This presentation is for education purposes only. This is not financial advice, please consider the risks before investing

1. Basics of Stock Market
Investing for any Beginner
July, 2021
Ali Kafel

2. This presentation is for education
purposes only. This is not
financial advice, please consider
the risks before investing

3. Agenda
● What is a stock?
● How do you make money investing in stocks?
● Stocks versus Bonds?
● What happens if I don’t have the time or interest to learn
○ Can I still invest in the stock market
● Mutual Funds and ETFs
○ Another way to invest without knowing much or caring to know much
● Setting up my Fidelity Account correctly
○ ReInvesting capital gains and dividends for compounding growth
○ Automatic month investment in a favorite Mutual Fund
● What to look for in picking an individual stock?
● How can I learn more?

4. What is a stock
● Ownership in a company (1 share is a very very
small percentage)
● You make money through dividends (while you own
it) and through the growth in value (when you sell)
● You buy/sell shares through a broker like Fidelity
○ You used to have to pay a fee, no more!
● You can buy/sell within the same day or for several
days, weeks or years

5. How do you make money in Stocks
● Through its capital gain (buy low, sell high)
● Through its dividends (for those stocks that pay dividends)

6. Stocks versus Bonds
● Stocks
● Bonds
Over the long term, stocks do better.
Since 1926, large stocks have returned an average of 10 % per year; long-term government bonds have
returned between 5% and 6%, according to investment researcher Morningstar.
Invest money
●Interest/Yield
●Value change*
Loan money
●Dividends **
●Value change
* a bond eventually matures, a bond fund (mutual fund or ETF) never does
**Not all stocks pay dividends

7. How to buy stocks
Through a broker like Fidelity, Ameritrade, Etrade, etc

8. How do you pick a stock
Understand the business they are in and how they are doing
● Good Fundamentals
○ How well is the company doing/financials:
■ earnings/profits & earnings growth, Return on equity cash flow & revenue
○ Overall health:
■ Valuation, Cash, Debt - current ratio (current asset/liabilities >1) and
○ Competitive advantages:
■ management team, industry, macro economics trends
○
● Technical analysis/company momentum
○ Is the company liked by investors, are more people buying the stock than selling
○ Too complex and a timing play - more used by traders

9. How do you learn about a company and its stock?
● Through public information from sources such as Fidelity and Yahoo Finance,
○ Key Stock information, read news articles, press releases,
● financial shows like CNBC Fast Money and Mad Money (Jim Cramer)
● If you want to get deep:
○ 10K, 10Q, conference calls and (a bit tedious and boring, especially for a beginner)
●
Otherwise if you don’t have the time, interest or knowledge, stick with mutual
funds or ETFs

10. But wait, What happens if you: 1> don’t have the
knowledge, 2> don’t have time or 3> care to learn
about stocks, can you still invest easily in stocks?
● This answer is: YES
● Welcome to Mutuals funds and Exchange Traded Funds (ETFs)
○ Portfolio of individual stocks, bonds or other investments
○ Mutual Funds - stock funds, bond funds, mixed of stocks and bonds - put buy/sell order
anytime but happens after the market closes
○ ETFs - stock funds, bond funds, mixed of stocks and bonds - put buy or sell order at anytime
and happens immediately when the market is open 9:30-4pm, trades like a stock

13. So if you are starting out, start with Mutual funds or
ETFs
● And most of your investments should be in mutual funds or ETFs to keep your
investments diversified
● Use some “play money” or “riskier investment portion” to buy individual stocks
(but only if you have the time to stay on top of it)

14. How much money to invest in the stock market
● Any amount you feel you won’t be needing for the next 3yrs or so
○ Could be as low at $100 or $10,000
● Start early, small and be consistent and disciplined
○ Invest additional money monthly even if it’s a small amount
● But start now!!!! Time is your best advantage
● General rules of thumb
○ Invest as early as possible and as much as you can
■ If you start investing at 25, you must invest just $380 monthly over 40 years at 7% to become a
millionaire by 65. A total investment of $182,400 leaves you with seven figures. But, if you wait a
decade until 35, you need to invest $820 monthly
○ Don't invest money you'll need right away
○ Take calculated risks - depends on the person
○ Diversity, Diversity, Diversity
○ Don’t investment in something you don’t have a basic understanding in

15. Reinvest Dividends in Security
Set up you account to Reinvest automatically (example with Fidelity)
Account & Trade → Account Features → Brokerage and Trading → Dividends and Capital Gains
….. For All equity positions currently held in this account and Future equity purchases, transfers, and
deposits to this account

16. Add a bank account for Electronic Funds
Transfer(EFT)

17. Provide your bank information

18. Bank information continued

19. But before you setup “Automatic Transfer and
Investment” consider which Mutual fund(s) you want
to pick

20. As of July 2021

21. Cont’d (July 2021)

22. Fidelity Total Market Index fund is one option

23. 500 Index fund

24. Fidelity® Select Retailing Portfolio, FSRPX

25. Another option, Fidelity Select Technology Fund, FSPTX

26. Or choose the Fidelity Select Software, FSCSX

27. Or Growth Fund

28. Then Set up automatic transfer and investment and
specify the amount

29. ETFs that look interesting
Vanguard Mega Cap Growth Index Fund ETF Shares (MGK)
MSCSX
Schwab U.S. Dividend Equity ETF (SCHD) - good dividends
Fidelity MSCI Consumer Discretionary Index ETF (FDIS)
IVW - another good one, growth
FLRN - Bond fund like cash
LQD - Grade A bond fund for older people
iShares Core Dividend Growth ETF (DGRO)

30. We have learned about how to buy stocks
using mutual funds and ETFs, you can stop
there or learn about individual stocks

31. Picking individual stocks

32. Things to look for

33. How “expensive” is a stock, its growth, “risk” and
analysts views

34. These are not facts but views/opinions of fidelity

35. Key Statistics for more in depth

36. Growth - probably the most important factor that drives the price
of a stock, especially for new companies

37. Profitability - another driver for stock growth, for established companies, “high
growth” and “impactful” companies not expected to be profitable

38. Valuation - compares how “expensive” a stock is to its
peers,

39. Companies’ Health
GOOG

40. Debt and how well a company is run
- Although high debt with high cash is not necessarily bad, especally for
companies in good health - for example Apple
GOOG
GOOG

41. Tax consequences
● ROTH IRA
○ Under 50: 6000/yr
○ Over 50: 7000/yr
○ Contributions are taxed but all gains are Tax free when over 59.5 yrs!!!!
● Regular IRA / 401K
○ Higher limit on contributions on 401K - taxes are deferred
● Capital gain - The profit on an asset sold when owned for 1yr or more
○ Either 0% (married filing jointly upto $80,000 incomes) or 15% (less than $501,600)
○ If owned less than 1yr - it’s taxed as ordinary income
● Qualified Dividends tax
○ Qualified dividends (held more than 60 days) taxed like capital gain
○ Ordinary dividends are taxed higher

42. Other equities to consider
Fidelity Large Cap Growth Index Fund (FSPGX)
iShares Core High Dividend ETF (HDV) - 3.59% Div (YTD: 12, 1-YR: 22, 3-YR: 8, 5-YR 7)
Vanguard Real Estate Index Fund ETF Shares (VNQ)
Global X NASDAQ 100 Covered Call ETF (QYLD) - 11.08% Div (YTD: 4, 1-YR: 17, 3-YR: 9, 5-YR 11)
Vanguard High Dividend Yield Index Fund ETF Shares (VYM) - 2.79% (YTD: 15, 1-YR: 32, 3-YR: 10,
5-YR 11)
Schwab U.S. Dividend Equity ETF (SCHD) - 2.89% (YTD: 19, 1-YR: 46, 3-YR: 18, 5-YR 16)
SPDR Portfolio S&P 500 High Dividend ETF (SPYD) - 4.75 ((YTD: 22, 1-YR: 45, 3-YR: 7, 5-YR 9)

43. Total Index Fund

44. Total Index Fund

45. Value Fund

46. Commons mistakes
● Putting all your eggs in one basket
● Trying to time the market
● Thinking short term
● Paying too much in fees and commissions or wrong aviser
● Not having clear investment goals
● Trading too much and too often - in and out
● Buying high and selling low
● Letting emotions get in the way
● Not reviewing investments regularly
● Not doing due diligence
● Reacting to the media
● Not controlling what you can- ie. not investing enough or starting too late
● Chasing yield
● Not knowing the true performance of your investments

47. How to avoid the mistakes
General rules of thumb for best habits
a. Invest as early as possible and as much as you can
i. If you start investing at 25, you must invest just $380 monthly over 40 years at 7% to become a millionaire by 65. A total investment of $182,400 leaves you
with seven figures. But, if you wait a decade until 35, you need to invest $820 monthly
b. Invest regularly (every 2 weeks, etc)
c. Maximize your investments based on what you invest in
d. Take advantage of employer match for 401K
e. Don't invest money you'll need right away
f. Buy good Mutual funds and ETFs for most or all of your investment
g. Know your risk level and Take calculated risks but don’t flip flop- depends on the person
h. Diversity, Diversity, Diversity
i. Don’t investment in something you don’t have a basic understanding in
j. Don’t borrow to invest especially on margin

48. How can I learn more?
https://www.slideshare.net/akafel/ for a presentation
Fidelity.com or finance.yahoo.com
AAII.com American Associations of Individual Investors
Investment magazines such as Kiplinger’s Personal Finance and Money
Books
● The Intelligent Investor - Benjamin Graham
● Common Stocks and uncommon profits - Philip A. Fisher
YouTube investment videos
- TD Ameritrade and others (links follow in the next few slides)
CNBC - all day long and at 5pm FastMoney and 6pm MadMoney

49. YouTube Videos
Investing 101: Stocks, Bonds, 401K, Cash, Portfolios, Asset Allocation,
Etc.
https://www.youtube.com/watch?v=l4TzfPfLMB4
What's the Difference Between Bonds and Stocks?
https://www.youtube.com/watch?v=uI2vhCitTBw
Explained | The Stock Market | FULL EPISODE | Netflix
https://www.youtube.com/watch?v=ZCFkWDdmXG8
How does the stock market work?
https://www.youtube.com/watch?v=p7HKvqRI_Bo

50. YouTube Videos (Cont’d)
Individual Bonds vs. Bond Funds: What’s the Difference?
https://www.youtube.com/watch?v=_tV9lQ8PF68
Investing Basics: Mutual Funds
https://www.youtube.com/watch?v=ngfKXvfzC74
Investing Basics: Fundamental Analysis
https://www.youtube.com/watch?v=00aPTfg3L9I

51. YouTube Videos (Cont’d)
Common Investing Mistakes and How to Potentially Avoid Them
https://www.youtube.com/watch?v=jOGePq7MXes&list=RDCMUCToe3dspZyw2L_JY-JmP3
Mw&index=2
How to Choose an Equity Mutual Fund
https://www.youtube.com/watch?v=IpQ5Z3tsUMc&list=RDCMUCToe3dspZyw2L_JY-JmP3M
w&index=5
Ways to Hedge a Portfolio Against Inflation
https://www.youtube.com/watch?v=E90rSIx6sDY&list=RDCMUCToe3dspZyw2L_JY-JmP3M
w&index=7