The Neatest Little Guide to Stock Market Investing by Jason Kelly

Speak the
 Language of Stocks
 Anybody can make money in the stock market. By picking up the phone or
 turning on the computer, you can own a piece of a company—and all of its
 fortune or folly—without ever attending a board meeting, developing a
 product, or devising a marketing strategy. When I was eleven years old, my
 grandfather explained to me in less than ten seconds why he invested in
 stocks. We sat by his pool in Arcadia, California, and he read the stock
 tables. I asked why he looked at all that fine print on such a beautiful day.
 He said, “Because it takes only $10,000 and two tenbaggers to become a
 millionaire.” That didn’t mean much to me at the time, but it does now. A
 tenbagger is a stock that grows tenfold. Invest $10,000 in your first
 tenbagger and you have $100,000. Invest that $100,000 in your second
 tenbagger and you have $1 million. That, in less than ten seconds, is why
 everybody should invest in stocks.
 This chapter further explains why investing in stocks is a good idea,
 then covers some basic information you’ll use in the rest of the book when
 you begin investing.

Why Stocks Are Good Investments
 You should know why stocks are good investments before you start
 investing in them. There are two reasons to own stocks. First, because they
 allow you to own successful companies and, second, because they’ve been
 the best investments over time.
 Stocks Allow You to Own Successful Companies
 Stocks are good investments because they allow you to own successful
 companies. Just like you can have equity in your home, you can have equity
 in a company by owning its stock. That’s why stocks are sometimes called
 equities.
 Think of all the rich people you’ve read about. How did they get rich?
 Was it by lending money to relatives who never repay? No. Was it by
 winning the lottery? Not very often. Was it by inheriting money? In some
 cases, but it’s irrelevant because nobody has control over this factor. In
 most cases, rich people got rich by owning something.
 That something might have been real estate. You learned the first time
 you watched Gone with the Wind that land has value and that owning some
 is a good idea. In most cases, though, people get rich by owning a business.
 Schoolchildren learn about John D. Rockefeller, Andrew Carnegie, and J.P.
 Morgan. They all owned businesses. Henry Ford sold cars, Ray Kroc sold
 hamburgers from McDonald’s, Thomas Watson sold business machines
 from IBM, Steve Jobs sold iPhones from Apple, Scott Cook and Tom
 Proulx sold financial software from Intuit, Howard Schultz sold coffee from
 Il Giornale. What’s that, you never heard of Il Giornale? Oh, but you have,
 just not by that name. Schultz rebranded it Starbucks after buying the
 company from its original owners in 1987. All these people owned their
 companies. I sold magazine subscriptions door-to-door in school to raise
 money for the student council. I didn’t get rich because I didn’t own the
 subscription company. See the difference?
 I could have taken some of that money I earned pawning off another
 copy of Reader’s Digest on Mrs. Klein and bought shares of the
 subscription company. Suddenly, I would have been a business owner

The Neatest Little Guide to Stock Market Investing by Jason Kelly