weight matters. Guys, my favorite example in the world, and I've loved this one for so long, Cisco Systems. Cisco was the Nvidia of 2000. It hit a high of $82 a share back in 2000. It has not hit that mark since. So you might wonder, oh, well, the stock's done crappy. Guys, guess what? Revenue's up 4X, profit's up 5X since this point right here. And here's what's interesting, guys. Get rid of this whole bubble right here. Got a pretty good-looking stock chart. And what's even more interesting, from this point to this point, the stock is up 10X. Guess what? The profit's up about 10X. Is that coincidence? No. In the short run, stocks are a voting machine. In the long run, they're a weighing machine. I want you to never forget this because Cisco is the company, if you go Google it, it's going to be the first trillion-dollar company. This company just eclipsed $500 billion. Still hasn't done it today. I teach on YouTube for this very reason. I want to see people become investors. I want to see people stop saying, oh, this is a great company. Well, no, you're saying it's a great company in terms of make a great product and all these things. I was somewhere where a very wealthy person, hundreds of millions of dollars, was talking about Nvidia and how awesome they were. And I said, do you know what Nvidia does? And he said, honestly, I don't. I said, do you know how much they make in revenue? No, I have no idea. That's gambling. They're following the stock price. You guys have to remember, price is what you pay, value is what you get. Price is just a sticker. Value is actually the worth of what you're buying. They're not the same thing. Warren Buffett does this all the time. Look at Coca-Cola, actually. Back in the late 1980s, he saw Coke as a global machine. Billions of people drink it every day and the company had incredible brand and pricing power. He calculated the value of the business and guess what, guys? He paid 30 times profit back then for the company. And since then, he's made over a 12% return with dividends. And that investment today still pays him hundreds of millions of dollars a year in dividends alone. Why? Because the value of Coke's business has far outweighed the price he paid back then. And that's another thing he did. He didn't sit there, get in and out, in and out, in and out. He sat there and held onto the long haul. Now imagine what Buffett had done, what most people would do. And he stared at the price bouncing up and down and saying, oh no, it went down today, better sell. He would have never seen that long-term payoff, but he understood the golden rule. If the value is greater than the price, that's when you buy. So remember, when you're looking at stocks, don't obsess over the flashing number on your screen. Ask yourself, what's the real value of this business? If you can buy a dollar for a lot less, like 60, 70 cents, you're in Buffett territory. If you're paying $2 for a dollar, you're just a speculator hoping to get lucky. Now I want you guys to remember, somebody out there that's watching this saying, yeah, but Paul, not all companies are the same. You're right. Valuing the company is the hard part, because it's an art. Two companies are exactly the same, but one has a different growth. They have different growth rates, are valued very different. Because remember, every investment is the present value of all the cash flows in the future. So the cash flows in the future from company A are going to be far greater than company B, it should be valued more. That's why I laugh when people say growth investing and value investing are different. No, they're not. In fact, in our stock analyzer tool, the very first line it asks you to input is revenue growth, the growth part of the business. That's what matters. If two companies are exactly the same, one's going to grow 20% a year, one at 5% a year, the 20% of your company deserves a higher value. You should pay more. But remember, this is the kicker. If you don't know how the company is going to make money, you will not be able to tell whether the price drop is just noise or a real problem. And that's why people panic. So your job as an investor is quite simple, but it's not easy. Ignore the flashing numbers and figure out what the business is really worth. Do the research. Put in the stock analyzer tool. It'll tell you what price to pay based on your assumption. And if the price falls far below enough to the value, congratulations, you've probably found a deal. But if the price shoots way above that, you don't need to be a buyer. You can sit in your hands doing nothing. Price is what you pay. Value is what you get. Never confuse those two things. Guys, for me, one of the most important things is I look at the balance sheet. Now, I don't get complicated about it. I look at their cashflow and their debt because companies that can easily afford their debt are going to be around for a long period of time. Then I make my assumptions about the future. I put them in my stock analyzer tool and it spits out a price. That's my first level because if it comes out all green and at a good buy price, I just want to make sure other things are in place. Now, keep in mind, guys, I buy large companies. I'm not looking to buy these small little companies that require me to really understand management. I'm too lazy. I want to buy big companies that are mispriced. Think Meta in 2022. I was a buyer of Meta from $150 all the way down. Actually, I think less than $200 all the way down to $88 a share. I bought it on its lowest day. And the entire time, people were saying, you don't get it, Paul. Meta's done. Zuckerberg needs to be fired. Those are the same people who are probably buying the company today at $760 a share. And guys, guess what? I do it all with this. That's the whole point. I think about my principle driven investing. I keep it simple. I repeat it. And I use the tools that I created for me in order to do this. Now, luckily, there's a lot of value to these tools to other people, but you've got to be very, very patient. Charlie Munger, Buffett's right-hand man, nailed it when he said, the big money is not in the buying or selling, but in the waiting. We have a lot of real estate upstairs. We've had properties for 15, 20 years. We rarely sell. Here's why that matters. Once you've done the work, you've studied the business, you've figured out its value. Now you just wait. Let the management take over. That's the hard part. Because in that time, you're going to see the stock going up and down like this. Everyone loves the thrill of buying. Everybody brags about selling and making a lot of money. But the big money shows up when you sit still, sit on your hands, and let time do the compounding. Your job is waiting. And as you wait, it quietly churns, it increases its cash flow. And when that cash flow goes up, it grows in value. The problem is most people can't sit still. They see that price wiggle and they think they need to do something. The itch to act is what kills returns. Patience feels boring in the moment, but it's what separates the speculators from the real investors. In fact, when I meet a real investor, I tell them, go find a hobby. It'll keep you distracted from worrying about your stocks. Look at the investors who got rich. They weren't flipping in and out every six months. They own great businesses for decades and let the compounding do the heavy lifting. So here's the truth. Buying right sets you up, but waiting unlocks the reward. If you know the value, you don't need to do the chase. You just need the discipline to sit on your hands and let time work for you. Now, this principle-driven investing approach is five tenets. These are what keep me from getting sucked into the noise. Instead of panicking over every price move, as I said before, I stay focused on the only thing that matters, the difference between price and value. And that's why principle-driven investing matters so much. It keeps me from falling into the emotional trap that ruins most investors. When prices swing wildly, emotions tell you to chase when it's high and panic when it's low. Principles remind me that the market is just an auction and the price isn't the same as value. And I've got to think about this long-term. Now, these principles aren't about making you emotionless. Guys, we all have emotion, but they're about giving you the proper framework that your decisions are based on logic, not fear, not greed. And that's how you stay focused on the only thing that matters in the long run, the gap between price and value. We want it this way, value up here, price down here, not this way. Now, guys, these principle-driven investing tenants that I told you about, first one, we're investors, not speculators. Second, every investment is a present value of all future cash flows. Third, if we don't understand it, we don't buy it. That's probably one of the hardest ones because people want to sit there and see a stock go up and go, well, yeah, they do this. But if you don't understand the numbers, if you don't understand the justification, you don't buy it. Number four, in the short run, stock market's a voting machine. In the long run, it's a weighing machine. And the fifth and probably most important one, a great story can become a bad investment if you pay the wrong price. Now, everybody listening to this can probably agree with that, but in action, it's hard because a great story sounds so exciting. We all fall in love with a story. Now, these principles are very important. And guys, I don't expect you to memorize all these principles right here, right now, but that's why I put together a shortcut for you, a simple PDF that lays them all out in plain English. I don't want you to do the hassle of writing, rewinding, no crazy jargon, just these rules. Click the link below. It will be emailed to you. This is your cheat sheet. You don't need to be a financial wizard. You just need the framework. The email will come to you within one or two minutes. It'll explain all five of these tenets to you in full detail. That way you can have it at easy access when you're feeling highly emotional to either buy or sell a company. So grab that PDF, keep it handy, and use it as your anchor. It's simple. It works. And guess what, guys? I use it every single day as my reminder. But here's the thing. Prices are never going to stop fluctuating. To the investor, this is a good thing. That's just the market being the market. But value, that's steady. And if you understand the difference, you're going to stop getting pushed around by the noise. Now, I think there's a time coming in the future when stocks will be a lot cheaper from a value standpoint. And that's exactly why you need to learn this skill right now. You don't sit there and get prepared after the fact. Get prepared ahead of time. Because if it's you versus your neighbor in terms of in the market, and you have the proper skill set, when markets crash, you're going to be like, no, this is a good thing. Your neighbor will be freaking out. So this next video, I think it's really important that you watch it because I'm going to walk you through how we actually think about valuing stocks. That way, when prices do swing and everyone else is losing their minds, like your neighbor, you'll be calm, you're going to be confident, and you'll be ready to act. The link is right here on your screen. Don't miss it. And this is how you get ready for your moment. Thank you for your time.