This is a summary of the 7 lessons that make up Level 1: Stock Market Investing for Beginners of our free course: How to Invest in Stocks: Learn How to Buy Stocks, Make Money, and Avoid Mistakes
We covered a lot in Level 1, including exploring why you should invest in stocks, how much money you can make with stocks, and the potential profits from stocks vs. real estate and other investments.
Let’s walk through a brief summary of the major takeaways from each lesson.
NOTE: You can click on any section title to read the full lesson:
We start with the hard fact-based reasons to invest in stocks, and transition into some less discussed (but still important) personal and professional reason to invest:
- Grow your money
- Historically stocks have gone up
- The power of compounding can make your wealth grow
- Money sitting in cash will lose its value
- You’ll make more in stocks than with other investments
- Stocks are easy to invest in
- Some accounts allow you to invest for tax-free profits
- Save for retirement
- Dividend stocks can provide steady income during retirement
- Stocks can provide diversification
- Own part of a company you love
- Vote on company issues you care about
- Profit from industries you know well
- Have fun
We think the stock market is one of the greatest ways to grow your wealth. And when done right, it can require relatively little effort on your part.
When it comes to investing in stocks, there are two simple ways you can make money:
- Collect dividends
- Sell a stock whose price has gone up from where you bought it
Combining these two strategies (buying a stock with high dividends whose price will appreciate) can create incredibly powerful results.
Learn how much the stock market usually returns, the critical role of dividends, how much mistakes can cost you, and the astounding magic of compounding.
- Stocks generally return 7-10% per year over long periods of time.
- In any given year, they could do far better or far worse than that.
- Over longer stretches of time (10-15+ years), the market almost always makes money.
- Pay attention to dividend stocks, because roughly 40% of the stock market’s gains tend to come from dividends (although it varies over time).
- Individual investors may do far better or (more commonly) far worse than the market, depending how good they are at investing and whether they avoid common mistakes.
- The longer you’re invested in the market, the more your money will grow.
- The higher your annual investing returns, the more your money will grow.
- Small improvements in your investing returns can make a HUGE difference in your wealth over time.
- The more you can avoid paying taxes on your investing gains, the more your money will grow.
- Solid stock investment returns compounded over long periods of time create almost magical amounts of wealth.
If you start early, save steadily, and invest intelligently, you can make a LOT of money in the stock market.
Take our “crash course” orientation on the most important basic concepts you need to get started investing
- A shareholder is someone who holds a share of the company and is therefore considered a partial owner.
- Common stock is the normal stock that we all think about when we discuss Apple (AAPL), Amazon (AMZN), or Coca-Cola (KO).
- A stock exchange is a platform on which shares are traded back and forth. It’s a market that connects buyers and sellers.
- An index is a list of stocks meant to capture a common theme.
- An initial public offering (usually just called an “IPO”) is the first time a company makes its shares available for purchase on the open market.
- When people discuss a “stockbroker,” sometimes they mean a person who provides you with trading advice, helps you manage your money, and invests on your behalf in exchange for a fee. Or, they’re simply referring to the brokerage company that places their trades.
- When investors talk about “market caps,” they’re simply referring to how big or small a company is.
- Sector and industry are simply ways of classifying a stock based on what type of business it operates.
- An investing style is a strategy you pursue to try and make money in the market.
- A dividend is a cash payment from a company to its shareholders. You’re handing over some amount of money to buy a tiny portion of a company, and in return, the company will pay you a tiny portion of their profits (since you’re now an owner).
- When it comes to stocks vs. bonds, ETFs, mutual funds, real estate, robo-advisors, etc., stocks generally offer higher returns over time but are also higher risk.
- A bull market is when stocks are going up and a bear market is when stocks are going down. A bear market is defined as a 20%+ decline in market prices over a two-month period.
- A “stock market crash” is a broad term that basically means a violent selloff and a significant decline in stock market prices over a short period of time. Crashes tend to be driven by panic and often draw the attention (and participation) of common investors.
- Research suggests timing the market is extremely difficult for the average investor to do and will likely cause you more harm than good.
- To “beat the market” means your investing gain this year (in percent) was greater than the gain of a common stock market index such as the S&P 500 or the Dow Jones Industrial Average.
- If you buy stocks, it’s extremely likely that you will lose some money on some positions. That’s a standard part of the game. Even the best investors lose money on some of their investments. Sometimes even 30% – 50% of their stocks end up sold for a loss. That said, if you do it right you will make money overall.
- There’s a famous saying in finance, “It’s not what you make, it’s what you keep.” There are taxes on short-term and long-term capital gains as well as dividends. Harvesting losses allows you to avoid paying taxes on capital gains.
Dig into the pros and cons of stocks vs other investment types; plus answer five major questions to decide which is best for you.
- Stocks have had excellent returns over time, making them one of the best long-term investments to maximize your profit (real estate is close behind).
- In the short term, stocks can have volatile drawdowns, so it’s critical you invest for the long term.
- Bonds offer great stability and steady income, but their long-term returns lag stocks by a ton. Buying bonds leaves a ton of potential wealth on the table over time.
- Actively managed mutual funds are a dying breed as their high fees tend to erode their often mediocre performance.
- Passively managed mutual funds (basically index funds) and ETFs can provide an easy and diversified way to invest in stocks for the passive do-it-for-me investor.
- Fees charged by mutual funds, ETFs, and robo-advisors can eat into your long-term returns in a big way.
- There are no long-term fees for investing in stocks, except for trading costs which are often less than $8 per trade or free at some brokerages.
- Buying dividend stocks can provide steady bond-like returns in the form of dividends with the upside of price gains if the stock goes up.
- Stocks, mutual funds, ETFs, and robo-advisors can all decline painfully during crashes, bear markets, or corrections. But over the long term, they have tended to perform very well. Since 1926, there’s never been a 15-year period where the S&P 500 didn’t earn a profit.
- Investing in stocks doesn’t have to take up a lot of your time. Using the right tools and strategy you can earn fantastic profit trading your own stocks by investing as little as 1-2 hours per month.
Understand “market cap” and the six main stock sizes, plus why small stocks have outperformed large stocks by such a huge amount.
- There are many more small stocks on the market than large stocks.
- Nearly 75% of all the stocks on the market are small-cap stocks, micro-cap stocks, or nano-cap stocks. Investors often refer to all three of these groups together simply as “small cap stocks.”
- Historically, small stocks have performed better than large stocks (but they have also been more volatile and erratic in their returns).
- Part of the reason small stocks outperform large stocks is due to less analyst coverage, more mergers and acquisitions, and greater insider ownership.
- Proven investing strategies focused on finding undervalued, high quality, and strong momentum companies have performed better on small stocks than large stocks.
- Small stocks aren’t automatically better than large stocks and come with their own unique risks.
- Smart investors can profit from any size stock if they have a good investing strategy.
Learn how stocks are grouped into sectors and industries, how each sector delivers profit to shareholders, and which sectors are best given the current economy.
- Sector and industry are ways of grouping companies based on what type of business they operate.
- The 11 sectors are Financials, Utilities, Consumer Discretionary, Consumer Staples, Energy, Healthcare, Industrials, Information Technology, Communications, Materials, and Real Estate.
- Cyclical sectors are closely tied to the strength or weakness of the broader economic backdrop. If the economy is thriving, companies in cyclical sectors tend to thrive as well. And if the economy is struggling, cyclical sectors and companies also tend to struggle.
- Defensive sectors are not as closely tied to what’s happening in the broader economy. Companies within these sectors tend to perform pretty steadily, regardless of what’s happening in the economy.
In the next few lessons you will learn…
- 17 different ways investors make money from stocks (and which is best for you)
- Why dividends matter and how to find the best dividend stocks
- Why stock markets crash and how you can survive (and even profit)
- Common stock market myths that you shouldn’t believe
- How to develop your own personal stock investing plan
- How much money to invest in the market
- How many stocks you should buy in your portfolio
- Why diversification is important (and how to do it)
- Whether it’s actually possible to beat the market (hint: yes, it is)
Get instant access to the next two levels of this course by grabbing a free password to Uncharted INSIDER (100% free):
Level 1: Stock Market Investing for Beginners (7 lessons)
- Lesson 1: 15 Reasons Why You Should Invest in the Stock Market (See why investing in the stock market is all about learning, having fun, and making money over the long term.)
- Lesson 2: How Do You Actually Make Money with Stocks? (Understand dividends and price appreciation, the two main ways you can make money with stocks.)
- Lesson 3: How Much Money Can You Make Investing in Stocks? (Learn how much the stock market usually returns, the critical role of dividends, how much mistakes can cost you, and the astounding magic of compounding.)
- Lesson 4: 17 Basic Stock Market Investing Concepts You Need to Know (Take our “crash course” orientation on the most important basic concepts you need to get started investing.)
- Lesson 5: Stocks vs. Bonds, Mutual Funds, ETFs, Real Estate, and Robo-Advisors (Dig into the pros and cons of stocks vs other investment types; plus answer five major questions to decide which is best for you.)
- Lesson 6: Market Cap: An Overview of Small-Cap, Mid-Cap, and Large-Cap Stocks (Understand “market cap” and the six main stock sizes, plus why small stocks have outperformed large stocks by such a huge amount.)
- Lesson 7: Sectors & Industries: How Stocks Are Grouped by Business Type (Learn how stocks are grouped into sectors and industries, how each sector delivers profit to shareholders, and which sectors are best given the current economy.)
- LEVEL 1 SUMMARY: Stock Market Investing for Beginners (A brief summary of all 7 lessons that make up Level 1, which explains the basics of the stock market for beginners.)
Level 2: How to Make (and Keep) Stock Profits (5 lessons)
- Lesson 8: Investing Styles & Strategies: 17 Ways Investors Make Money in Stocks (A crash course in the common investing styles, including value and growth investing, and technical strategies like momentum and day trading.)
- Lesson 9: Dividend Stocks: How Yield & Income Can Boost Your Investing Profits (Understand how dividends work, why yield finds the best dividend stocks, how much dividends contribute to returns, and why reinvestment matters.)
- Lesson 10: Stock Market Crashes: Why Markets Decline & How to Survive (Find out what causes stock markets to decline, how much they fall and how fast they recover, and what you can do to stay calm and profit from a sell off.)
- Lesson 11: What Are the Risks of Investing in Stocks? (We outline the most common investing risks that impact the entire stock market, certain sectors and industries, individual companies, and single investors.)
- Lesson 12: 18 Stock Market Investing Myths Debunked (Let’s walk through the most common myths about investing in stocks and understand why they’re simply not true.)
- LEVEL 2 SUMMARY: How to Make (and Keep) Stock Profits (A brief summary of all 5 lessons that make up Level 2, which explains how to make and keep stock market profits.)
Level 3: Build Your Personal Stock Investing Plan (6 lessons)
- Lesson 13: Can You Really Beat the Market by Buying Your Own Stocks? (See how two investors have consistently beaten the market over time using very different strategies, and discover four simple strategies that beat the market.)
- Lesson 14: What’s the Best Investment Strategy for You? (Walk through four popular investment strategies and decide which are best for you. Plus see how and where you can apply them for high returns and low risk.)
- Lesson 15: How Much Money Should You Invest in Stocks? (Find out how much money you need to start investing in stocks, how much money you should aim to invest over time, and the critical mistakes to avoid.)
- Lesson 16: How Many Stocks Should You Own? (Discover why most investors own between 10-30 stocks in their portfolio and how to stay diversified based on your investing strategy.)
- Lesson 17: How to Diversify Your Stock Portfolio (Find out why diversity can boost your investing returns and reduce your risk. Review the six rules of stock portfolio diversity and when to break them.)
- Lesson 18: How Taxes Impact Your Stock Investing (Let’s review the seven main types of investment taxes, understand how they impact your portfolio, and discuss some (legal) ways to reduce your investing taxes.)
- LEVEL 3 SUMMARY: Build Your Personal Stock Investing Plan (A brief summary of all 6 lessons that make up Level 3, which explains how to build a personal stock investing plan.)
Level 4: How to Research and Buy the Best Stocks (12 lessons)
- Lesson 19: How to Read a Stock Quote (with Handout Cheat Sheet) (An overview on how to read and understand a stock quote; PLUS a free stock quote “cheat sheet” for your download.)
- Lesson 20: How to Find the Best Stocks to Buy (with Handout Cheat Sheet) (A step-by-step guide to finding the best stocks, with screenshots; PLUS a free “cheat sheet” for your download.)
- Lesson 21 (Growth Investing): A Step-by-Step Guide to Picking the Best Growth Stocks (Discover which growth stocks perform best; includes a step-by-step guide to find the best growth stocks with screenshots & pre-filtered screens.)
- Lesson 22 (Value Investing): A Step-by-Step Guide to Picking the Best Value Stocks (Discover which value stocks perform best; includes a step-by-step guide to find the best value stocks with screenshots & pre-filtered screens.)
- Lesson 23 (Small Cap Investing): A Step-by-Step Guide to Picking the Best Small Cap Stocks (Discover which small cap stocks perform best; includes a step-by-step guide to find the best small cap stocks using pre-filtered screens.)
- Lesson 24 (Large Cap Investing): A Step-by-Step Guide to Picking the Best Large Cap Stocks (Discover which large cap stocks perform best; includes a step-by-step guide to find the best large cap stocks with screenshots & pre-filtered screens.)
- Lesson 25 (Blue Chip Investing): A Step-by-Step Guide to Picking the Best Blue Chip Stocks (Discover which blue chip stocks perform best; includes a step-by-step guide to find the best blue chip stocks using pre-filtered screens.)
- Lesson 26 (Dividend Investing): A Step-by-Step Guide to Picking the Best Dividend Stocks (Discover which dividend stocks perform best; includes a step-by-step guide to find the best dividend stocks with screenshots & pre-filtered screens.)
- Lesson 27: The Magic of Combining Investment Strategies (When it comes to finding the best stocks to buy, many investors focus on value, growth, blue chip, dividend, or small cap stocks. We propose a better way.)
- Lesson 28: Investing Styles Cheat Sheet (Handout) (Six lessons on how to find the best small cap, large cap, growth, value, blue chip, and dividend stocks summarized in a downloadable handout “cheat sheet.”)
- Lesson 29: How to Profit During Economic Recessions (This lesson covers how to spot an upcoming recession and play “defense” or “offense” to either avoid or profit from the large decline in the market.)
- Lesson 30: Intro to Profit Lab: Proven Ways to Profit from Stocks (Profit Lab is our original strategy series where we share proven ways to profit from stocks.)
- LEVEL 4 SUMMARY: How to Research and Buy the Best Stocks (A brief summary of all 12 lessons that make up Level 4, which explains how to research and buy the best stocks.)
Level 5: When to Buy and Sell Your Stocks (4 lessons)
- Lesson 31: Why “Buy and Hold” Is a Dangerous Strategy (Investors are often told to “buy and hold” their stocks. We share several examples of why it’s a dangerous strategy and outline what you should do instead.)
- Lesson 32: When Should You Buy a Stock? (Plus Handout: “Stock Buyer’s Checklist”) (We walk through a 5-step checklist to decide exactly when to buy a new stock. Comes with a course handout for download.)
- Lesson 33: When Should You Sell a Stock? (Plus Handout: “Stock Seller’s Checklist”) (We walk through a 10-step checklist to help you decide exactly when to sell a stock. Comes with a course handout for download and future reference.)
- Lesson 34: How to Buy and Sell Your Stocks (Best Brokers, Order Types, and More) (Review the best stock brokerages, account types, how to use market orders, limit orders, stop loss orders, when to place trades, and more.)
- LEVEL 5 SUMMARY: When to Buy and Sell Your Stocks (A brief summary of all four lessons that make up Level 5, which explains when to buy and sell your stocks.)
Level 6: The Most Powerful Insights for Profitable Investing (9 lessons)
- Lesson 35: What to Expect Once You Start Investing in Stocks (There are many things about stock investing that often surprise new investors, such as analyst estimates, earnings reports, market volatility, and more.)
- Lesson 36: The 23 Biggest Mistakes Investors Make (And How to Avoid Them) (There are 23 common mistakes that new investors make which tend to destroy their investing profits. We explain how to spot and avoid these common mistakes.)
- Lesson 37: The 10 Most Powerful Metrics in Investing (with Handout) (We explain the 10 best metrics for finding profitable stocks to buy. They include four growth metrics, two value metrics, three dividend metrics, and one more.)
- Lesson 38: The Psychology of Successful Investing (+10 Extra Bonus Tips) (Understand the 22 cognitive traps that set investors back and hurt their long term returns. Plus 15 powerful questions to avoid these common mistakes.)
- Lesson 39: Dangerous Stock Market Scams & Rip-Offs (And How to Avoid Them) (We cover many common stock market scams and share the “red flags” to watch for. Included are tools and strategies for avoiding scams and rip-offs.)
- Lesson 40: The 50 Laws of Stock Market Success (We pull together the most powerful lessons, insights, concepts, and strategies from our entire course into a collection of The 50 Laws of Stock Market Success.)
- Lesson 41: The 26 Best Books on Stock Market Investing (These 26 must-read books on stock market investing include titles on how to pick the best stocks, value investing, trading psychology, and more.)
- Lesson 42: The Giant List of Must-Have Tools and Resources for Stock Investors (This giant list of must-have tools for stock investors includes analyst estimate summaries, sentiment readers, calculators, stock screeners, and more.)
- Lesson 43: Our #1 Lesson on How to Invest in Stocks (Closing Thoughts) (Of the many strategies in this course, the #1 lesson stands out above all the rest. Investors who follow this strategy will advance miles ahead of others.)
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