What to Know BEFORE You Start Investing in the Stock Market

If you've been investing in the stock market for a while, you know some implicit things because you've been there and you've done that and you have the experience to know what to look for and why some things happen the way they do and avoid some of the really common minds and pitfalls that new investors in the market succumb to. That's why in this video I'm covering what you need to know before you start investing in stocks. This is not a technical overview or a here's the trading strategy to use. This is just the context that you should be aware of how things work that people don't really talk about if you watch a how to start investing kind of video. I have absolutely nothing to sell you. There is no course at the end of this. My name is John Law and on this channel we talk about money, entrepreneurship, and technology. Now this video is like a pick your own adventure game. You can watch all of it if you want to or you can just watch one part. And there are seven big components that we're going to cover. That's going to be risk, types of investments, types of stocks, stock size, the five most important terms to know, industries, and finally strategy. Now I'm going to keep this video on the shorter side. I did make a three hour long full-on debrief of the stock market that functions as a kind of expanded kind of encompassing version of this video. If you do want to see that that's going to be right up here in the card in the corner. You know I just remembered that you can stack expos. I kind of kind of love this. And if you want to see other videos about investing or personal finance on this channel you can see some of those on the screen right now. And links for those will be in the description. So we're going to start off with the subject of risk before you ever touch the stock market. And before we get into that I want to tell you about the benefactor of today's video. So Immunoprecise Antibodies also known as IPA and I'll write that out really big here is a publicly traded company on the NASDAQ exchange. And if you don't know what those words mean we're going to cover that in just a minute. The company has gone from a $0.27 to nearly $3 share price at the time of this recording. And I want to share their AI story with you and the implications for the wider space. So the problem is fundamentally that drug discovery is broken. Over 90% of drugs that are researched fail and they consume a massive amount of human talent and effort and time and money while doing so. And even with AI today traditional AI models are just not fit for the drug research job because biology is just too complex for simple pattern recognition. All the companies in the industry are looking for a solution and AI can't be the solution but only if it's done right. And that is where IPA comes in. There's this thing called HYFTs that are the missing link. They kind of index biology just like Google indexes the web. And they eliminate the kind of black box problem of AI drug discovery and replace it with something that's traceable and tractable. And IPA put this breakthrough to work in the Lens AI platform. Let's erase this. That's Lens AI. It's a biological intelligence system and platform that connects over 25 billion biological relationships using rag and knowledge graphs. This lets IPA design better drugs, faster predict toxicity, and optimize therapeutics before costly lab work. In this way IPA is bridging AI with wet lab capabilities. And that's a huge competitive advantage in a market projected to be worth hundreds of billions of dollars. And there's a lot of news recently about this company's AI pipeline. And you can see some of that on the screen now. But something really important that I want to double click on there is that IPA is pioneering AI-designed GLP-1 therapies for diabetes and metabolic disorders. And that's all using that Lens AI platform. And this could result in treatments like transdermal patches for diabetes care which would be hugely impactful. All of this means that investors should pay attention. IPA is delivering results with proprietary IP, patents, and real-world partnerships with some of the largest pharma and biotech companies. These industries need better AI-powered drug discovery. And IPA has the tech to make that happen. So in summary, AI isn't just enhancing drug discovery. It's completely transforming it. And IPA is one of the only companies actually executing on AI-powered drug discovery. And finally, big players are watching and investors should keep an eye out as well. That said, this video was sponsored on behalf of IPA. And that said, it's time for the big category, number one of what you need to know before you start investing in the stock market, risk. So I'm going to write this down. And this is a big word because fundamentally, if you are investing in the stock market, you want return, right? You want to make money with your money. But the thing is, there is no free lunch in a very mature market with a lot of different players. Everyone's trying to make money. Everyone's paying attention. No one can just kind of hack the system and make an infinite boatload of money. And what that means is something that I've said in a lot of videos on this channel, if you have watched them. And that is risk correlates with return. Meaning you want return, right? And what that means is you want risk. You are asking for risk the moment that you decide to invest in the stock market. I don't care if you're buying the S&P or if you're trading the equivalent of stock market meme coins, right? No matter what it is, you're going to take on and accept some level of risk. So that is the first thing you need to just keep in mind. You are asking for risk and you need to be prepared for risk. You can do things to mitigate that. And that's the second big point here, which is there's a whole spectrum of risk if we think about the stock market. Risk and return wise is not one entity. There are really risky parts of it and there are relatively safe parts of it. And you can, if you want more return, go to the riskier sides and hope it works out there. You can go to the safer sides. And most people like you probably, if you're watching this video, stick to the safer side. They invest in things like the S&P, which I'll get to in a few minutes, or major indexes or safer companies like J&J that just grow their revenue by 5% every year and they're kind of recession proof. Or other people, they want the return. They want to make 20% a year and they go buy NVIDIA and Apple, right? And that's their choice and that's totally fine either way. That said, most people who try to trade in the market lose a lot of money. And something else I said in a video recently that I think is applicable here is in any asset class where it's speculative, where prices could go up and down, if you don't have an edge, then the more you try and trade, the more you're going to lose over time. If you don't have an edge, that edge could be skill, it could be insider information. So generally, and I had this phase myself, nearly everyone does, to be honest, when they go and start investing. You try and trade everything you think that you can beat the market, right? And I'm here to tell you, you probably cannot beat the market. And if you do, it will be in a much simpler way than you think. It won't be by doing everything. It'll be by a very simple methodology like buy great companies when they're down, and that's how you're going to do it. So in sum, for risk, you are accepting risk. You could lose money. You probably will, depending on the time that you start investing in the market. But by accepting risk, you also accept return. You also are going to make money with your money. And you're much better off doing that if you stick to those safer assets and if you stick to investing for a long period of time and you don't trade. Now, I just wanted to get that out of the way. Now we're going to get into the types of investments in the market and what to know there. And for these investments, I want to describe more so how they work than what they are in a technical sense. So first, there are indexes, forgive my handwriting, and there are ETFs. These are kind of the same thing. It's just one is actively managed. So you pay a little bit for it. The other is not. So indexes, that's going to be basically a collection or a bubble of different stocks. So if we think about, let's say we wanted a tech index, and this is a super simple version of that. But let's say the index trades at a price of $100. Well, maybe when you buy this index, this tech index for $100, you buy $33 of NVIDIA, $33 of AMD, and $33 of Broadcom. And so this is like a chip or a technology index. So you just buy the index. But what's going on under the hood is that you are buying these three different technology stocks. And then if the price of those go up, the price of the index goes up and vice versa. And so when people say, oh, I'm buying the S&P or I'm buying the QQQ, these are indexes. And the S&P, for example, or the Standard & Poor 500, that's going to be 500 companies that kind of represent the US or the American stock market. And so you're buying little pieces of 500 companies when you buy an index like the S&P 500. And what that means is the more stocks you buy, the more diversified you are and the less risk there is, going back to what we said. So when people buy indexes, they want to just kind of average out their returns. So they're not going to make a ton of money. They're not going to lose money, probably. And so people buy indexes when they want kind of stable returns. They don't want to think about the market. They just want to put their money in and then just forget about it. ETFs or exchange traded funds are kind of like the same thing. Again, the difference is there's some person sitting on the other side of the screen who's managing it. So like Vanguard is a really big company that does a lot of ETFs, for example. And so they have people who are professionals who sit there all day just managing and picking the stocks to go into ETF. Whereas for the index, it's automatic for the most part. So essentially, if you want stable returns and you have yet to start investing and you don't want to think about stocks, go for indexes and ETFs. They're great. They're simple. And over the long term, they have never failed in the American stock market to make people money. Also, just a little fun fact here. There are now more ETFs than there are individual stocks in the American stock market. OK, so next there are individual stocks. Now we're going to get into the classifications of stocks in just a minute here. And I think that's more important because there are so many different types of stocks. But essentially, stocks are just buying ownership in a company and a stock can go up or down for any number of reasons. And this is important. It's not always because of fundamental value. It's not always because the company is making more money. Uber is a great example. They lost tens of billions of dollars. The lifetime earnings of Uber is like negative $20 billion. Don't quote me on that, but it's a lot, right? And so stocks can trade based on speculation, right? If people think they're going to do really well in the future, they could go up a lot. If people think they're going to go down in the future, they could go down a lot. So it's not just about the fundamentals of stocks. And again, you can buy all kinds of different stocks. You can buy stocks that are more stable for the most part than indexes. You could buy stocks that are super risky, that are penny stocks. And we're going to get into all of that in a minute. Now, the third big category in the market is kind of derivatives, right? So these are things which are a derivative or which trade on top of some kind of underlying asset. For example, let's say we have, let's go NVIDIA. Or actually, let's go AMD. There's fewer letters, right? We have AMD stock price. And AMD stock price is trading at $10. Well, this is just the stock, right? Now, what if I said, if AMD does not go up by 10% in the next month, then you give me $1. And if it does, then I give you, let's say not $1, let's say $3, right? So this is like a betting, right? Just like you could bet on a sports game. And so in the analogy, the sports game or the stock is the thing under the hood. But if you bet on top of it, then now this is a derivative, right? This is something which is based on the underlying asset. So either the sports game or the players or the stock. And then you're going to make money on basically a side bet. So the whole genre of derivatives are kind of like these side bets in sports games. And so the big one there is options. And I made a video about options very recently. You can see that up here. I don't recommend you touch options, but people can use options in a lot of different ways. They can use them to just bet on stocks going up a lot. They can use them to just bet that they are stable and don't move that much. But generally, people who go into options are doing something risky. And also a lot of people who start investing in the market, this will probably be you, have this phase where they go into options and they realize how much money they could make. And then they start to do it. I did that. I lost a lot of money doing that. And again, I'm sure a lot of you who are watching this are going to go through that regardless of what I say. So the context that I want to give you on options, and you can watch the other video to learn about what they actually are, is this. If you start trading options because you want to make more money or you just want more risk in return for the potential of more return, start small. Start very small. Size up very slowly. And then I would highly recommend selling options first, not buying them. You can watch the video to understand what that means. But start with super low risk stuff and get more comfortable over time because they really are more volatile for the most part than something like stocks or indexes. Now there's a fourth category here. It isn't an official kind of type of investment. But I do want to focus on it because it represents a different way of making money from the market. And that's going to be dividend stocks. And dividends are money that companies pay out to shareholders just for owning the stock, right? It's a way of the company kind of saying thank you, but also just encouraging people to buy the stock because they're making so much money that they can afford to pay out a return to shareholders. So for example, this is done on a per share basis. So if a stock price was $100, maybe they have a 1% dividend. That would mean that for every share that you own for $100, you're getting paid out $1 or 1% of the $100 every year. And there are four quarters in the stock market. There's Q1, Q2, Q3, and then the big Q4 where everyone has what's called guidance for the following year or companies say, okay, hey, this is what I think I'm going to do, how my financials are going to look for the whole next year. And so you're paid out one quarter of a percent every quarter for that $100. So $1 for every $100. And you could own a million shares and you could get paid out a million times a dollar. But remember, this is not stuck in stone. A company one quarter could pay out 4% and the next quarter could pay out half a percent on an annual basis. And you saw that a lot with oil stocks, for example, where people were buying oil stocks back when there was a whole boom in oil prices. And they were making, I remember, like 12% a year plus in dividends. Meaning if you just held the stock, you on paper would make 12% that year. The problem with that is, right, that could only hold for a month. And maybe the next month is 11, month after is 10, month after is 9. And if that keeps going down, you're not making 12% for the year. But still, dividends are a great way of actually making money from your investments, right? Like real income that is paid out quarterly. And so a lot of people talk about investing in dividend stocks. That's what they mean. They want just cash in return for actually owning the stock. And dividends typically mean that a company is doing pretty well because they can afford to just hand out money to their shareholders. First, we have growth versus value stocks. So growth stocks are stocks where you're buying them because they're going to grow in the future. And they're growing really fast. So it's normal for a company to grow somewhere between 5% and 10% a year or so. Like that's a pretty normal, pretty healthy company. And growth stocks, they're doing 20%, 30%, 40% clips per year. They're growing really fast. And that's even up to the scale of a large company, right? Like NVIDIA is kind of the classic example of that. And Palantir maybe with growing revenue and all their top line, bottom line. And that just means top line is revenue, bottom line is going to be actual profit. If they're growing that really fast, like again, 20%, 30%, 40% as a multi-hundred billion or multi-trillion dollar company, that's really impressive. And that makes them growth stocks. Value stocks on the other side are stocks that people buy because they are quote, unquote, undervalued. People think that they're worth more than they are. People think that they have been oversold so that their actual price, the stock price is under what they should be worth. And so people buy them not because they're growing really fast, but just because they think people have sold them too much or that the stock is undervalued. For example, Estee Lauder, right? They're a big cosmetics and beauty company that you see in every airport and everywhere. They are kind of a value stock play because they have a ton of issues with profit and they've gone through this whole plan for the past few years. And only now are they starting to kind of come back into gear. And that would be a value play. A growth play would be your Palantir, your NVIDIA, your AMD. Those are all the stocks that get all the headlines because they're growing really fast and look really, really impressive. Then we have cyclical versus non-cyclical stocks. So you hear people talk about this all the time. Generally, some stocks move in turn with the economy or with seasons and other ones don't. And you can kind of think of this like an evergreen tree versus a tree that dies in winter and looks really beautiful in fall or during summer. Cyclical stocks are the same versus non-cyclical, right? Non-cyclical stocks, they don't have cycles. They're going to do well or do bad or do something all the time. They're not tied to a specific market. A cyclical stock is going to do really well sometimes and really poorly other times. And what that could mean is when the economy is really good, they're going to do really good. So it could be like a macro economic cycle. It could also be seasonal, right? Like a farm company, for example, might do really well one quarter and really poorly the next. Or an e-commerce company, for example, could do really, really well during the holiday season in Q4, right? And really poorly for the rest of the year. Then we have blue chip stocks. Blue chip stocks are big stable behemoths that have done really well for a long time. This is your Coca-Cola, your J&J. They're going to be here tomorrow. They're going to be here in 10 years. They just go and make money and do what they do best. So people buy blue chip stocks to just make consistent money. Same concept as buying an index fund. People just often buy them if they like those companies or really believe in those products. Okay, two more. First up is penny stocks. Penny stocks are just really cheap stocks with a small market cap. And we're going to get to market cap in just a second. Generally, if people buy penny stocks, they want risk or they believe that something great is going to happen to that stock, right? You see a lot of biotech penny stocks where they do really well with a discovery or a drug, and then boom, they go through the roof. And you can make a lot of money with penny stocks. You can also lose a lot of money because they are smaller companies for the most part. And now finally, we have income stocks. These are stocks that you buy for the dividends like I just spoke of. So these are stocks that are paying out 3%, 5%, 8% a year in dividends. And you want to buy them. You can also make money from the share price going up, but really you're there in large part for just getting paid out your 5% or 8% a year. Okay, now we have stock size. And I want you to understand just kind of the rough range of stocks in or the rough range of market caps in the stock market. So first, what is the market cap? It's just going to be the number of shares times the share price, right? So if we have a $10 stock and there are 100 total shares that constitute the company, then the market cap is $1,000 or 100 times 10. Now, the numbers are a lot bigger than that in actuality. So I want to give you again an idea of kind of how the size or the scale of these companies. So Nvidia currently is the largest company in the stock market. And they're worth, I believe right now, about $4.3 trillion. That's trillion with a T. So the largest company out there on any stock market, I believe, maybe Saudi Aramco is technically above them, but anyway, $4.3 trillion. Now, the trillion dollar club is kind of the exclusive club in the stock market. So that's companies with over a $1 trillion market cap. It is pretty exclusive, but there are a good amount of companies that are over that mark. There's things like Meta and Apple and Microsoft are all worth one, two, or more, three, four, even trillion dollars. So that's like the exclusive club. Maybe a dozen companies are over that mark out there. And a lot of other companies are trying to get there or closing in. Things like Eli Lilly are worth a lot of money but are not at the trillion dollar mark yet. Then at the bottom, you have things like your penny stocks. And generally, if you see a stock worth under 100 million bucks, that's considered really, really small as a market cap. That's like super micro market cap. And from there, you can go up to a billion, 10 million, 100 billion. Over 100 billion, for the most part, are pretty stable-ish. Anywhere from 1 billion to 100 billion is usually either a smaller company or in a growth phase. And under a billion is considered pretty, really small in the stock market. Okay, now we have the five most important terms. Now, I already covered one of those important terms, that being dividend, because that is very important. And if you don't understand what this is, you're going to see money just appear in your account sometimes and be really happy it got there, but not know why it got there. And so dividends, again, it is just money that you're paid out for owning a stock. And you can see that whenever you go wherever you buy stocks, right? If you buy it online through a portal, if you buy it in an app, you're going to see the dividend yield somewhere, and that yield is expressed in percent. So 1% dividend means you make 1% of the value of the stock price every year, 4%, right, 5%, same exact deal. Then we have EPS. This is term number two. EPS means earnings per share. And that just means how much money is the company making per share that's out there? For example, I used the 100 shares, $10 example a few minutes ago. In reality, companies have tens or hundreds of millions of shares out there. So if you're making, let's say, $0.29 per share, that's your earnings per share, then you're making a profit of $0.29 for every share that you have. And that could be, again, 100 million shares. So we're talking, we could be talking tens or hundreds of billions of dollars in bottom line profit. And again, top line is things like revenue, it's money coming in. And then you funnel down to your bottom line. Your bottom line is your profit. So EPS is a bottom line metric. It's just a way of understanding how much money kind of a company is actually making relative to the amount of shares out there. And you'll hear about guidance all the time the moment that you start investing. And guidance is what either the company or what professionals like analysts think certain numbers are going to be. And EPS is one of the numbers that these analysts and the companies provide guidance on and have expectations on. So if this was a quarterly report, and again, companies report every quarter with the big one, like the annual one being at the end of the year, the expectation could be $0.31. So all the analysts in the company said, hey, we're going to make $0.31 EPS, earnings per share. And then it was actually $0.29. Well, that is a earnings miss. They missed that quarterly earning EPS number. And so maybe the stock will go down because of that. Okay, another big earnings number, a quarterly earnings number, and one that's very useful to just understand a stock is P to E or the PE ratio. What that means is price to earnings. So what that compares is the market cap of the company relative to the amount of money the company makes. For example, if the market price or excuse me, the market cap was $100 and this company makes $10 per year, let's just go with a million for sake of being realistic. The company is worth $100 million. That's the market cap. It makes in profit $10 million a year. What that's going to be is a 10 P to E, right? If you add up 10 years of earnings, 10 times 10 or 10 times 10 million, you get the $100 million. So this would be a 10X. And so this is a really important number to not just know what it means, but to contextually understand it. So most stocks trade anywhere around, let's say a 10X up to a 30X. I'd say this is a pretty normal range. So a 10 to 30 P to E ratio. That means for the annual profit that they make, if you multiply that number by 10 to 30, that's a pretty normal valuation for companies. And some have astronomical, like 400 times P to E ratios, like Palantir if you've heard of them. And the reason you get much higher P to E ratios is people are pricing in growth. They think you're going to make more money in the future so that this P to E will go down over time. And so generally more stable stocks have lower P to E's. And it's not necessarily a bad thing at all. That could mean that they're undervalued going back to value stocks. While the more expensive, quote unquote, a stock is, the more you pay in the stock price per actual dollar or unit of earnings that it makes or on its bottom line, then the more kind of speculative it is and that people are pricing in future growth and future profit to help with that astronomical valuation. Now, again, 30X is pretty reasonable, right? But if we're talking like 400, that's a very ugly zero, like 400X P to E, that means if you were making a dollar per year, the stock price would be 400, excuse me, the market cap would be $400, right? That's pretty, pretty out there. So that's the P to E ratio. Next up is IPO. This means initial public offering. What that just means is when a company launches on a stock exchange or market, their launch event or them coming on to the market is an initial public offering because it's the first time that they've been offering their shares to the public. So just keep an eye out. You'll see things like, okay, IPO is launching next week or this company just IPO. That just means they launched on the stock market. Essentially, they were a private company. Then they became a public company where the public can buy their shares. Now, typically, there's a lot of volatility around IPOs. So people may buy a company that recently IPO'd, and it probably went up a lot or went down a lot. Like you might have heard of Figma or Bullish recently. They both went up several hundred percent, I think, on their IPO day. So that can happen. You can also go down a lot. It's typically a much more volatile period since they just launched. So people are still figuring out what the market thinks it's actually worth. Then finally, we have exchange. This is something I kind of touched on earlier, but I want to clarify this. So there are different exchanges in the quote-unquote stock market. The stock market consists of different exchanges, and different companies can IPO or can be listed on certain exchanges. So you'll hear about things like the NASDAQ exchange, and you'll see that for certain stocks. The NASDAQ is a company that lists stocks, and it just does the under-the-hood machinery, the technical work of making them available to trade. So the NASDAQ is a big one. There's ones in Texas. There's ones all over. But the actual stock market has different exchanges underneath it. So an exchange is kind of like a part of the stock market. But really, no one cares about which company was listed on which exchange, unless it's some small one that no one has heard of. But really, the stock market, in a technical sense, is made up of exchanges on which companies list themselves to make themselves available for sale. Okay, next up is industries. And again, I want to focus more on kind of the context here. Industries really do matter, because there are industry norms for companies, and people buy or sell or expect certain behavior compared to the peers of companies. Based on their industry. And then that, a lot of times, kind of determines what happens with the actual stock price. And also, different investors buy into certain industries for certain reasons. For example, tech is a very high-growth, kind of risk-oriented sector or industry, where people who invest in tech companies, they want return, and they're looking for growth. And if you are making, you know, 8%, 10% revenue growth in tech, that's like, it's perfectly mediocre. You're not losing money, or excuse me, you're not losing growth, but you're not doing that well, right? Meanwhile, if you went over to something like the banking sector, and you were growing your core business by 10% a year, if you're one of the big banks out there, not like a SoFi, right, that would be pretty stellar. So tech, if you buy a tech company, you're probably looking for growth stocks and for risk. Biotechs are another kind of tech-equivalent sector in terms of how people think about them or trade them. Biotechs are often reliant upon a one or two, or kind of this drug pipeline, where if they go through, they go, like, one drug goes through the FDA approval process, they go up a lot, and vice versa, that doesn't happen. So people who invest in biotechs typically are looking for that higher risk, higher reward type of investment scheme. Then you have something like consumer staples, right? So this is like your retail, your Target, your Walmart, typically much more stable, trades at lower multiples. And the same kind of applies for the most part in the food and beverage space. So you just know that if you invest into a certain industry that comes with certain norms for companies in that industry that could affect what happens to the company. Okay, I want to wrap this video up with some notion of strategies. We've talked about a lot of different things, and hopefully you understand kind of some of the context for the stocks that you're buying, or which stocks you choose to buy, or your portfolio choices. But how do we tie all of that together with your stock market investing strategy, assuming that you right now have not purchased stocks before? Well, the point I want to nail in is that your strategy right now that you decide upon should be two things. First, it should be a strategy. You should have an actual plan. You can update that plan over time, but you should have a system in mind. The more erratic you are, the more emotional your decision-making is, the worse you're going to do. That is point number one. Point number two on strategy is your strategy should be based on you. You are the cornerstone of your strategy. There is no stock market strategy out there that is head and shoulders above the rest for every single person, right? It depends on your financial goals. If you have $100 million in the bank and you have a team of advisors, you're going to have a very different strategy, as in you're just never going to think about it, versus someone with $1,000 in the bank who's 19, who wants to really grow that portfolio aggressively over time and learn how to invest. And so there's a few things that you should keep in mind when thinking about your strategy. The first is just that risk versus reward. So what kind of risk do you want to see, and what kind of reward do you want to see? And that determines what you're going to invest in. If you want to make, like, let's say you're about to retire, you have $400,000 in the bank, you just don't want to lose your money, right? In that case, stick it in the S&P, stick it in an index fund or in blue chip stocks or in dividend stocks, and don't think about it, right? And again, that comes down to you. And then if someone else, again, going back to the 22-year-old hustler with $3,000, you probably really want to double down on risk. Because if you double down on risk over the next 40 years of your career before you retire, you're going to also on average make a lot more money than the person who's going for very low risk and low return. So part of the question to ask yourself is, well, how much risk do you want to take on? And again, like I've said, that correlates with the amount of return that you can expect. A second component is your effort in that there's one extreme, right? There's traders who spend all their time looking at stock charts and kind of trade in the moment based on that. The other extreme is set it and forget it, right? Buy the S&P, take an automatic portion of it out of your paycheck, and then just log in once every three years, right? To see where it's at. You are somewhere on that spectrum. Maybe you want to invest in some individual stocks that you really like. You want to do some research. Maybe you really love listening to earnings calls and you love picking stocks and you just like that. You do it for fun, so might as well do it to make money. And so you pay attention to 10, 15, 20 stocks, and those are the ones that you invest in both positions and over time. That's a pretty solid middle ground anywhere in their works. Just keep in mind, you have to abstract from you and your effort preferences in addition to your risk preferences, your stock market strategy. And another component is the duration of your investments, right? So I'll write out duration here. By that, I mean going back to the retirement example. Let's say you want to retire and you want to buy a sailboat to sail around the world. Or maybe you are 32 years old. You've saved up $200,000 and you want to buy your first house in a year. In those cases, your time scale for the amount of time that you're going to be in the market might be sub five years. Well, you have to think about this very differently versus if you are 22 years old and you have 45 years of investing, of being in the stock market ahead of you. That's why things like for a Roth IRAs are so valuable where you can invest and then you don't have to pay taxes on your capital gains if you take that money out when you retire. Those things are awesome. But again, you're going to think about this very differently because if you are going to invest only in for the next two years, right? There's a lot more risk there if your investments go down for the next two years because you made bad picks. Well, shoot, now you just lost a bunch of money. And so generally, I would say if the lower the duration is, the less time you have in the market, the less risk you should take because you don't have as much time for just time in the market to beat out the returns of the things you invest in. It's not a hard rule, but especially if you don't want to think about your investments, what you really don't want to do is only plan to be in the market for two years, put all your money in three stocks that you liked, and then you're just down 20% because you're unlucky, you caught a crash at the wrong time, and then you just lost a lot of that money. And so lastly here, I want to cover some of the kind of standard strategies out there that you can then combine with those preferences, these things we just talked about to come up with your strategy while you or before you start investing. So first, a lot of people only buy the major indexes. They just go to things like the S&P 500 or the QQQ or SPY or any one of these other indexes, which are made up of hundreds or thousands of individual stocks. And then they take 20% of their paycheck every time it comes in. They put it in that index and they log in once a year and they see what their account is at. And that's their retirement investment, right? That is a totally valid strategy. Great. Another very common strategy is just buy what you like. And the thesis there is if I buy companies where I love their product and services, then I think they're going to do well for the long term because the product and service is sound. I like it. Probably other people like it. And so you buy the stock. And there's some famous stock book. I have an image in my head of the investor. I want to say Peter Lynch. Don't quote me on that, but you can Google. See if the book is by Peter Lynch. But what he did, for example, he would walk into a Nike store and he liked the shoes and he saw, wow, there are so many people in here. It's busy all the time. And that was his decision to buy the stock because he just went around his life as a normal person. He saw a product or service that he liked, that a lot of other people liked because it was busy all the time. And then, well, he went and he made a boatload of money in Nike stock. Another strategy is value focused. So this is just buying great companies or at least companies that have been around for a long time and then buying them when they're down. Estee Lauder would be a great example of this. Nike actually nowadays would also be a great example of this. And the concept here is when the new cycles are really bad and everyone's like, oh, they're never going to come back. Wait, right. When sentiment is at the lowest, buy these solid companies that have been around for 100 years or 50 years and just ride them on the way back up. Like you just have faith that eventually you're making this value play. These companies, which are solid companies, are going to come back up. Then there's also industry or technology thesis driven investment portfolios. For example, maybe you are set upon the idea that nuclear or an AI, right? Nuclear and AI are the two industries of the future. And so you just work back from that and you buy all the best nuclear and AI companies. And that's all you do are chip companies as well. Or maybe you think natural gas is going to replace oil over the next 10 years instead of renewables. And you think it's going to be a big deal. So you just go and you buy up all the shares that you can get of every natural gas company out there. So in those cases, you have a specific thesis about something that's going to happen. And then you go and buy stocks that support or would do well if your thesis would hold true. And then, of course, there's also traders who look on a technical basis. They trade based on earnings. They do short-term stuff to try and make a lot of money. Some of those people do really, really well. A very small minority and a lot of them lose money. But if you are one of the small minority, then that's a perfectly valid strategy. So what I want you to do, think about those strategies that a lot of other people use. Think about the things we talked about that should determine, in large part, your strategy. Bring all that together and make a great baby of an investment strategy that was born for you. And then with all the context we talked about in this video, go and just do it. Go and log into Robinhood or E-Trade or Charles Schwab or Fidelity and just buy something. I don't care if you put $10 in that account or you put a million dollars in. Log in there, fund it from your bank account, and buy your first share of your first stock. If you want some more context on this stuff, you can watch that video in the corner. That's the three-hour deep dive into all of this. There are also so many great resources on the internet. There's tons of YouTubers, tons of books. Just go buy that stuff. And I would say, honestly, something easy to do that is low-risk compared to the way a lot of people who start investing decide to pick stocks is just buy something you like. Going back to the Nike example, if you are a Shake Shack guy and you see your Shake Shack is busy every Friday, go and buy a share of Shake Shack as your first stock. And then every time you walk into Shake Shack, you are a part owner of that business. And for every burger that they serve you, you are making money off of a little bit of that if, because of that burger, the stock price goes up. It's a really cool feeling. And hey, it starts with that one share. And over time, it can become a really big, really impactful thing. As it has for most people in the United States right now. And that's not to mention tens or hundreds of millions of people all around the world. As I said, this video was what to know before you start investing in the stock market. Thank you all for being here, for spending some time with me. And as I said, like usual, I'll see you in the next one. Cheers.