# Felix Prehn's 25 Years of Investing Advice in 6 hours (Beginners Guide)

https://www.youtube.com/watch?v=ECD31IpNUTw
Translation: de

[00:01] Winston and I are super excited to have slaved away for about three and a half months to record this endless hours of editing it and three years studying economics working on a bank and everything else and actually giving you a free course that delivers real value.
  Winston und ich sind super aufgeregt, dass wir etwa dreieinhalb Monate lang geschuftet haben, um diese endlosen Stunden der Bearbeitung aufzunehmen, und drei Jahre lang Wirtschaft studiert, bei einer Bank gearbeitet und alles andere getan haben, um Ihnen tatsächlich einen kostenlosen Kurs zu bieten, der echten Wert liefert.

[00:23] And basically in the next six hours you will get the financial education that you should have had at school and it's a freaking Scandal the government doesn't give it to you follow the money Trail if you want to figure out why.
  Und im Grunde werden Sie in den nächsten sechs Stunden die finanzielle Bildung erhalten, die Sie in der Schule hätten bekommen sollen, und es ist ein verdammter Skandal, dass die Regierung sie Ihnen nicht gibt – folgen Sie der Geldspur, wenn Sie herausfinden wollen, warum.

[00:37] But by watching this video and maybe you'll watch it in parts and maybe you'll rewatch some parts of it I think you're going to get tremendous knowledge tremendous skill and making money from your money is a skill it's a skill you can learn it's no more difficult than learning to drive a car or I don't know repairing an engine or something which is something I I haven't absolutely no idea about but I know I could learn it.
  Aber wenn Sie sich dieses Video ansehen – und vielleicht sehen Sie es in Teilen und vielleicht sehen Sie sich einige Teile noch einmal an –, denke ich, werden Sie enormes Wissen und enorme Fähigkeiten erlangen, und Geld aus Ihrem Geld zu machen ist eine Fähigkeit, es ist eine Fähigkeit, die Sie lernen können, es ist nicht schwieriger als Autofahren zu lernen oder, ich weiß nicht, einen Motor zu reparieren oder so etwas, wovon ich absolut keine Ahnung habe, aber ich weiß, dass ich es lernen könnte.

[01:03] You can learn to become an amazing money manager, but first you need to understand the foundation.
  Sie können lernen, ein erstaunlicher Geldmanager zu werden, aber zuerst müssen Sie die Grundlagen verstehen.

[01:07] How does it work?
  Wie funktioniert es?

[01:09] What are the asset classes?
  Was sind die Anlageklassen?

[01:12] How are companies valued?
  Wie werden Unternehmen bewertet?

[01:16] All that stuff is in this in the following six hours.
  All das Zeug ist in den folgenden sechs Stunden enthalten.

[01:19] So I couldn't think of a better way to celebrate 150,000 subscribers, which is insane, than giving you the most value that I could possibly think of in this video.
  Also fiel mir kein besserer Weg ein, 150.000 Abonnenten zu feiern, was verrückt ist, als Ihnen den größtmöglichen Mehrwert zu bieten, den ich mir in diesem Video vorstellen konnte.

[01:30] I hope you enjoy it.
  Ich hoffe, es gefällt Ihnen.

[01:34] I hope you get a tan out of it.
  Ich hoffe, Sie bekommen etwas Sonne davon ab.

[01:37] There is also a handbook that you can download.
  Es gibt auch ein Handbuch, das Sie herunterladen können.

[01:39] There's a first link in the description down below, and it'll give you additional resources and links to all the things that I use and so on.
  Es gibt einen ersten Link in der Beschreibung unten, und er wird Ihnen zusätzliche Ressourcen und Links zu all den Dingen geben, die ich verwende und so weiter.

[01:48] And if you enjoy this video, if you get some value out of it, share it with people.
  Und wenn Ihnen dieses Video gefällt, wenn Sie einen Mehrwert daraus ziehen, teilen Sie es mit anderen.

[01:52] That's really what this is all about, right?
  Darum geht es doch eigentlich, oder?

[01:53] We want to make a million people financially free here, me and Winston and all of you, I hope.
  Wir wollen hier eine Million Menschen finanziell frei machen, ich und Winston und ihr alle, hoffe ich.

[01:58] And to do that, we need to reach more people.
  Und um das zu erreichen, müssen wir mehr Menschen erreichen.

[02:00] More people need to get the financial education they deserve.
  Mehr Menschen müssen die finanzielle Bildung erhalten, die sie verdienen.

[02:05] Spread the word, enjoy the video, get studying.
  Verbreite die Nachricht, genieße das Video, mach dich ans Lernen.

[02:09] What actually is a stock market?
  Was ist eigentlich ein Aktienmarkt?

[02:12] I think it's a question many of us haven't actually asked ourselves for some time.
  Ich denke, es ist eine Frage, die viele von uns seit einiger Zeit nicht wirklich gestellt haben.

[02:17] Well, what is it really?
  Nun, was ist es wirklich?

[02:17] Well, it's a market, much like a real physical market that sells, say, groceries or, you know, vegetables or something, where basically you can buy or sell and issue shares of publicly traded companies.
  Nun, es ist ein Markt, ähnlich wie ein echter physischer Markt, der zum Beispiel Lebensmittel oder, wissen Sie, Gemüse oder so etwas verkauft, wo man im Grunde Aktien von börsennotierten Unternehmen kaufen, verkaufen und ausgeben kann.

[02:31] And also, it isn't just actually stocks that are traded; it's also ETFs, other funds, bonds, and various other financial instruments.
  Und außerdem werden nicht nur Aktien gehandelt, sondern auch ETFs, andere Fonds, Anleihen und verschiedene andere Finanzinstrumente.

[02:40] Um, the leading stock markets in the world are probably the New York Stock Exchange and the NASDAQ, and perhaps the Chicago Board of Options Exchange.
  Ähm, die führenden Aktienmärkte der Welt sind wahrscheinlich die New York Stock Exchange und die NASDAQ, und vielleicht die Chicago Board Options Exchange.

[02:49] There are, of course, many others around the world, but fundamentally, I think the US model is what has been copied around the world.
  Es gibt natürlich viele andere auf der Welt, aber im Grunde denke ich, dass das US-Modell weltweit kopiert wurde.

[02:54] And that sort of Anglo-Saxon US model of market regulation is in most exchanges around the world.
  Und diese Art von angelsächsischem US-Modell der Marktregulierung ist an den meisten Börsen der Welt zu finden.

[03:04] So how does it really work?
  Wie funktioniert es also wirklich?

[03:04] What is it really?
  Was ist es wirklich?

[03:05] All about well it's basically um gives you or us rather a a secure and managed environment in which we can trade financial instruments.
  Alles in allem, es ist im Grunde ähm gibt Ihnen oder uns eher eine sichere und verwaltete Umgebung, in der wir Finanzinstrumente handeln können.

[03:18] So say it's a you know stock market you have thousands hundreds of thousands of people who want to buy a stock and want to sell a stock at certain prices and and their system figures out exactly the most efficient way of doing it.
  Also sagen wir, es ist ein, wissen Sie, Aktienmarkt, Sie haben Tausende, Hunderttausende von Menschen, die eine Aktie kaufen und eine Aktie zu bestimmten Preisen verkaufen wollen, und ihr System findet genau den effizientesten Weg, dies zu tun.

[03:33] Um what else do they do well H they give us the opportunity to do that very trading at very low prices typically speaking they charge pretty low nominal fees.
  Ähm, was machen sie noch? Nun, sie geben uns die Gelegenheit, genau diesen Handel zu sehr niedrigen Preisen durchzuführen, normalerweise verlangen sie ziemlich niedrige nominelle Gebühren.

[03:44] They provide us with data real life data sometimes slightly delayed by 15 minutes or so but near life data Al certainly they charge you for access to real life data and historic data of companies.
  Sie versorgen uns mit Daten, Echtzeitdaten, manchmal leicht verzögert um etwa 15 Minuten, aber nahezu Echtzeitdaten, sicherlich verlangen sie eine Gebühr für den Zugang zu Echtzeitdaten und historischen Daten von Unternehmen.

[03:57] Um they are two markets really with an each stock market has the primary market and the secondary Market the primary Market is basically for IPOs initial public.
  Ähm, es gibt wirklich zwei Märkte, jeder Aktienmarkt hat den Primärmarkt und den Sekundärmarkt, der Primärmarkt ist im Grunde für Börsengänge (IPOs).

[04:06] Offerings so when a company first goes public, i.e., they want to list their stocks on the exchange, they need a stock exchange to essentially tell them how to do it, an efficient method of pricing those stocks and providing a regulatory framework whereby they have to provide — the company has to provide — certain information, certain updates when they do certain deals or trades inside of sell stocks, buy stocks.
  Angebote: Wenn ein Unternehmen zum ersten Mal an die Börse geht, d. h. es seine Aktien an der Börse notieren möchte, benötigt es eine Börse, die ihm im Wesentlichen sagt, wie es das machen soll, eine effiziente Methode zur Preisgestaltung dieser Aktien und einen regulatorischen Rahmen, in dem es bestimmte Informationen, bestimmte Aktualisierungen bereitstellen muss, wenn es bestimmte Geschäfte oder Transaktionen innerhalb von Aktienverkäufen oder -käufen tätigt.

[04:34] They have, you know, they lose some money, something unexpected happens, they have to file their quarterly earnings, all these kind of things.
  Sie haben, wissen Sie, sie verlieren etwas Geld, etwas Unerwartetes passiert, sie müssen ihre Quartalsergebnisse einreichen, all diese Dinge.

[04:39] It's all regulated essentially by the stock market or their regulator.
  Es wird im Wesentlichen vom Aktienmarkt oder ihrer Regulierungsbehörde reguliert.

[04:44] In the US that will be the SEC, and that's a very, very good service they provide.
  In den USA ist das die SEC, und das ist ein sehr, sehr guter Dienst, den sie leisten.

[04:48] I think we have to really admit that, um, most trading of course nowadays is done electronically.
  Ich denke, wir müssen wirklich zugeben, dass der meiste Handel heutzutage natürlich elektronisch abgewickelt wird.

[04:55] There's very, very little left that is done in paper, and that makes things more efficient, uh, and allows us to basically get the best price when we buy or sell this secondary.
  Es gibt nur noch sehr, sehr wenig, das auf Papier erledigt wird, und das macht die Dinge effizienter, äh, und ermöglicht es uns im Grunde, den besten Preis zu erzielen, wenn wir diese Sekundärmarktgeschäfte kaufen oder verkaufen.

[05:07] Market is essentially whereby companies that already listed you can then buy the shares from the guys who bought it at the initial public offering and then from there on on after we are all in the secondary Market.
  Der Markt ist im Wesentlichen der Ort, an dem Unternehmen, die bereits notiert sind, es ermöglichen, dass man die Aktien von denjenigen kaufen kann, die sie beim Börsengang erworben haben, und danach sind wir alle im Sekundärmarkt.

[05:22] The secondary Market also gives companies that are already listed the opportunity to issue additional shares.
  Der Sekundärmarkt gibt auch bereits notierten Unternehmen die Möglichkeit, zusätzliche Aktien auszugeben.

[05:25] Uh they can issue also debt you know bonds.
  Äh, sie können auch Schuldtitel ausgeben, wissen Sie, Anleihen.

[05:30] They can even buy back shares or they can even delist the whole company.
  Sie können sogar Aktien zurückkaufen oder das gesamte Unternehmen von der Börse nehmen.

[05:34] So there's a whole range of kind of services if you will that the stock exchange actually provides that we sort of just take for granted but it works rather marvelously and that's quite important.
  Es gibt also eine ganze Reihe von Dienstleistungen, wenn man so will, die die Börse tatsächlich bereitstellt, die wir irgendwie als selbstverständlich hinnehmen, aber sie funktioniert ziemlich wunderbar, und das ist ziemlich wichtig.

[05:43] Often stock exchanges then also create indcs like the S&P 500 or the NASDAQ 100 index and again those give us an easy snap short of an industry of a market or of a of a country's even economy.
  Oft schaffen Börsen dann auch Indizes wie den S&P 500 oder den NASDAQ 100 Index, und auch diese geben uns einen einfachen Überblick über eine Branche, einen Markt oder sogar die Wirtschaft eines Landes.

[05:56] And then and people can create ETFs so we can buy the whole industry basically very very easily.
  Und dann können Leute ETFs erstellen, sodass wir im Grunde die gesamte Branche sehr, sehr einfach kaufen können.

[06:03] So there's quite a lot of uh
  Es gibt also ziemlich viel, äh

[06:07] Fastic Services they really provide for us and generally speaking they make the market fairer than if they weren't around if there wasn't a regulator you know it would be a it would be like a bazaar where you pay what the vendor thinks you're willing to pay and that isn't really happening here.
  Fastic Services bieten sie uns wirklich und im Allgemeinen machen sie den Markt fairer, als wenn sie nicht da wären, wenn es keinen Regulierer gäbe, wissen Sie, es wäre ein Basar, wo Sie zahlen, was der Verkäufer denkt, dass Sie bereit sind zu zahlen, und das passiert hier nicht wirklich.

[06:26] Um now the whole um liquidity is also a big big issue.
  Ähm, jetzt ist die ganze Liquidität auch ein großes, großes Problem.

[06:29] Um stock market stock exchanges ensure that there is sufficient liquidity in a stock if not they will actually suspend trading or delist them eventually and um basically protect investors as far as they can by sort of setting uniform standards for companies and investors big and small.
  Ähm, Aktienmärkte, Börsen stellen sicher, dass ausreichend Liquidität in einer Aktie vorhanden ist, andernfalls werden sie den Handel tatsächlich aussetzen oder sie schließlich delisten und ähm schützen Anleger grundsätzlich so gut sie können, indem sie quasi einheitliche Standards für Unternehmen und Anleger, große und kleine, festlegen.

[06:51] Who is in the market?
  Wer ist am Markt?

[06:53] Well there are investors uh then there are speculators I would say who who you might call short short term Traders there are of course stock brokers in there um who are typically licensed professionals um in the US they certainly are and they are buying and
  Nun, es gibt Investoren, äh, dann gibt es Spekulanten, würde ich sagen, die man kurzfristige Händler nennen könnte, es gibt natürlich auch Börsenmakler, ähm, die in der Regel lizenzierte Fachleute sind, ähm, in den USA sind sie das sicherlich, und sie kaufen und

[07:08] Selling securities on behalf of their investors who are doing something else, playing golf or something like that, and prefer to let a stock broker do it for them.
  Sie verkaufen Wertpapiere im Namen ihrer Anleger, die etwas anderes tun, Golf spielen oder so ähnlich, und es vorziehen, einen Aktienmakler für sich machen zu lassen.

[07:20] There are portfolio managers again who invest on behalf of their clients, um, and they might make decisions or they might make recommendations rather.
  Es gibt wiederum Portfoliomanager, die im Namen ihrer Kunden investieren, ähm, und sie könnten Entscheidungen treffen oder eher Empfehlungen aussprechen.

[07:30] And then you have investment banks, of course; they typically handle the IPOs, the initial public offerings, um, and mergers and other sort of major items, um, such as issuing convertible bonds, for example, and all those kind of things, um.
  Und dann gibt es natürlich Investmentbanken; sie kümmern sich typischerweise um die Börsengänge, die Initial Public Offerings, ähm, und Fusionen und andere größere Angelegenheiten, ähm, wie zum Beispiel die Ausgabe von Wandelanleihen und all diese Dinge, ähm.

[07:45] And then you have custodians also who basically hold securities for safekeeping, so they are just kind of there to hold things, um.
  Und dann gibt es auch Verwahrstellen, die im Grunde Wertpapiere zur sicheren Aufbewahrung halten, also sind sie einfach da, um Dinge zu verwahren, ähm.

[07:54] How does the stock exchange actually, um, how does it work as a business?
  Wie funktioniert die Börse eigentlich, ähm, wie funktioniert sie als Geschäft?

[07:59] Well, they charge a small fee for each trade, um, that's in addition to stamp duties that most governments collect, or they also make money from data.
  Nun, sie erheben eine kleine Gebühr für jeden Handel, ähm, zusätzlich zu den Stempelsteuern, die die meisten Regierungen erheben, oder sie verdienen auch Geld mit Daten.

[08:10] Get access to live data for the NASDAQ.
  Erhalten Sie Zugang zu Live-Daten für die NASDAQ.

[08:12] For example, you have to pay something like I don't know $2 or something a month or as an individual, obviously more if you're a large corporate.
  Zum Beispiel müssen Sie so etwas wie, ich weiß nicht, 2 Dollar oder so im Monat bezahlen, oder als Einzelperson, natürlich mehr, wenn Sie ein großes Unternehmen sind.

[08:21] Uh, if you want to get access to back data, again they charge you for that.
  Äh, wenn Sie Zugang zu historischen Daten erhalten möchten, verlangen sie wiederum eine Gebühr dafür.

[08:26] And various other bits of filing and subscriptions services that they have, because they get a lot of information obviously every second of the day.
  Und verschiedene andere Teile von Einreichungs- und Abonnementdiensten, die sie haben, weil sie offensichtlich jede Sekunde des Tages viele Informationen erhalten.

[08:36] They also give access to certain traders who are allowed to do high frequency trading.
  Sie geben auch bestimmten Händlern Zugang, die Hochfrequenzhandel betreiben dürfen.

[08:41] Again, that's a sort of an additional paid for service.
  Auch das ist eine Art zusätzlicher kostenpflichtiger Dienst.

[08:44] Is any of this ever going to change?
  Wird sich daran jemals etwas ändern?

[08:46] Possibly with blockchain.
  Möglicherweise mit Blockchain.

[08:49] Uh, there is, I think, an opportunity to do stock trading more cheaply, more efficiently, at lower transaction costs than we have right now.
  Äh, es gibt, denke ich, eine Möglichkeit, Aktienhandel billiger, effizienter und mit niedrigeren Transaktionskosten durchzuführen als derzeit.

[08:56] So we might see competing exchanges being set up, or perhaps the existing exchanges acquiring some of that blockchain data or paying a license fee to somebody who has it.
  Daher könnten wir sehen, dass konkurrierende Börsen eingerichtet werden, oder dass die bestehenden Börsen einige dieser Blockchain-Daten erwerben oder eine Lizenzgebühr an jemanden zahlen, der sie besitzt.

[09:09] So, um, that's kind of a quick roundup here on stock.
  Also, ähm, das ist so eine kurze Zusammenfassung hier über Aktien.

[09:11] Markets overall part of our kind of introduction series to really understand the terminology of all these um very very important parts of the financial world that we live in.
  Märkte insgesamt Teil unserer Art von Einführungsserie, um die Terminologie all dieser ähm sehr sehr wichtigen Teile der Finanzwelt, in der wir leben, wirklich zu verstehen.

[09:22] We're going to discuss the kind of Market orders, the kind of orders you can place when buying and selling stocks.
  Wir werden die Art von Marktaufträgen besprechen, die Art von Aufträgen, die Sie beim Kauf und Verkauf von Aktien platzieren können.

[09:29] You might have noticed on your brokerages, whether it's on your phone or on your computer or wherever, there are lots of options and a lot of people find them quite confusing and I totally understand why.
  Sie haben vielleicht bei Ihren Brokern bemerkt, ob auf Ihrem Telefon oder auf Ihrem Computer oder wo auch immer, es gibt viele Optionen und viele Leute finden sie ziemlich verwirrend, und ich verstehe vollkommen, warum.

[09:37] So we're going to go through that guys.
  Also werden wir das durchgehen, Leute.

[09:39] As always, remember this is not Financial advice, this is just for well educational purposes I suppose in this instance, but also for entertainment.
  Wie immer, denkt daran, das ist keine Finanzberatung, das ist nur für, nun ja, Bildungszwecke, nehme ich an in diesem Fall, aber auch zur Unterhaltung.

[09:47] As always, I try to make it as entertaining as I can, but I I might write a few notes here and you can see my horrible handwriting.
  Wie immer versuche ich, es so unterhaltsam wie möglich zu gestalten, aber ich ich könnte hier ein paar Notizen schreiben und ihr könnt meine schreckliche Handschrift sehen.

[09:54] So what are the kind of order types we have?
  Also, welche Arten von Auftragstypen haben wir?

[09:57] Well, the first one is basically the Market order, right.
  Nun, der erste ist im Grunde der Marktauftrag, richtig.

[10:01] So the you will see that I was a a lawyer at one point and that ruins your handwriting, so I blame that on it.
  Also, ihr werdet sehen, dass ich war ein Anwalt zu einem Zeitpunkt und das ruiniert eure Handschrift, also gebe ich dem die Schuld.

[10:11] So what's the market order?
  Also, was ist der Marktauftrag?

[10:12] Basically saying I'm going to buy this at market price and it guarantees you that you are going to get this order executed but it doesn't guarantee you any kind of particular price.
  Im Grunde sage ich, dass ich dies zum Marktpreis kaufen werde, und es garantiert Ihnen, dass dieser Auftrag ausgeführt wird, aber es garantiert Ihnen keinen bestimmten Preis.

[10:27] I'm not a huge fan of them.
  Ich bin kein großer Fan davon.

[10:29] Well, I suppose sometimes it doesn't really matter with certain stocks if you just think well it doesn't really matter if I buy this a few cents or dollars higher or lower.
  Nun, ich nehme an, manchmal spielt es bei bestimmten Aktien keine große Rolle, wenn man denkt, es macht keinen Unterschied, ob ich diese ein paar Cent oder Dollar höher oder niedriger kaufe.

[10:36] I just want to get my hands on it.
  Ich möchte es einfach in die Finger bekommen.

[10:39] It is a popular choice in the sense that it does it like that without any delay and that can be advantageous, but you just simply don't know the exact price you're buying it at.
  Es ist eine beliebte Wahl, da es so ohne Verzögerung funktioniert, was vorteilhaft sein kann, aber man kennt einfach nicht den genauen Preis, zu dem man kauft.

[10:50] So I prefer personally to set limits, and that's really the next type.
  Daher ziehe ich es persönlich vor, Limits zu setzen, und das ist wirklich der nächste Typ.

[10:54] So that is write over top of each other, uh, limit orders.
  Also das ist, äh, übereinander geschrieben, Limit-Orders.

[10:58] So what's the difference here?
  Also, was ist hier der Unterschied?

[11:00] It's quite simple really.
  Es ist eigentlich ganz einfach.

[11:02] You are basically saying, um, I'm going to buy this order but I'm only going to buy this at, say, $10 if the stock price before your order gets executed goes.
  Sie sagen im Grunde, ähm, ich werde diesen Auftrag kaufen, aber ich werde ihn nur zu, sagen wir, 10 $ kaufen, wenn der Aktienkurs, bevor Ihr Auftrag ausgeführt wird, geht.

[11:14] To 15 it won't simply won't get filled so
  Auf 15 wird es einfach nicht gefüllt, also

[11:17] Your order will just sort of sit there pending whatever and it might expire at some point depending on what brokerage you use.
  Ihre Order wird einfach so herumliegen, in der Schwebe, und sie könnte irgendwann verfallen, je nachdem, welchen Broker Sie verwenden.

[11:27] Um, so the other thing to understand with that is it it doesn't mean that you're to buy it necessarily at $10.
  Ähm, die andere Sache, die man dabei verstehen muss, ist, dass es nicht unbedingt bedeutet, dass Sie es für 10 $ kaufen.

[11:34] You might buy it at $9.95 if it's your lucky day.
  Sie könnten es für 9,95 $ kaufen, wenn Sie Glück haben.

[11:37] So it's it's a maximum it's it's a a a Max limit typically.
  Es ist also ein Maximum, es ist ein, ein, ein Max-Limit, typischerweise.

[11:41] So there are a couple of variations of this.
  Es gibt also ein paar Variationen davon.

[11:42] There are buy limits and that's basically you purchasing it below a specified price.
  Es gibt Kauf-Limits, und das bedeutet im Grunde, dass Sie es unter einem bestimmten Preis kaufen.

[11:50] So there are some options here.
  Es gibt also einige Optionen hier.

[11:52] Basically there is this is the one you see um most frequently by limit um probably the standard option on most brokerages.
  Im Grunde ist dies die, die Sie am häufigsten sehen, ähm, per Limit, ähm, wahrscheinlich die Standardoption bei den meisten Brokern.

[12:02] Now there are also sell limits of course which say you're going to sell this only above a certain price.
  Es gibt natürlich auch Verkaufs-Limits, die besagen, dass Sie dies nur über einem bestimmten Preis verkaufen werden.

[12:08] Um, and that can be a nice way to exit um and it can also be a nice way so you have also a cell excuse my handwriting.
  Ähm, und das kann eine schöne Möglichkeit sein, auszusteigen, ähm, und es kann auch eine schöne Möglichkeit sein, also haben Sie auch eine Zelle, entschuldigen Sie meine Handschrift.

[12:18] Here guys, um, it is also a little tricky to get this just right.
  Hier, Leute, ähm, es ist auch ein wenig knifflig, das richtig hinzubekommen.

[12:23] So you can have a sell limit too.
  Also kannst du auch einen Sell-Limit haben.

[12:26] Um, or you can have a buy stop or a sell stop, and I might have lost some of you now, apologies for that.
  Ähm, oder du kannst einen Buy-Stop oder einen Sell-Stop haben, und ich habe vielleicht einige von euch jetzt verloren, Entschuldigung dafür.

[12:36] So a buy stop is basically an order to buy a stock or a security at a price above the current market bit.
  Also ein Buy-Stop ist im Grunde ein Auftrag, eine Aktie oder ein Wertpapier zu einem Preis über dem aktuellen Marktkurs zu kaufen.

[12:42] Um, so it basically only buys you in above a certain level.
  Ähm, also kauft es dich im Grunde nur oberhalb eines bestimmten Niveaus ein.

[12:49] Um, you might wonder why you want to do that.
  Ähm, du fragst dich vielleicht, warum du das tun möchtest.

[12:52] Are we going to get into the details of that a bit later, but it can make sense in certain situations.
  Werden wir später auf die Details davon eingehen, aber es kann in bestimmten Situationen Sinn ergeben.

[12:57] For example, if you sold short, uh, then the fourth option here is a sell stop.
  Zum Beispiel, wenn du leer verkauft hast, äh, dann ist die vierte Option hier ein Sell-Stop.

[13:05] A sell stop is an order to sell a security at a price below the current asking price.
  Ein Sell-Stop ist ein Auftrag, ein Wertpapier zu einem Preis unter dem aktuellen Briefkurs zu verkaufen.

[13:12] So, um, basically it only becomes active after a specified price level has been reached below that; that's when it sells.
  Also, ähm, im Grunde wird es erst aktiv, nachdem ein bestimmtes Preisniveau darunter erreicht wurde; dann verkauft es.

[13:19] Again, that makes sense in some situations, but really the main ones you are likely to encounter are buy limits and sell limits, and they kind of matter the most.
  Wiederum ergibt das in manchen Situationen Sinn, aber die wichtigsten, denen Sie wahrscheinlich begegnen werden, sind Kauf-Limits und Verkaufs-Limits, und sie sind irgendwie am wichtigsten.

[13:30] Now, what is one thing to bear in mind with this?
  Nun, was sollte man dabei beachten?

[13:33] As always with trading, the big thing is cost.
  Wie immer beim Trading ist die große Sache die Kosten.

[13:37] Always check out the cost.
  Überprüfen Sie immer die Kosten.

[13:39] Some brokerages, especially the more traditional older ones, have higher fees for limit orders than for market orders.
  Manche Broker, besonders die traditionelleren älteren, haben höhere Gebühren für Limit-Orders als für Markt-Orders.

[13:47] So if you say, "I only want to pay $10 for this, not 10.02 or 10.03 or 10.05," some brokerages just charge you higher fees for that.
  Wenn Sie also sagen: „Ich möchte nur 10 $ dafür bezahlen, nicht 10,02 oder 10,03 oder 10,05“, verlangen manche Broker einfach höhere Gebühren dafür.

[13:54] So check with your brokerages.
  Also fragen Sie bei Ihren Brokern nach.

[13:57] One of the most important things in trading or investing, I think, is keeping an eye on fees, and a lot of people don't.
  Eines der wichtigsten Dinge beim Trading oder Investieren ist meiner Meinung nach, die Gebühren im Auge zu behalten, und viele Leute tun das nicht.

[14:04] And half a percent here, 1% there, 2% here and there, it really adds up, and it massively erodes your long-term performance of your, uh, um, of your investments.
  Und ein halbes Prozent hier, 1% dort, 2% hier und da, das summiert sich wirklich und untergräbt massiv Ihre langfristige Performance Ihrer, äh, ähm, Ihrer Investitionen.

[14:12] And I'm going to cover quite a bit of that, uh, really here, because that in some of the next lessons, that is a super, super important thing to look out for.
  Und ich werde darauf ziemlich eingehen, äh, wirklich hier, denn das ist in einigen der nächsten Lektionen eine super, super wichtige Sache, auf die man achten sollte.

[14:19] Now, you might also have.
  Nun, Sie könnten auch haben.

[14:21] Heard of some other ones right there.
  Habe von einigen anderen gehört, genau dort.

[14:23] There are quite a few other ones as well.
  Es gibt auch einige andere.

[14:24] And we're going to just run through a couple here.
  Und wir werden hier nur ein paar durchgehen.

[14:26] So I'm just going to get rid of these and start again at the fresh.
  Also werde ich diese einfach loswerden und frisch von vorne beginnen.

[14:30] So these are kind of the little bit more exotic ones.
  Das sind also sozusagen die etwas exotischeren.

[14:31] So you have a stop loss.
  Also haben Sie einen Stop-Loss.

[14:35] Uh you have stop apologies for my writing.
  Äh, Sie haben Stop – entschuldigen Sie meine Schrift.

[14:41] You have stop limit.
  Sie haben Stop-Limit.

[14:44] Um what else do we have?
  Ähm, was haben wir noch?

[14:47] We got we also have uh a few more yeah.
  Wir haben auch noch ein paar mehr, ja.

[14:49] We have some other ones we should probably also cover.
  Wir haben einige andere, die wir wahrscheinlich auch behandeln sollten.

[14:51] There is all or none.
  Es gibt Alles-oder-Nichts.

[14:56] Um sometimes also abbreviated to A N.
  Ähm, manchmal auch abgekürzt als A N.

[14:59] That can be an important one.
  Das kann ein wichtiger sein.

[15:01] You also have something called IOC.
  Sie haben auch etwas namens IOC.

[15:05] It's not the International Olympic Committee.
  Es ist nicht das Internationale Olympische Komitee.

[15:07] Uh you also have uh F orders.
  Äh, Sie haben auch äh F-Orders.

[15:12] And that is not an abbreviation for a swear word.
  Und das ist keine Abkürzung für ein Schimpfwort.

[15:15] Um there are a few others I suppose which we could also run through.
  Ähm, es gibt noch ein paar andere, nehme ich an, die wir auch durchgehen könnten.

[15:20] Um perhaps just one or two others I can think of.
  Ähm, vielleicht nur ein oder zwei andere, die mir einfallen.

[15:22] Here there is GTC uh there is day and also take profit.
  Hier gibt es GTC, äh, es gibt Tag und auch Take Profit.

[15:31] So let's run through these.
  Also gehen wir diese durch.

[15:34] Um you probably can't see the last one there but I wrote take profit.
  Ähm, du kannst wahrscheinlich die letzte dort nicht sehen, aber ich habe Take Profit geschrieben.

[15:41] So stop loss orders are fairly simple.
  Also Stop-Loss-Orders sind ziemlich einfach.

[15:44] Um they are basically um telling you to if your price uh drops below a certain level.
  Ähm, sie sagen dir im Grunde, äh, wenn dein Preis unter ein bestimmtes Niveau fällt.

[15:50] So say you bought a stock at 10 but you can't sleep at night if your stocks drop more than 10%.
  Also sagen wir, du hast eine Aktie bei 10 gekauft, aber du kannst nachts nicht schlafen, wenn deine Aktien um mehr als 10% fallen.

[15:55] You just can't handle it, you can't afford it.
  Du kommst einfach nicht damit klar, du kannst es dir nicht leisten.

[15:58] That's the maximum risk you're willing to take.
  Das ist das maximale Risiko, das du bereit bist einzugehen.

[15:59] Which can be a very sensible decision depending on your investment Horizon.
  Was eine sehr vernünftige Entscheidung sein kann, abhängig von deinem Anlagehorizont.

[16:03] You are basically saying I'm going to do nothing with this but when it hits $9 so 10% less it automatically sells it.
  Du sagst im Grunde, ich werde nichts damit tun, aber wenn es 9 $ erreicht, also 10% weniger, verkauft es sich automatisch.

[16:15] And that can be a really sensible way of of just you know kind of setting downside limits especially if you're trading in volatile stocks.
  Und das kann eine wirklich vernünftige Art sein, einfach, weißt du, eine Art Abwärtsgrenzen zu setzen, besonders wenn du mit volatilen Aktien handelst.

[16:22] Some growth stocks we look at things sometimes they go down.
  Einige Wachstumsaktien, die wir uns ansehen, fallen manchmal.

[16:23] 30% in a day or something you might not want to go down 30% in a day.
  30% an einem Tag oder so, möchten Sie vielleicht nicht um 30% an einem Tag fallen.

[16:27] You might only want to do 5% or 10% or whatever it is.
  Sie möchten vielleicht nur 5% oder 10% oder was auch immer machen.

[16:30] For that I would always look back at the volatility though of the charts.
  Dafür würde ich jedoch immer auf die Volatilität der Charts zurückblicken.

[16:34] And we are going to get into charts a bit later, how you can see and read volatility quite easily.
  Und wir werden später etwas auf Charts eingehen, wie Sie Volatilität recht einfach sehen und lesen können.

[16:40] Because if you have a stock that goes up and down 10% each day, if you set a 5% stop loss order, a fairly good chance 50/50 that you are out on day two.
  Denn wenn Sie eine Aktie haben, die jeden Tag um 10% steigt und fällt, und Sie eine Stop-Loss-Order von 5% setzen, besteht eine ziemlich gute 50/50-Chance, dass Sie am zweiten Tag raus sind.

[16:50] In which case you've just spent money on two trades and you haven't really achieved very much.
  In diesem Fall haben Sie gerade Geld für zwei Trades ausgegeben und nicht wirklich viel erreicht.

[16:53] But it's a really sensible thing to do.
  Aber es ist eine wirklich vernünftige Sache.

[16:54] Um, what are stop limit orders then?
  Ähm, was sind dann Stop-Limit-Orders?

[16:57] The second one here, they're quite similar to stop loss orders but um there is a limit on the price at which they'll execute.
  Die zweite hier, sie sind Stop-Loss-Orders recht ähnlich, aber ähm, es gibt eine Begrenzung des Preises, zu dem sie ausgeführt werden.

[17:04] So there are two prices specified in a stop limit order.
  Es werden also zwei Preise in einer Stop-Limit-Order angegeben.

[17:06] Basically there is the stop price which converts the order to a sell order and the limit price.
  Im Grunde gibt es den Stop-Preis, der die Order in eine Verkaufsorder umwandelt, und den Limit-Preis.

[17:14] Instead of the order becoming a market order to sell, the sell order becomes a limit order that will only execute at the limit price or better.
  Statt dass die Order zu einer Marktorder zum Verkauf wird, wird die Verkaufsorder zu einer Limit-Order, die nur zum Limit-Preis oder besser ausgeführt wird.

[17:24] Better so again this can mitigate the problem with stop-loss orders which can be triggered during a flash crash when prices plummet but subsequently recover.
  Besser so, wieder kann dies das Problem mit Stop-Loss-Orders mildern, die während eines Flash-Crashs ausgelöst werden können, wenn die Preise einbrechen, sich aber anschließend erholen.

[17:32] So it's kind of a little bit more of a sophisticated way of looking at it again.
  Es ist also eine etwas ausgefeiltere Art, es wieder zu betrachten.

[17:36] We can look in some of those things a little bit more in detail down the road.
  Wir können einige dieser Dinge später etwas detaillierter betrachten.

[17:40] Um, I also wrote down all or none, AON.
  Ähm, ich habe auch 'Alles oder Nichts', AON, notiert.

[17:44] Now you might never have encountered this and you might never encounter this in your life, in which case go and get yourself a cup of coffee.
  Nun, du bist vielleicht noch nie darauf gestoßen und wirst es vielleicht nie in deinem Leben antreffen, in diesem Fall hol dir eine Tasse Kaffee.

[17:50] But if you trade penny stocks and this has become a popular thing again of late, sort of the revival of the 80s, so be looking at pink sheets.
  Aber wenn du mit Pennystocks handelst und dies in letzter Zeit wieder populär geworden ist, eine Art Wiederbelebung der 80er Jahre, dann schau dir die Pink Sheets an.

[18:00] And why are we excited in penny stocks?
  Und warum sind wir bei Pennystocks aufgeregt?

[18:04] Well, there is potentially an opportunity to make a lot more money or lose a lot more money as somehow people seem to be particularly attracted to stocks with very low nominal share prices.
  Nun, es gibt potenziell die Gelegenheit, viel mehr Geld zu verdienen oder viel mehr Geld zu verlieren, da die Leute irgendwie besonders von Aktien mit sehr niedrigen nominalen Aktienkursen angezogen zu sein scheinen.

[18:15] That doesn't mean, by the way, that the stock is cheap.
  Das bedeutet übrigens nicht, dass die Aktie billig ist.

[18:17] That doesn't mean that it just means that, um, basically there are too many shares outstanding or the company really isn't worth very much.
  Das bedeutet nicht, dass es nur bedeutet, dass, ähm, im Grunde zu viele Aktien im Umlauf sind oder das Unternehmen wirklich nicht viel wert ist.

[18:25] So you get an A N order for penny stocks.
  So erhalten Sie eine A-N-Order für Pennystocks.

[18:28] And that basically means, say I want to buy a thousand shares of some penny stock.
  Und das bedeutet im Grunde, sagen wir, ich möchte tausend Aktien eines Pennystocks kaufen.

[18:35] If there aren't a thousand stocks available at that time — and that's the problem with penny stocks or OTC stocks, sometimes the volume simply isn't there — then you can put an AO, all or none.
  Wenn zu diesem Zeitpunkt nicht tausend Aktien verfügbar sind – und das ist das Problem bei Pennystocks oder OTC-Aktien, manchmal ist das Volumen einfach nicht da – dann können Sie eine AO, alles oder nichts, setzen.

[18:50] So if you set it, if you tick that, it means the trade will only be executed if you can get a thousand stocks at the same time.
  Wenn Sie das also aktivieren, bedeutet das, dass der Handel nur ausgeführt wird, wenn Sie tausend Aktien gleichzeitig bekommen können.

[18:58] If there are 500 available but not a thousand, the order won't execute.
  Wenn 500 verfügbar sind, aber nicht tausend, wird die Order nicht ausgeführt.

[19:04] Whereas if you don't set this, you'll get 500 at this price and then you get the next 500 at a higher price possibly.
  Wenn Sie dies hingegen nicht setzen, erhalten Sie 500 zu diesem Preis und dann die nächsten 500 möglicherweise zu einem höheren Preis.

[19:09] And that of course happens — you also see that a lot when you're trading crypto.
  Und das passiert natürlich – das sehen Sie auch oft beim Handel mit Kryptowährungen.

[19:13] You often, you know, you say you want to buy one Bitcoin; you might get it in three little bits at three different prices.
  Sie sagen oft, wissen Sie, Sie möchten einen Bitcoin kaufen; Sie bekommen ihn vielleicht in drei kleinen Stücken zu drei verschiedenen Preisen.

[19:18] So that's kind of an interesting one, especially if you're looking at penny stocks.
  Das ist also eine interessante Sache, besonders wenn Sie sich Pennystocks ansehen.

[19:22] What is the IOC — the Olympic International Organizing?
  Was ist das IOC – das Olympic International Organizing?

[19:26] Committee, it's an immediate or cancel order.
  Ausschuss, es ist eine sofortige oder stornierte Order.

[19:28] So it basically says, um, it sets a very, very short time limit, often just literally a few seconds.
  Es besagt also im Grunde, ähm, es setzt eine sehr, sehr kurze Zeitspanne, oft buchstäblich nur ein paar Sekunden.

[19:35] So either this gets filled right here, right now, or it's canceled completely.
  Entweder wird dies genau hier und jetzt ausgeführt, oder es wird vollständig storniert.

[19:40] And that can be, again, very sensible if you are trading highly volatile stocks and you have had sort of a kind of flash crash situation.
  Und das kann wiederum sehr sinnvoll sein, wenn Sie mit sehr volatilen Aktien handeln und eine Art Flash-Crash-Situation hatten.

[19:47] You're saying, "I want to buy in right now, this second."
  Sie sagen: „Ich möchte jetzt sofort kaufen, in dieser Sekunde.“

[19:51] I'm not interested in one minute.
  Ich bin nicht an einer Minute interessiert.

[19:53] Then again, that's an interesting one, perhaps less interesting for some, but certainly for others.
  Andererseits ist das eine interessante Sache, vielleicht weniger interessant für einige, aber sicherlich für andere.

[19:57] What is the full order?
  Was ist die vollständige Order?

[19:59] It is fill or kill.
  Es ist „Fill or Kill“.

[20:03] So this combines the, um, with an IOC.
  Dies kombiniert also die, ähm, mit einem IOC.

[20:08] Probably have lost you here on the acronym.
  Wahrscheinlich habe ich Sie hier mit dem Akronym verloren.

[20:11] So, um, in other words, basically it says that the entire order size has to be traded in a very, very short time period, so a few seconds.
  Also, ähm, mit anderen Worten, es besagt im Grunde, dass die gesamte Ordermenge in einer sehr, sehr kurzen Zeitspanne gehandelt werden muss, also ein paar Sekunden.

[20:19] So basically, unless, say, I want to buy a thousand shares, I want to buy it on a fill or kill.
  Also im Grunde, es sei denn, sagen wir, ich möchte tausend Aktien kaufen, ich möchte sie auf „Fill or Kill“ kaufen.

[20:23] I'm combining my all-or-none with.
  Ich kombiniere mein „Alles-oder-Nichts“ mit.

[20:29] my ioc unit means either I get the

[20:31] thousand shares right here right now

[20:33] this very second or I'm going to have a

[20:35] tantrum and I'm going to I'm going to

[20:37] not want it anymore so that's that's

[20:39] your your F order there and and then

[20:42] there is three more which is the good

[20:44] till canel so this is basically um it

[20:48] basically remains active until you

[20:50] decide to cancel it it typically most

[20:53] brokerages set sort of a 90-day limit on

[20:55] that so you can say say I want to buy a

[20:58] you know the Neo stock but I want to buy

[21:00] it below $20 I hope it never gets to

[21:03] that but you know then you could set

[21:05] that order and you could have it valid

[21:06] for 90 days or however long your

[21:08] brokerage allows you again you need to

[21:10] check with them on that it varies but 90

[21:13] days is typically the the limit so that

[21:15] can be quite a nice way of I've decided

[21:17] to buy this but I've only decided to buy

[21:19] this once it falls below a certain

[21:21] support line and we are of course going

[21:23] to look at that when we get to charts

[21:24] later down the road um then that's kind

[21:28] of a kind of a sensible way of of

[21:30] picking up a bargain if if you are a

[21:32] bargain hunter now what about day I

[21:34] wrote here at the beginning what does

[21:36] that mean well it's simply the the span

[21:39] validity of your order again quite

[21:41] typical but a lot of brokerages I use

[21:43] they actually have that set as standard

[21:45] so it means it's only valid for today uh

[21:48] why is that well I think some of it has

[21:50] to do with the fact that brokerages just

[21:52] don't want to have all these pending

[21:54] Half Baked orders on their books um but

[21:57] yeah perhaps also it is just sensible

[21:59] you either want to buy it or you you

[22:01] kind of you know these sort of prices

[22:02] but if say the price runs away from you

[22:04] say you want to buy it at

[22:05] $10 you know um today but the price went

[22:11] to 1050 11 12 no real point in keeping

[22:14] that order open if you don't think

[22:15] you're going to get back down to those

[22:17] levels the last one here you can't

[22:19] really see because I've written it below

[22:21] the screen just going to keep it

[22:23] interesting take profit or a profit

[22:26] Target is basically

[22:29] tells you to close the trade so that

[22:32] could be to sell it or to buy it

[22:34] depending on whether you're long or

[22:35] short but if you are long it basically

[22:37] says execute a

[22:39] sell once we reached a certain profit

[22:43] amount so for that you need to have an

[22:45] open position first um so you need to

[22:48] already have the shares say or you could

[22:50] have short sell but let's keep it on the

[22:52] long story to say I have a 100 shares at

[22:54] $10 I want to make a $100 profit and

[22:58] there for when they go up $1 this will

[23:00] automatically uh sell and where does

[23:03] that make sense well especially when we

[23:04] look at the event driven trading I I

[23:06] like to do that sometimes when some sort

[23:08] of catastrophe happens uh often good

[23:10] stocks good companies get hit say 25 30%

[23:14] in which case I'm the kind of a um

[23:17] scavenger that then buys them and I

[23:19] might set a um take profit order at 10%

[23:23] above perhaps and it simply gets me out

[23:25] so I'm sitting there I'm doing nothing I

[23:26] don't have to monitor it every single

[23:28] day and I get my 10% I'm very very happy

[23:30] when is it a good time or a bad time or

[23:33] the right time to sell a stock and it's

[23:34] a difficult question because actually

[23:36] selling is often much much harder than

[23:39] buying it's hard to sell things when

[23:41] they've gone up and it's even harder to

[23:43] sell things when they've gone down and

[23:45] we see that red number we see that loss

[23:48] we don't want to realize because we

[23:49] don't want it to be true so psychology

[23:51] is a hugely important part Here and Now

[23:54] generally speaking there are three

[23:56] reasons to sell a stock

[23:59] one it was a mistake to buy it that's

[24:03] pretty hard to admit to ourselves but

[24:05] we're going to look into that when the

[24:07] price has gone up not just a bit but

[24:10] tremendously or thirdly when there's an

[24:13] actually a fundamental change to the

[24:15] business and again it's important to

[24:17] spot those as soon as they happen um

[24:22] what makes selling stocks so hard greed

[24:25] it really is just greed and emotion and

[24:29] fear that is our biggest enemy when we

[24:32] are investing in stocks so say you know

[24:36] you bought a stock at $10 it's G gone to

[24:38] 12 gone to 13 gone to 14 and you thought

[24:42] well I I mean that's fantastic it's gone

[24:44] up 30 40% but I'm going to hold on I

[24:47] think I'm I'm gonna I'm gonna I'm

[24:48] feeling greedy feeling really really

[24:50] really greedy uh then you think it's

[24:52] going to go to 15 it doesn't it goes

[24:54] back down to 12 you think well it'll

[24:56] recover it doesn't it goes to 11 to 9 to

[25:00] 9.5 what do you do do you sell or

[25:04] hold it's a tough question at that point

[25:07] it of course depends on what you

[25:08] actually bought so really the

[25:12] fundamental reasons to seller a stock

[25:15] the first one is let's assume here and

[25:17] that's a big assumption that you've done

[25:19] some real research on this stock you

[25:21] really done some analysis you read their

[25:24] um financial statements you read some

[25:27] analyst reviews use on it you understand

[25:29] the business you know how they're making

[25:31] money you you know what their margins

[25:33] are you know what their free cash flow

[25:34] is and you know why they are better than

[25:38] their competitor you know why they are

[25:41] keeping their customers you know that

[25:42] there is some sort of moot something

[25:44] special exclusive they have that could

[25:46] be dominant market share it could be

[25:47] extremely loyal customers because it's

[25:49] expensive to replace the product or

[25:51] service or it could be that they have an

[25:54] invention a technology um you know a

[25:56] brand that is so powerful that people

[25:58] will stick to it but if you don't know

[26:00] the answer to any of those things I

[26:02] would say to start with stop buying

[26:05] stocks Because unless you know that you

[26:07] are just following the width of the

[26:10] market and whatever headline you see in

[26:12] often when it hits the headlines it's

[26:13] perhaps too late to get in on it not

[26:16] always but it can be so blindly buying

[26:19] stocks I wouldn't recommend if you want

[26:21] to blindly buy stocks buy an index buy

[26:24] an index fund and again we're going to

[26:25] look at that uh in one of the lessons

[26:27] coming up that can be a fantastic way of

[26:30] doing it and I'm going to show you also

[26:31] the kind of returns you can get with

[26:32] that which can also be tremendous and

[26:34] you might simply not have the time or

[26:36] inclination or interest to dig deep into

[26:39] all the stocks that you own if you do

[26:41] have more inclination then if you buy a

[26:43] stock um you should certainly do some

[26:45] research or at least join a research

[26:48] Community where other people have done

[26:50] research and you can read that research

[26:52] and you think that they didn't just put

[26:54] on their Rose tinted glasses and only

[26:56] look at the Sunny Side of of the stock

[26:59] or the company we just a real danger so

[27:01] that's why I particularly love our

[27:02] patreon community guys because people

[27:04] actually critically thinking over there

[27:06] so that's fantastic thank you for that

[27:09] now if you bought a stock and it turns

[27:12] out your analysis was flawed somewhere

[27:14] and we make mistakes I make mistakes

[27:16] every day everybody does then the

[27:20] important thing to do is to realize it

[27:22] ex say to yourself it's fine you made a

[27:24] mistake you didn't lose much money but

[27:26] if you're going to hold on to this

[27:27] mistake you potentially are going to

[27:29] lose a lot of money so just sell the

[27:31] thing if it's a DT get rid of it as

[27:33] quickly as you can if the reason for you

[27:35] buying it has changed and I'm going to

[27:37] put out um down below a sort of document

[27:40] with where you can write down for each

[27:43] stock you buy the reasons you bought

[27:45] them and what you aim to achieve with it

[27:48] and at what point point you are exiting

[27:50] and that I recommend to print it out and

[27:53] stick it on a wall stick it on your

[27:55] fridge or you know wherever your desk or

[27:57] stud is and look at it when you look at

[28:00] the stock and then if it goes up above

[28:02] that level then you you know then one

[28:04] that you target it don't be too greedy

[28:07] now the second one here I said when the

[28:09] price goes up and up dramatically so

[28:13] some stocks have just these massive

[28:15] rallies in in in a short short term um

[28:18] you know couple of days couple of weeks

[28:19] and they go up 30% 100% 500% whatever it

[28:22] is that you're investing in

[28:24] um you could therefore think hang on I'm

[28:27] incredi wise and clever and I picked the

[28:30] one thing that went up 300% I now

[28:33] believe this is going to go up another

[28:35] 300%

[28:37] um it's mostly a

[28:40] mistake very very rarely do stocks keep

[28:44] going up like that if they go up like

[28:46] that they typically come down again at

[28:48] least halfway or so yes they might

[28:49] continue to go up but I think there is a

[28:52] very very good reason to get out at the

[28:55] tips of those or near the tip of those

[28:57] or perhaps when it starts to come down

[28:59] again a little bit just sell it at that

[29:01] point you can always get back into it

[29:03] when it drops again and for that we are

[29:04] going to look at a technical analysis

[29:06] down the road I think that might assist

[29:09] you guys certainly does does assist me

[29:11] in making those decisions the third

[29:14] thing here is fundamental change what is

[29:17] the fundamental change I'm pointing in

[29:19] the wrong direction and I hear this my

[29:21] screen seem do the

[29:23] opposite it's basically valuation so say

[29:27] the compy you you bought in at had a had

[29:29] a PE multiple of 15 the stock performs

[29:33] very nicely it goes up now the PE

[29:34] multiple is 20 or 25 the competitors

[29:38] have a PE multiple still of 15 or 16 or

[29:41] 17 yours is 25 or even 30 say it's

[29:45] doubled at that point a rational value

[29:49] investor would look at that and go well

[29:52] it's gone up very nicely I made a lot of

[29:53] money valuation now is at a level where

[29:56] it's substantially above the competitors

[29:58] yes it's perhaps a slightly better

[29:59] company than the competitors but it

[30:01] isn't doubly as good as much as I love

[30:04] it and I think that is kind of the hard

[30:06] decision to make because you hear a lot

[30:07] of this talk of conviction stocks and

[30:11] that doesn't mean you can't change your

[30:13] conviction your conviction says this is

[30:15] going to I you know I believe this is

[30:17] going to increase for whatever reason

[30:20] once it's reached what you were

[30:23] expecting get

[30:25] out um provided uh you know some of

[30:29] those indicators say your PE ratio has

[30:31] gone up that much compared to the market

[30:33] or compared to competitors if the whole

[30:35] Market has gone up like that and the

[30:37] competitors have also and you believe

[30:39] this is going to continue as a trend

[30:42] fine keep it stick with it but if it has

[30:45] dramatically outperformed competitors

[30:47] and the market typically things revert

[30:49] back to where where the average

[30:52] lies another indicator from fundamentals

[30:55] to look at would be um a revenue

[30:58] declining uh that's generally speaking a

[31:00] big no no if you have a company that's

[31:03] been growing even if it's growing slowly

[31:05] 2% 5% 10% and then suddenly they have a

[31:08] revenue declining that's typically a big

[31:10] red flag indicator that something is

[31:12] seriously wrong there so that is is is

[31:15] one where I would sell um cost cutting

[31:18] is another one when you get companies

[31:20] and that of course happens with cyclical

[31:22] stocks like banks for example in in

[31:24] downturns they always start to uh you

[31:27] know cut costs lay off

[31:29] people that tends to give the stock

[31:32] price a temporary

[31:34] boost but in the long run it does tell

[31:36] you something about that business that

[31:38] isn't quite right now banks are perhaps

[31:40] not the greatest example because there

[31:41] are certain banks that simply do perform

[31:43] in the long run because they have

[31:44] incredible businesses but there are a

[31:46] lot of other examples if you look at a

[31:47] manufacturer say and they start cutting

[31:50] costs why are they doing that well they

[31:53] obviously have some issues with margins

[31:55] and profitability and perhaps customer

[31:57] retention so I think those are kind of

[31:59] sensible things to look at

[32:02] um so essentially I would look here at

[32:05] earnings uh cash flow also I would look

[32:07] at U PE ratio Revenue declining and then

[32:11] cost cutting for me those are all kind

[32:14] of not on itself red flags but certainly

[32:17] something where you need to really look

[32:18] at it and think hey maybe I have ridden

[32:21] this one as far as I can and maybe I get

[32:23] out of it and I'll keep watching it and

[32:25] I canaps perhaps get back into it and

[32:27] you know what a lot of the time you sell

[32:28] those things and they go up an extra 10%

[32:30] do you beat yourself up over it no you

[32:33] made some money or you made less of a

[32:35] loss perhaps and and you're happy with

[32:37] that you just have to accept that every

[32:40] trade you can't optimize each trade it

[32:42] is just simply not possible and it isn't

[32:44] actually desirable either it just causes

[32:47] a lot of stress all you got to do is set

[32:49] your targets for the profits you want to

[32:51] achieve and and stick to that and now

[32:53] there is a last one I really wanted to

[32:54] put on here I suppose and that would be

[32:57] um uh

[33:01] Financial

[33:04] need that's yours not the companies and

[33:07] that is of course a a hugely valid

[33:09] reason to sell stocks and that is really

[33:11] the first thing uh just to start with

[33:13] and we are going to look at some

[33:15] portfolio planning down the line line

[33:16] here um when you invest your money you

[33:19] need to realize will I need that money

[33:22] back at some point and how soon is that

[33:25] some point is it 3 months 6 months 6

[33:27] years 10 years the longer that Horizon

[33:29] the lower your risk the shorter that

[33:31] Horizon the higher your risk that's

[33:33] really something to bear in mind that

[33:35] sometimes holding cash even though it

[33:36] isn't a great investment about any

[33:38] stretch of the imagination it can be a

[33:39] good thing to do so when to sell here

[33:42] either it's your mistake which is the

[33:44] best thing is to admit it to yourself

[33:46] the price has gone up dramatically um or

[33:49] there's a fundamental change in the

[33:51] business which you can see through um

[33:53] Revenue changes you can see it through

[33:55] growth changes um PE rate multiples

[33:58] changing cost cutting are always a bit

[34:00] of an alarm Bell to me um or of course

[34:04] your financial situation requires that

[34:06] cash for whatever reason that is always

[34:09] a good reason to get out that might not

[34:11] be the optimal time to do it but you

[34:12] know that is just the reality so we have

[34:14] to start our planning with that in mind

[34:16] guys so the most important and the most

[34:19] overlooked area of investment it's fees

[34:23] costs transaction fees whatever you want

[34:25] to call them that is probably about 40

[34:29] to

[34:30] 50% of your investment success it's all

[34:33] about costs and fees and how to minimize

[34:35] them so what kind of fees are we looking

[34:37] at here by now you are probably used to

[34:39] my horrific

[34:40] scribbles we have a couple of different

[34:42] fees depending on what you're buying um

[34:44] starting at the bottom uh bank transfer

[34:47] fees when you send money from your bank

[34:49] to your brokerage account is there any

[34:52] kind of fee from either party that's the

[34:55] first thing to look at and write it down

[34:58] um secondly you have brokerage fees most

[35:02] brokerages have fees depending on how

[35:05] big a trade you make look at that table

[35:08] quite often they're fixed fees so I use

[35:10] one brokerage for example they charge me

[35:12] say um $20 when I buy from zero to ,000

[35:17] per trade when I buy from ,000 to

[35:20] $110,000 they charge me $15 so does it

[35:24] make sense for me to execute a $1,000

[35:27] $100 trade no it doesn't um so you have

[35:31] to kind of find The Sweet Spot within

[35:33] the fee structure you're in and really

[35:35] do compare the brokerages because it

[35:38] makes a huge difference um the expense

[35:40] ratio transaction costs and sales fees

[35:42] here that I've also got on the on the

[35:44] screen here are more relevant if you are

[35:47] buying ETFs and funds and I know a lot

[35:49] of people are I certainly am and here is

[35:52] a little example I wanted to show you

[35:54] here this is I don't actually know where

[35:57] this came from so some website so they

[35:59] are here basically doing this typical

[36:01] mutual funds are bad kind of comparison

[36:05] um to me that isn't actually the point

[36:07] nowadays there are good mutual funds

[36:08] there are bad mutual funds same with

[36:11] ETFs but what most funds will tell you

[36:15] is their expense

[36:17] ratio and how much they charge you when

[36:19] you buy it so here they call it sales

[36:21] charges some people call it whatever

[36:23] over the counter fees or whatever that

[36:25] might be so you look at this and you

[36:26] think okay I'm going to half a percent

[36:28] to buy this and then I'm going to pay

[36:29] 1.3% a year that's usually all they show

[36:32] you what they don't normally show you is

[36:35] the transaction costs they are hidden

[36:37] fees they typically don't disclose them

[36:40] and what are they every single time they

[36:42] trade they incur brokerage fees now they

[36:46] might well be pocketing that profit

[36:48] through another subsidiary or parent

[36:50] company but they are fees that they're

[36:52] charging you and they're not telling you

[36:54] about so what does a good fund

[36:58] look like a good fan F fund fact sheet

[37:01] that's a typical word actually tells you

[37:04] what they are so they tell you here at

[37:05] the top uh the fee to buy into it in

[37:08] this case 105% to 95 cents depending on

[37:11] the size of your

[37:13] investment and then you scroll down and

[37:16] it's in the key facts it's on the front

[37:18] page very very clear 2020 transaction

[37:21] costs

[37:22] 0.03% which is incredibly low and it

[37:25] basically means these guys did very very

[37:27] very few trades uh and that's another

[37:29] way of looking at it is to look at their

[37:31] turnover but really you want to be able

[37:34] to see the transaction costs from their

[37:36] fun fact sheet if they don't tell you

[37:38] that I would just run because they

[37:40] obviously have something to hide and

[37:42] they don't like the number that they

[37:43] have there um and there is also

[37:45] something in just trading too much quite

[37:47] frankly so for this fund here therefore

[37:50] what is my cost say I'm paying the 105%

[37:53] to buy it that's my in and then every

[37:56] year it is 0. 0 3% on transaction costs

[37:59] so that's pretty clear right that's

[38:01] rather yeah very very obvious why does

[38:05] it

[38:06] matter okay say here you paying 3.2% in

[38:11] total now um in in uh in actual expense

[38:14] ratios fees if you bought a fund or an

[38:19] index fund because nowadays there are

[38:20] also mutual funds with low very low fees

[38:22] that had a half a percent um fee

[38:26] structure versus 3.

[38:28] 2% we put that into a compound

[38:30] calculator and you say oh my God why is

[38:32] he talking about compounding say you

[38:33] start with

[38:35] $1,000 uh and say you are getting 8 and

[38:38] a half% sort of Market average or so so

[38:41] now you're getting 8% because you've

[38:42] paid half a percent to this Fund in fees

[38:47] and we're going to do that

[38:49] over um 10 years so 120 months monthly

[38:55] I'm we're going to deposit every month

[38:56] $1,000

[38:58] now that might seem high that might seem

[38:59] low to you but just as a as an example

[39:01] here so what does that leave us with it

[39:04] means that that is now worth

[39:07] $185,000 after 10 years let's do this

[39:10] same exercise again we have $1,000 to

[39:13] start with but now we don't have 8% we

[39:17] have we spent 3.2% so what is three uh

[39:21] 8.5 minus 3.2 so 8.5 was our average so

[39:25] now that is 5.3% % net interest that

[39:29] you're getting again we do that over 120

[39:31] months and we are still depositing ,000

[39:35] we're not changing that at all we're

[39:37] keeping that the same so what does that

[39:39] mean you got

[39:43] $159,000 and here you got

[39:46] $185,000 so 185 minus1 159 that is

[39:52] $26,000 that you have essentially paid

[39:55] in fees or rather that didn't enjoy as

[39:59] part of your your your compounding over

[40:01] time being able to reinvest it because

[40:03] you you paid those fees so you might

[40:05] think that's a small difference picking

[40:07] a mutual fund with sort of hidden fees

[40:10] versus a um a fund with low fees or an

[40:13] ETF $26,000 over 10 years and that's

[40:17] only investing ,000 a month that might

[40:19] be a lot for you might be a little to

[40:20] you um but obviously the numbers um will

[40:23] will go up um substantially if you you

[40:26] put in more more money in into that so

[40:28] ease are the single most important and

[40:31] the single most overlooked item in in

[40:34] investing so before you do your next

[40:37] trade look at your last 10 trades and

[40:40] it's painful because brokerages

[40:42] typically hide this stuff in sort of

[40:44] PDFs they send somewhere where no one

[40:46] will look at them and they are often

[40:48] pretty messy to look at make a list

[40:51] write write down your costs did it cost

[40:53] you money to send it to The Brokerage if

[40:55] yes write down how much how big was the

[40:58] trade you made how much did you buy what

[40:59] amount write down the fees you were

[41:01] charged there'll be a brokerage fee

[41:03] there might also be a little bit of

[41:05] stamp Duty depending on where you're

[41:06] buying in What markets or or sort of um

[41:10] Stock Exchange fees that might perhaps

[41:12] be split out sometimes they combine it

[41:14] sometimes they split it out and write

[41:16] that down and and just keep that column

[41:18] and see what are my fees and I think

[41:21] you'll typically notice that your fees

[41:22] are higher the smaller your trades are

[41:25] now of course there are newer apps that

[41:28] are are virtually commission free or

[41:30] have very low commission and again you

[41:32] can write down write down the platforms

[41:34] do may do that comparison it'll probably

[41:36] take you an hour or two of your life and

[41:38] it won't be the most enjoyable hour or

[41:40] two but just think if that hour can make

[41:44] you 25,000 or 26,000 us I think it's

[41:48] worthwhile doing it um and then by all

[41:50] means do please share your findings with

[41:53] our um Discord Community because

[41:56] everybody else is in the same same boat

[41:58] and it is super interesting to spot

[42:00] these little fees I do it for my trades

[42:02] I track all of the fees and it's tedious

[42:05] but the longer you do it for the more

[42:08] you realize ha okay I've got here

[42:10] $1,500 it doesn't make sense for me to

[42:13] buy this now I'm going to have to wait

[42:14] till I get to $2 and a half thousand

[42:16] because otherwise I'm spending an extra

[42:17] $50 on fees which doesn't seem like a

[42:20] lot but if I do this 10 times a year

[42:23] then yeah it does really add up over

[42:25] time so at the three types of

[42:27] fundamental stock strategies that are

[42:29] out there or the types of Investments

[42:31] you can make people often talk about

[42:33] these what are they well let me pull

[42:35] that up for you here I'm going to write

[42:37] it out in my horrific handwriting U

[42:40] there is

[42:42] income what's next there is value uh and

[42:46] they are similar some people say or

[42:48] different it depends on your perspective

[42:50] they think they are actually quite

[42:53] different um and that's growth and and

[42:56] there we have it so what what does that

[42:58] mean really um well income basically

[43:01] refers to dividends so what would be

[43:05] that's a sort of stock that gives you a

[43:07] high income level well let me pull up

[43:09] one up for you here um AT&T for example

[43:13] 6.94% dividend yield you can see that

[43:17] simply by typing AT&T stock into Google

[43:20] and it shows you the dividend yield you

[43:22] don't need any specific um knowledge of

[43:25] that um has to stop stock performed

[43:27] wonderfully no it has basically lost

[43:32] about 20 25% of its value since 2016 so

[43:36] if you'd had it held it throughout this

[43:38] whole time you would have um yeah burned

[43:41] quite a bit of cash how however why do

[43:44] people buy something that looks has this

[43:47] kind of a chart when you think well you

[43:48] know let's look at the maximum chart

[43:51] here again not particularly wonderful

[43:53] right what's the reason a lot of people

[43:56] do it a retirement plan now some people

[43:59] are also simply more conservative at

[44:02] doing this even when they're much much

[44:04] younger and it's a reasonable thing to

[44:06] do it basically is a little bit like a

[44:09] bond it's a fixed income kind of type

[44:11] product almost um now it doesn't

[44:16] guarantee you that dividend yield

[44:18] whereas if you buy a bond it near nearly

[44:22] guarantees it to you except if the

[44:24] company or the government that issued

[44:26] that Bond goes out of business but bonds

[44:28] at the moment I at the moment don't hold

[44:30] any bonds I used to why because what

[44:33] they pay you simply isn't very much and

[44:35] the ones that do pay you quite a lot are

[44:37] T typically pretty risky and that goes

[44:40] through Cycles there were were times

[44:42] sort of after 2008 financial crash for

[44:44] example when

[44:46] Financial bonds bonds of banks were

[44:49] incredibly cheap they were trading at

[44:50] say 30 out of 100 and they then

[44:54] recovered all sort of 70 80 90 levels

[44:56] that was fantastic trade from that point

[44:58] of view but that wasn't for the income

[45:00] that was because you know they just got

[45:02] got hit over their head and generally

[45:03] speaking governments were bailing out

[45:05] those banks at least until a certain

[45:07] point in time but I digress here so AT&T

[45:10] for example if you buy that today and

[45:12] you don't give a hoot about what the

[45:14] stock price is going to do you never

[45:16] ever look at that again as long as you

[45:18] think that AT&T will have sufficient pre

[45:21] cash flow to pay that dividend yield and

[45:24] that's one thing we're going to get to

[45:26] of course is how can establish that you

[45:28] buy it you get

[45:30] 6.94% and you're basically done one

[45:33] thing I would bear in mind though

[45:34] depending on where you reside there are

[45:37] income tax consequences for that there

[45:40] are dividend taxes in most jurisdictions

[45:43] and there are so look at what those tax

[45:45] rates are look at what the thresholds

[45:47] are there is typically an Optimum Point

[45:50] um of having it or a point where you

[45:54] might say well I've got enough income

[45:55] now because I'm just going to get taxed

[45:57] at a higher rate uh there are also of

[45:59] course investment um strategies that

[46:03] reinvest that dividend deal then so you

[46:05] get that compounding going and sometimes

[46:08] therefore using some sort of bond or ETF

[46:10] can make more sense because you avoid

[46:13] the dividend tax when it gets paid out

[46:16] so

[46:17] accumulative funds can be kind of an

[46:20] interesting one and often when you look

[46:21] at funds they are offered with an Inc at

[46:25] the end and an ACC Inc means income as

[46:28] in you get the dividends when they get

[46:29] paid out ACC means they simply reinvest

[46:32] them they accumulate them that's really

[46:34] a tax strategy there more than anything

[46:36] else now second value what's value all

[46:40] about well it's the sort of a lot of

[46:43] people summarize it by using the name

[46:45] name Warren Buffett and that's helpful

[46:47] and not helpful because not everybody

[46:49] understands what that really means um so

[46:52] basically you buying a stock because of

[46:55] its Financial situation um and what do

[46:58] you look at there well it can be

[47:00] dividends but it doesn't actually have

[47:02] to pay dividends I quite like value

[47:04] stocks that don't pay dividends because

[47:06] it means that their business is growing

[47:08] sufficiently that they can reinvest

[47:09] those profits and grow faster and get a

[47:12] higher return than if they just gave me

[47:14] five or six% uh so you look at some

[47:18] Basics like Price to Book ratios price

[47:20] earnings ratios but that isn't quite

[47:22] enough uh really you want to look

[47:25] at um free cash flow you want lots of

[47:28] free cash flow because that is money

[47:31] that they can reinvest in that compounds

[47:33] you want high gross margins you want

[47:36] High net margins uh and you want a high

[47:39] return on Equity employed or a high

[47:42] return on Capital employed and if that

[47:44] all goes over your head that's

[47:46] completely fine we are going to look at

[47:48] those details we going to look at some

[47:49] examples down the road here so this is

[47:51] kind of a this lesson a bit of an

[47:53] overview on differentiator really in

[47:55] these and I'm going to pull pull one

[47:57] Value stock up for you here Mech comic

[48:00] in company is a value stock that I I own

[48:03] um and it isn't the most sexy company in

[48:05] the world it is basically food spices

[48:08] and

[48:10] flavorings uh both for retail and you

[48:12] might have seen their spices on the

[48:13] spice rack but also they Supply a lot of

[48:15] food manufacturers and Food Service

[48:17] businesses so um so you know Caterers

[48:19] and those kind of people and this is the

[48:22] this is the share price and you can see

[48:24] it's gone up very very nicely if you

[48:26] were to draw a line in on that you can

[48:29] basically see here someone has drawn a

[48:31] line in on that I guess that was me in

[48:33] in a previous life but you can

[48:35] essentially see that's basically what

[48:37] you want to see with a value stock you

[48:40] want to see this and that is compounding

[48:43] basically it just goes up steadily and

[48:46] slowly over time and yes it does have

[48:48] some Kinks and dips and and and mini

[48:50] rallies but over time it simply performs

[48:53] and why because it's highly profitable

[48:55] they have a very good mode they very

[48:57] loyal customers and people basically buy

[49:00] spices no matter what happens in the

[49:01] world good things bad things people will

[49:04] want to eat tasty food therefore spices

[49:07] are always one of those things so to me

[49:08] for example this is a pretty decent

[49:10] Value

[49:13] stock thirdly growth and that is of

[49:16] course what we read most about why

[49:18] because that is what is most exciting

[49:21] it's where it gives you those 100% 500%

[49:24] returns th% returns uh sometimes when

[49:27] you time it right and that is therefore

[49:29] what hits the market and the headlines

[49:31] the most because it simply is the most

[49:33] exciting and that can be you know it can

[49:35] be Tech at the moment or green energy or

[49:37] biotech or you know the you know space

[49:40] or whatever is sort of the flavor of the

[49:42] month and what's their business model

[49:45] basically well they're generally

[49:46] speaking fairly new companies that have

[49:48] a great concept a great idea perhaps a

[49:50] great invention and they are kind of

[49:53] disrupting a business they are or are

[49:57] creating a whole new industry um they

[50:00] can give you very very good Capital

[50:02] returns but typically they are not

[50:06] profitable um not always but typically

[50:08] they're not profitable and typically

[50:10] they are reinvesting all those profits

[50:12] um back into if they have any at the

[50:14] gross level back into the business so

[50:16] their aim is to grow their aim is not to

[50:19] generate dividends or or you know a big

[50:22] cash pile so what would be a good Growth

[50:26] Company for examp example well the one

[50:28] that gets talked about as I'm filming

[50:30] this a great deal is of course Tesla and

[50:32] you can see why here here's the 5% the

[50:34] 5year chart uh so massive valuations

[50:38] that also comes with it quite often

[50:40] th000 PE ratio 1100 PE ratio as we're

[50:43] talking about this um so here is a

[50:46] company that has disrupted the

[50:47] automobile space and possibly also other

[50:51] energy Industries and simply has come up

[50:53] with essentially a new product a new way

[50:55] of uh Power Ing and and uh uh cast

[50:59] really basically you know replacing the

[51:02] the

[51:03] IC so it's a huge huge growth story it's

[51:06] also hugely more volatile of course so

[51:10] um it's I think a very exciting part of

[51:14] one's portfolio uh if it's the only part

[51:17] of your portfolio you have to be willing

[51:18] to take very very significant volatility

[51:21] so that's really something to bear in

[51:23] mind here so that's kind of a quick take

[51:25] on here income is basically dividends

[51:28] value is not necessarily dividends you

[51:30] can have great value stocks without

[51:32] dividends it just means it's a sort of

[51:34] product that people buy every single day

[51:36] and no matter what happens in the day

[51:37] they can't do without it they typically

[51:39] have near dominant Market positions or

[51:41] dominant Market positions in their

[51:43] sector uh are and have very high Returns

[51:46] on their their Capital employed and very

[51:49] very big free cash flow that's normally

[51:52] what what people look for in value

[51:53] stocks and they are kind of things that

[51:55] value investors simply buy and more or

[51:58] less forget about I mean still keep an

[51:59] eye on it of course on their performance

[52:01] but it is sort of a a buy and what's

[52:03] your time Horizon well forever that's

[52:07] that's kind of the ideal value company

[52:09] there and then growth of course is the

[52:12] exciting new technologies disrupting

[52:14] Industries creating something that is so

[52:17] fantastic that it'll possibly go up

[52:21] tenfold 100 fold and therefore give you

[52:23] those massive massive Capital returns in

[52:25] a potentially short period of time time

[52:26] but also gives you volatility of course

[52:28] at the same time asset allocation yes

[52:31] sexy subject indeed well what what are

[52:33] the assets that we actually could invest

[52:35] in well let's start off with

[52:38] cash uh there are

[52:41] stocks there are

[52:44] bonds and yes crypto I'm going to add

[52:47] that to the list here um anything else

[52:50] you can think of well as real estate

[53:00] right um apologies for my scribbly

[53:02] handwriting as always so there we have

[53:04] it we've got basically four or less five

[53:07] assets classes yes you could have sub

[53:09] assets within that different types of

[53:11] you know reads and things like that but

[53:13] I think for this purpose we don't really

[53:15] need that so let's go through the first

[53:17] one is cash an asset how do you define

[53:20] an asset well I like my assets to go up

[53:24] in value or at the very least give me an

[53:28] income now cash does neither at present

[53:33] um cash essentially deflates and you

[53:36] might say well but inflation is really

[53:37] really low I'm not worried about it true

[53:40] uh so inflation is you know say so just

[53:43] say say you have $10,000 in the bank

[53:45] here and say inflation is you know 1.5%

[53:50] say it is then over 10 years um what is

[53:56] the amount of money that you have lost

[53:58] well you you've lost

[54:00] $1,393 there so you think okay yeah I I

[54:03] get that but it's not that bad is it

[54:05] really

[54:07] well that's true but assets real assets

[54:13] stocks have gone up 8% Plus on average

[54:17] over the last 10 years or so and if you

[54:19] pick some good ones you will actually go

[54:22] up more than that or you got some good

[54:23] funds so say you're inflation rate your

[54:27] actual inflation rate which the

[54:28] government is hiding from us is minus 8%

[54:31] I have to do that negative here

[54:32] otherwise it doesn't compounded so then

[54:35] you've lost

[54:36] $5,500 after 10 years of your

[54:40] 10,000 so that's pretty bad right so so

[54:43] quite frankly I would say to me cash yes

[54:45] we need some of it uh we need to have uh

[54:49] have some to as a sort of emergency type

[54:52] thing is some sort of uh you know backup

[54:55] fund so it sort of a um an amount that

[54:58] makes us feel secure uh that should be I

[55:03] would say at the very least uh one month

[55:05] of your expenses uh perhaps a little bit

[55:08] more than that I would sort of put one

[55:10] to three months uh of your

[55:14] expenses and that obviously really

[55:16] depends on who you are as a person and

[55:19] whether you sleep well at night and I'm

[55:22] going to show you the chart here as well

[55:23] and the notes I'm making so you can see

[55:25] them um you know some people don't feel

[55:28] comfortable some people don't sleep at

[55:30] night if they haven't got a certain

[55:31] amount of cash stuffed on mattress and

[55:32] if that's you that's totally fine do

[55:35] that don't worry about inflation sleep

[55:37] is more important in the long run so but

[55:39] cash quite frankly isn't really a viable

[55:41] investment even if you are getting one

[55:43] or 2% or so it simply isn't going to

[55:46] give you a great deal Now Stocks is

[55:49] obviously one of the main ones we're

[55:50] going to talk about the question is

[55:51] therefore how much to put into it well

[55:54] before we get to that let's take off

[55:56] bonds because bonds have traditionally

[55:59] had this this theory that the amount of

[56:04] uh your portfolio that should be in well

[56:08] in stocks really was sort of

[56:10] 120 minus your age so when you are 30

[56:15] years old that means 90% of your

[56:17] portfolio is in stocks right so that is

[56:21] the old the old one the old kind of

[56:24] mentality is 120 minus H and that means

[56:28] that when you are then 70s years old

[56:31] your portfolio is now 5050 right is that

[56:35] still a sensible thing to do I very much

[56:38] doubt it um and that's of course at the

[56:41] time of me recording this if you're

[56:42] watching this in the year 3000 things

[56:44] might look different but at the moment

[56:46] the way that governments are acting it

[56:49] doesn't seem to me all that sensible to

[56:52] have that much in bonds and I'm going to

[56:54] show you why

[56:57] these are American bond prices at the

[56:58] moment these are the yields here this is

[57:01] the yield this black column here so even

[57:02] if you buy a 30-year US Government Bond

[57:07] the yield is

[57:08] 2.35% so compared to the stock market

[57:11] you're still losing at least 5.6% or

[57:14] thereabouts so you are basically making

[57:18] yourself poorer in comparison to stocks

[57:22] as an asset class each year if you hold

[57:25] these um now some people believe that

[57:28] the end of the world is coming and there

[57:30] therefore believe that us long-term

[57:33] government yields are going to Skyrocket

[57:35] and okay if that's your your plan that

[57:37] that is is is is a valid investment

[57:39] strategy in the short term not in the

[57:41] long term so for me uh bonds at the

[57:44] moment and this is of course my personal

[57:46] take on it for me bonds are in absolute

[57:49] zero and that's the world's worst zero

[57:52] there it is can I make that better

[57:56] still struggling with his pen I'll get

[57:57] there in the end so for me bonds are an

[57:59] absolute no no um I'm not saying you

[58:02] shouldn't have any but corporate bonds

[58:04] that pay you a decent return tend to be

[58:07] from corporates that have a decent

[58:09] chance of going out of business and not

[58:11] paying you at all and you might be

[58:14] thinking well maybe the government will

[58:15] bail us out I don't know they did that

[58:17] with the whole financial sector on the

[58:19] last crash it's true but towards the end

[58:21] of that cycle they stopped bailing out

[58:23] the bond holders which was rather

[58:25] painful for the bundles at least they

[58:26] gave him a nice haircut which is what I

[58:29] need uh so for me bonds are not really a

[58:32] sensible place to go and I'm going to

[58:34] show you what I would put in the money

[58:36] in

[58:38] instead crypto crypto is something that

[58:41] a lot of people think is absolutely

[58:43] insane a lot of people think it's

[58:45] absolutely wonderful and magical at the

[58:47] moment it is a tiny fraction of the

[58:49] world's assets it's something like 2.5

[58:52] trillion or something like that of

[58:53] course that's going to keep going up I

[58:55] think um for me I think having a

[58:57] portfolio that's all crypto is more

[58:59] volatility than I can handle so for me

[59:02] uh something

[59:04] like 1 to 5% I would say and that

[59:07] depends really on your risk appetite and

[59:09] again on how soon you need that money

[59:11] that's what I would say because that's

[59:13] what I do so for me that is kind of my

[59:15] allocation here whereas for bonds it's

[59:17] absolutely zero and I'm not saying that

[59:19] my point of view is absolutely correct I

[59:21] can only share with you though what my

[59:24] My Views are real estate I think is a

[59:27] sensible thing now there are of course

[59:29] two parts to real estate there is

[59:32] investment real

[59:36] estate and then there is the the home

[59:40] our for walls now a lot of people will

[59:44] argue that the home is not an investment

[59:46] at all because it doesn't provide you

[59:48] with any kind of income or ass you know

[59:51] it's not an asset you can access you

[59:52] can't really sell it because you're in

[59:54] it and it certainly doesn't pay you pay

[59:56] you any kind of uh income right it

[59:59] doesn't pay you rent in fact it's a it's

[01:00:01] a it's a cost because you have to keep

[01:00:02] paying for all the fees and the taxes

[01:00:04] and the repairs and the maintenance

[01:00:06] having said that I I'm rather a fan of

[01:00:08] owning one's home it is an allocation of

[01:00:11] assets so say you put $500,000 into your

[01:00:15] home that $500,000 in stocks could get

[01:00:18] you I think 8% or maybe 10 or 11% or

[01:00:22] something like that so you are that's

[01:00:23] your opportunity cost there but at the

[01:00:26] same time if everything in the world

[01:00:28] goes belly up you're sitting in a home

[01:00:30] that is paid off and that's the big

[01:00:33] assumption here that you actually paying

[01:00:35] it off uh I'm not really a fan of people

[01:00:37] sitting in homes that are highly

[01:00:39] mortgaged because I think then you are

[01:00:41] you're getting neither the the sort of

[01:00:43] safety long-term benefit nor are you

[01:00:45] really getting the returns you kind of

[01:00:47] have the the worst of Both Worlds I

[01:00:49] appreciate you might disagree with me on

[01:00:51] that point of view but that's that's

[01:00:52] sort of where I'm coming from so I would

[01:00:54] say a a home and my caveat there is is

[01:00:58] uh is basically a low leverage or rather

[01:01:02] low mortgage I'm going to write

[01:01:05] here yeah low mortgage uh I think that

[01:01:08] is qu quite important to actually pay

[01:01:09] that off not a sort of interest only or

[01:01:11] anything like that because the whole

[01:01:12] point here is to plan uh to reduce your

[01:01:16] risks and one way of doing that is to

[01:01:20] remove one of the main expenditures in

[01:01:21] your life and that is probably the home

[01:01:23] you live in if you've paid it off fully

[01:01:25] your costs are relatively moderate so

[01:01:27] that's I think one ter thing there real

[01:01:29] estate as an investment is of course a

[01:01:31] different Beast altogether typically it

[01:01:34] depends very much on how much money you

[01:01:36] can borrow there whether that gives you

[01:01:38] a decent return or not and then taxation

[01:01:40] comes in and this is not a real estate

[01:01:42] course so I'm just throwing this in on

[01:01:43] the side I think it is a nice thing to

[01:01:45] have in the mix I certainly own real

[01:01:47] estate U and it sort of balances out

[01:01:50] your risks a little bit because you sort

[01:01:51] of know okay say if the stock market

[01:01:53] tumbles yes real estate markets tend to

[01:01:55] go with it but it is still an asset you

[01:01:57] have you might have hopefully have

[01:01:58] somebody who's paying your rent there so

[01:02:00] you're still getting an income flow from

[01:02:02] that which is separate from what your

[01:02:04] other Investments are doing so that

[01:02:07] leaves the question then you know stocks

[01:02:09] what are we going to do with stocks the

[01:02:11] 120 minus age for me uh that is kind of

[01:02:15] an old thing I'm going to I'm going to

[01:02:16] kind of cross that out here I don't

[01:02:18] think that really applies anymore in the

[01:02:20] real world so I'm therefore going to

[01:02:22] delete this whole thing and I'm going to

[01:02:24] break this down because I think uh after

[01:02:28] you have allocated some money to perhaps

[01:02:30] real estate or to your home or if you

[01:02:32] haven't done it yet I think stocks are

[01:02:35] the ensable place to start and I'm going

[01:02:37] to split the stocks here into several

[01:02:40] categories I'm going to split it into uh

[01:02:45] dividend I'm going to split it into

[01:02:50] value and I'm going to split it into

[01:02:53] growth and you think hang on we've done

[01:02:55] a class on this before uh true but this

[01:02:58] is a little bit different I'm not going

[01:02:59] to explain what they are I'm just going

[01:03:01] to explain how you might divide your

[01:03:03] Investments between the

[01:03:06] three what I treat as the old

[01:03:09] bond is value stocks and why because

[01:03:14] they are companies that have been around

[01:03:15] for 90 years that have a huge return on

[01:03:18] Capital they have a huge mode they're

[01:03:20] very profitable they're highly unlikely

[01:03:22] to go out of business you know think

[01:03:23] Coca-Cola think Proctor and Gamble think

[01:03:26] those kind of companies uh and they are

[01:03:28] therefore paying you a almost Bond likee

[01:03:31] increase on your Capital so really these

[01:03:35] two together up here and I'm going to

[01:03:38] talk about dividend in a second there

[01:03:40] are my basically they are my new Bond um

[01:03:44] because at the moment I don't see the

[01:03:46] point in owning things that are paying

[01:03:47] me you know one or

[01:03:50] 2% income I just don't see the purpose

[01:03:53] to it it just in some sort of vague hope

[01:03:55] that might somehow diversify me so what

[01:03:58] about dividends and value then how do

[01:03:59] you find them um well you could

[01:04:02] think let me show you this here so there

[01:04:04] there are a lot of screening softwares

[01:04:07] this one here is called macrotrends.net

[01:04:09] you can see that at the top it's not the

[01:04:11] world's best or the world's worst but

[01:04:13] it's a pretty decent one so say you

[01:04:14] wanted to look for a value stock and

[01:04:16] somehow you thought well why don't I

[01:04:18] just look at what some of the Big Value

[01:04:20] funds own that's actually a good place

[01:04:22] to start so look at what Buffett owns

[01:04:24] look at what if you want new case say

[01:04:25] fundsmith owns or look at some of the

[01:04:27] Big Value ETFs and go through some of

[01:04:29] those names and that's a way to do it

[01:04:31] but you can also just here look at a

[01:04:32] screen here so I'm putting in market cap

[01:04:34] here 10 billion why I don't want the

[01:04:36] teeny tiny companies that might go out

[01:04:38] of business PE ratio I've put a cap here

[01:04:40] of 30 it's a little bit random but I'm

[01:04:42] just eliminating the really expensive

[01:04:44] companies although having said that I am

[01:04:46] with by doing that eliminating some of

[01:04:47] the best companies so this perhaps not

[01:04:49] the wisest thing to do is so I'm going

[01:04:51] to take it out um my return on Equity I

[01:04:55] put in here at least

[01:04:56] 50% uh and that kind gives me uh then 64

[01:05:03] stock sale and you might not want to go

[01:05:04] through 64 of them but certainly some of

[01:05:06] the ones that are coming here at the top

[01:05:09] and I've soed them also by dividend

[01:05:10] yield you can have value stocks that

[01:05:12] also pay you good dividend so Altria

[01:05:14] which is basically the sort of us Philip

[01:05:16] Morris business um it's the parent

[01:05:18] company of Philip Morris it pays a 6.6%

[01:05:21] dividend that's pretty good um it has

[01:05:23] actually done reasonably well this year

[01:05:24] but in the long run um yeah it hasn't

[01:05:28] done badly but in the long run it's

[01:05:30] really only been the last year it's done

[01:05:32] well and it isn't a great kind of

[01:05:34] performer but it gives you

[01:05:36] 6.6% so that's much better than most

[01:05:39] bonds and less likely to go out of

[01:05:41] business because people will still smoke

[01:05:43] until they've all D Dr dead basically

[01:05:46] you have a couple of other ones in here

[01:05:47] MK Kimberly Clark PepsiCo loit Martin

[01:05:51] Clorox that you you know you might be

[01:05:53] aware of UPS Colgate so you know these

[01:05:57] kind of things Colgate sells basically

[01:05:59] pretty much all the toothpaste in the

[01:06:01] world and people are always going to buy

[01:06:03] toothpaste right pretty much no matter

[01:06:04] what happens so that's sort of the

[01:06:06] theory there behind pitting some of

[01:06:07] these value stocks um now if you wanted

[01:06:10] to purely look at dividends you could of

[01:06:13] course um do that and you could you

[01:06:16] could simply filter for there must be a

[01:06:18] a dividend tag here somewhere um he

[01:06:22] dividend yield you could simply uh you

[01:06:24] know get rid of of the return on on on

[01:06:27] equity and just say I want at least 6%

[01:06:31] now the trouble with that is it'll give

[01:06:33] you a bunch of stocks that are possibly

[01:06:36] tinkering on on on on the edge of of of

[01:06:39] being around often they're quite highly

[01:06:41] indebted so one thing you would really

[01:06:44] need to look out for then here in

[01:06:45] dividends um yes great they're paying

[01:06:48] you lots of dividends but you have to

[01:06:50] also look at their debt levels you have

[01:06:52] to basically see um how much debt do

[01:06:56] they have to equities for example here

[01:06:58] chinya Energy Partners has 32 times more

[01:07:01] debt than Equity um that doesn't look

[01:07:03] great Numa does too but that's a bank so

[01:07:06] that might might make a lot more sense

[01:07:08] so that's you kind of have to look at

[01:07:10] those and you have to also look and this

[01:07:11] does not show you that this particular

[01:07:13] tracker here have a look at their

[01:07:16] interest coverage and things like that

[01:07:17] so for for dividends uh again I I would

[01:07:20] be a little bit careful I would dig into

[01:07:22] them in quite a lot of detail um you

[01:07:25] want want to find the ones that pay you

[01:07:27] high dividends personally I'm not a huge

[01:07:29] dividend Hunter I totally get the

[01:07:32] attraction as a sort of retir in play

[01:07:34] and if you want to live off the income

[01:07:36] I'm fortunate that I have an income and

[01:07:38] therefore I I am looking to invest my

[01:07:40] income rather than in getting income

[01:07:42] from my stocks I'm very happy for that

[01:07:43] to be reinvested all the time so I'm not

[01:07:46] really looking for those when when I do

[01:07:48] I reinvest them so um so in in in short

[01:07:52] here basically a combination of

[01:07:53] dividends and value stocks is what I

[01:07:55] would treat as a bond and that therefore

[01:07:58] could be whatever percentage you feel

[01:08:00] comfortable with you think come on come

[01:08:01] on answer the question for crying out

[01:08:03] loud so people's theory is generally

[01:08:06] when you are younger you can go for

[01:08:10] more risk right where does the risk Live

[01:08:13] Well the risk lives here in our growth

[01:08:16] stocks and therefore you know you can

[01:08:19] afford to spend put more money into

[01:08:20] things like Tesla or whatever the growth

[01:08:22] stock is of the day uh which is of

[01:08:24] course true I put 100% of my money into

[01:08:27] growth stocks no why because I don't

[01:08:30] like the volatility I don't like my

[01:08:32] entire portfolio being down 30 40% so if

[01:08:35] I put some of my money here into my my

[01:08:37] sort of new bonds up here so I I would

[01:08:41] say I know does that there we go so to

[01:08:45] me this uh would be something like 30 to

[01:08:49] uh 80% and that really depends on your

[01:08:52] appetite for risk if you are you don't

[01:08:55] like B risk you don't have a big

[01:08:56] appetite for it you could make it 80%

[01:08:58] you could make it 100% um off of this

[01:09:01] sort of stock budget of yours um if you

[01:09:04] are younger you have a high personal

[01:09:07] income and you just want to invest it

[01:09:09] and you want to enjoy the fruits of that

[01:09:10] labor of course putting more money into

[01:09:12] growth stocks would possibly give you a

[01:09:15] longer a higher return um another thing

[01:09:18] to do is if you are sort of sitting on

[01:09:20] the fence uh what rather than picking

[01:09:23] individual grow stocks uh you just buy

[01:09:25] by the NASDAQ so

[01:09:28] you just put your money into you can see

[01:09:31] how challenging it is to write on this

[01:09:33] you just put your money into a NASDAQ

[01:09:35] ETF and therefore you've kind of got

[01:09:38] your growth without having to pick

[01:09:39] particular companies and the NASDAQ does

[01:09:41] out tend to outperform certainly the

[01:09:43] last 10 years or so the S&P 500 so

[01:09:46] therefore you can throw some money at

[01:09:48] that fairly easily and fairly blindly um

[01:09:51] and I'm going to show you also how you

[01:09:53] can do that when we get to the T

[01:09:55] analysis how we you can do that at a

[01:09:58] more efficient way in fact actually as

[01:10:00] we are here why don't we do it right

[01:10:02] here right now rather than waiting for

[01:10:04] it so we're going to put pull up uh any

[01:10:08] of these stocks and any of these charts

[01:10:11] here and I'm going to show you what I do

[01:10:15] with the NASDAQ as an entry point so

[01:10:19] um where's our NASDAQ friend here yeah

[01:10:22] NASDAQ that's Futures sorry

[01:10:26] weeks and

[01:10:27] Futures days let me get rid of that and

[01:10:32] [Music]

[01:10:35] um

[01:10:38] ndaq NASDAQ IES trust NASDAQ 100 now you

[01:10:42] can of course do this with any kind of

[01:10:45] um ETF and there are plenty of them out

[01:10:48] there that you can use and what's what's

[01:10:51] the easy easy way of doing this you see

[01:10:53] this okay I've made the chart really

[01:10:55] simple it's a blue line the black line

[01:10:57] is the 50-day moving average line now as

[01:11:01] you can see the NASDAQ has performed

[01:11:05] reasonably well in recent years right it

[01:11:07] has just gone up rather tremendously for

[01:11:09] for ages um what you can see if you look

[01:11:12] at a bit closer is most of the time as

[01:11:15] it is going up a lot of the time it is

[01:11:17] sitting above the black line the black

[01:11:19] line being the 50-day moving average

[01:11:22] therefore when it is below that 50-day

[01:11:24] moving average you get a buy opportunity

[01:11:27] you could also make this more extreme

[01:11:29] and you could set this as a 100 days and

[01:11:31] you're wondering well where do I do that

[01:11:32] what software do I do that and U this is

[01:11:35] tradingview.com it is absolutely free um

[01:11:38] you sit you simply put in you know

[01:11:41] NASDAQ whatever ticker you want from the

[01:11:43] NASDAQ whatever your your ETF of choices

[01:11:46] for the

[01:11:46] NASDAQ uh and if you want to compare

[01:11:49] them uh go back to that ETF tool I

[01:11:51] showed you in an earlier video and you

[01:11:53] can compare the fees that's what it's

[01:11:54] all about out and then you can type into

[01:11:57] the indicator moving average and the

[01:11:59] moving average you then click on the

[01:12:02] little settings icon here and you change

[01:12:05] the length to 100 days and be sure to be

[01:12:08] on the day one day um time frame up here

[01:12:12] so that each of these periods is one day

[01:12:15] uh and then what does that show you well

[01:12:16] it shows you that ever so so so often or

[01:12:19] ever so rarely in some ways do we drop

[01:12:22] to or below that 100 day line so this

[01:12:27] here of course was the buying

[01:12:28] opportunity of or buying opportunities

[01:12:30] and that was Co right so that's the big

[01:12:32] c um similarly here previously there was

[01:12:35] some opportunities here and there and

[01:12:37] there um we touched it here in November

[01:12:40] 2020 so you would have bought it here at

[01:12:43] 11,000 that would have been better than

[01:12:45] buying it at 12,000 I think you'll agree

[01:12:47] with that right and similarly we had

[01:12:49] that here more recently in in in March

[01:12:51] um but this Theory quite frankly applies

[01:12:55] matter how far back in time you go look

[01:12:56] we can go back in time to whatever year

[01:12:59] you want say you know 2016 or something

[01:13:03] again buying it at 4,000 rather than

[01:13:06] 4,700 is is is a better place to jump in

[01:13:10] so you can time these slightly I I would

[01:13:13] say by looking at the average and

[01:13:15] therefore you're getting a little bit of

[01:13:17] a better entry point if if you are so

[01:13:19] inclined or the other alternative is

[01:13:21] simply buy it every week or every month

[01:13:23] and don't worry about it

[01:13:26] so that's kind of I think uh how I would

[01:13:28] I would divvy this up I mean for me uh

[01:13:31] it is it varies a little bit since the

[01:13:34] beginning of the year because tech

[01:13:36] stocks are so very high I work a little

[01:13:38] bit cyclically I've been putting my

[01:13:40] fresh money into my value stocks and

[01:13:43] less money into growth stocks only when

[01:13:45] there are individual sort of real buying

[01:13:47] opportunities so I I suppose um if we

[01:13:51] sum this up let me get rid of all of

[01:13:53] this so I I'm just going to going to say

[01:13:56] so we have

[01:13:59] bonds

[01:14:01] uh I would say

[01:14:03] 0% and that is of course just me guys

[01:14:06] but that's what I would do I would then

[01:14:08] go for Value personally because I have

[01:14:10] an income uh and therefore I would put

[01:14:13] value somewhere perhaps 50% plus and you

[01:14:16] might think that's a bit too

[01:14:17] conservative but it also depends of

[01:14:19] course on your age and your circumstance

[01:14:21] and what you're trying to achieve my

[01:14:23] value portfolio does something like 11

[01:14:25] 12% a year sometimes 15 sometimes 18%

[01:14:28] but pretty much always at least 10 11%

[01:14:30] so I'm pretty happy with that growth

[01:14:33] overall and

[01:14:34] then the stocks that I'm particularly

[01:14:37] interested in which is what I call

[01:14:42] growth I pressed the button here again

[01:14:44] what did I

[01:14:46] do seriously what am I

[01:14:50] doing oh dear um

[01:14:54] so growth here that would then be you

[01:14:58] know something like less than 50% uh I

[01:15:03] would recommend um you might be thinking

[01:15:06] okay what about my dividends well I I

[01:15:07] take the dividends out of the value

[01:15:09] because to me that's sort of the same

[01:15:11] thing um if you are uh of an age where

[01:15:14] you are either retiring or you're a

[01:15:16] young individual uh who just simply

[01:15:19] wants to live of income from your

[01:15:21] Investments because you are sick of

[01:15:23] drawing a salary which I have huge

[01:15:27] appreciation for uh then you could of

[01:15:29] course shift this a little bit uh and

[01:15:32] then you could add to it uh your

[01:15:35] dividends having said

[01:15:37] that I think I can get a higher

[01:15:41] income capital appreciation from my

[01:15:44] value than the dividends because

[01:15:46] dividends I think really the good

[01:15:48] companies at present pay you about 6%

[01:15:51] right above that you you get to kind of

[01:15:53] like sort of dodgy territory of

[01:15:56] companies that might go out business so

[01:15:57] here I get 6% uh up here I get sort of I

[01:16:01] would say 11 uh% plus so therefore for

[01:16:05] me the value actually gives me income I

[01:16:08] could take some of that and spend it now

[01:16:10] that might sound alien to you but it's

[01:16:12] exactly the same thing whether you're

[01:16:13] getting dividends in spending them or

[01:16:14] whether you're getting you're selling a

[01:16:16] couple of shares every year or month it

[01:16:18] is exactly the same thing so for me uh I

[01:16:21] therefore prefer the value over the

[01:16:24] dividends but I appreciate some people

[01:16:26] like the feeling that they're getting

[01:16:27] that or they might simply want

[01:16:30] to I don't know they just feel more

[01:16:32] comfortable getting a little bit more of

[01:16:34] a diversification in there um now if you

[01:16:36] have extra cash I I I would say A you

[01:16:40] know uh real estate um

[01:16:44] income is is a good place to be uh why

[01:16:48] because it is it is a genuine

[01:16:50] diversification away from stocks and it

[01:16:52] is likely to still pay you income when

[01:16:54] the stock market goes kaput uh in in the

[01:16:57] short term your your tenant will still

[01:16:59] be there okay they might ask for

[01:17:00] discount at some point but they're still

[01:17:02] going to pay you some money so for me

[01:17:04] that is kind of the the breakdown here

[01:17:06] and as I say it really depends on a

[01:17:08] personal load there isn't a right or

[01:17:10] wrong answer I would just say if you are

[01:17:13] 100% in one of these four or five

[01:17:16] classes I would think about it because I

[01:17:19] think if you're 100% exposed to one

[01:17:21] thing um you you're probably missing out

[01:17:24] on something okay you could say if I'm

[01:17:26] 100% in dividends or 100% in value they

[01:17:29] are sort of the bonds you're just a

[01:17:30] conservative person and I respect that I

[01:17:33] totally get that but if you're 100% in

[01:17:35] growth or 100% in real estate or 100% in

[01:17:38] dividends I I I kind of think there is

[01:17:41] perhaps a little bit of room there for

[01:17:42] smart diversification not just

[01:17:45] diversification for the point of it guys

[01:17:47] so if you have any questions let me know

[01:17:49] you can also of course send me messages

[01:17:51] with what your situation is and

[01:17:52] everything and we can discuss it we can

[01:17:54] do it anonymous ly if if you like so

[01:17:56] thanks very much guys and see you on the

[01:17:59] next lesson and make sure do a little

[01:18:01] bit of homework have a look at what your

[01:18:04] assets are make a list make a list of

[01:18:06] what they're worth and make a list of

[01:18:08] what category they fall into at the

[01:18:10] moment and work out what return that

[01:18:13] actually gives you um net and I'm

[01:18:16] talking net after expenses and after

[01:18:18] taxes and particularly for Real Estate

[01:18:20] income that can be a little bit more

[01:18:22] tedious to work out because you have

[01:18:24] little bits of monthly and you know

[01:18:25] quarterly and annual expenses but do

[01:18:28] work it out it's really important to do

[01:18:30] it you don't need a huge software

[01:18:31] program a piece of paper will pretty

[01:18:33] much do you might need a few pieces of

[01:18:35] paper but eventually uh you you you kind

[01:18:37] of have it down uh and I think that's a

[01:18:38] good place to start to really see where

[01:18:40] your assets are now and which ones are

[01:18:43] performing and which ones aren't and

[01:18:45] that might be an interesting place to

[01:18:47] start but thinking about are there some

[01:18:49] things I want to sell or things I want

[01:18:50] to get more of and quite often we have

[01:18:53] the one gem already we just don't

[01:18:54] realize it and we can put perhaps put

[01:18:56] more more money into that one gem

[01:18:59] commonly used and most simple investment

[01:19:02] strategies there is really it is called

[01:19:05] dollar cost averaging dollar

[01:19:10] cost

[01:19:12] averaging what is it it just means that

[01:19:15] you are going to invest a fixed amount

[01:19:18] of money so you are spending a fixed

[01:19:22] amount of dollars in a

[01:19:26] fixed uh

[01:19:30] period what do I mean by that uh I

[01:19:32] basically mean you're going to say

[01:19:34] invest $100 every Monday or you're going

[01:19:36] to invest $1,000 every 30th of the month

[01:19:39] or whatever amount it is some people do

[01:19:41] it quarterly um I would advise to do it

[01:19:45] at least monthly and I'm going to get

[01:19:46] you why just in a moment if you have a

[01:19:50] 401k as an if you're an American you are

[01:19:53] probably already doing this well you're

[01:19:54] definitely already doing this you can't

[01:19:55] really go go without it um and what's

[01:19:58] the idea why do we bother doing this

[01:20:01] well it's basically um timing the market

[01:20:04] is just not something that most people

[01:20:06] are very good at most people buy at the

[01:20:09] top of the market and they sell at the

[01:20:10] bottom of the market that's just human

[01:20:12] psychology you read about it in the news

[01:20:15] and therefore you think oh my God that's

[01:20:16] G up this much let's go and buy it it's

[01:20:17] fantastic that was the peak then it it

[01:20:20] falls 10 or 20% and you think oh my God

[01:20:22] that was Dreadful let's sell it and

[01:20:24] that's what most investors do and that's

[01:20:25] sadly why most retail investors uh lose

[01:20:28] money over time much much better

[01:20:30] therefore to Simply follow a very simple

[01:20:32] model like this and to Simply say no

[01:20:35] matter what happens I am buying and that

[01:20:38] means through massive stock market

[01:20:40] crashes you keep buying because you

[01:20:42] actually it's more important to buy when

[01:20:44] it's down than when it's up why let me

[01:20:47] explain that so say say you have $100

[01:20:51] right and say your share price is

[01:20:56] $10 now say your share price is $15 or

[01:21:00] say your share price is say $7 how many

[01:21:04] shares do I get from this from the $10 I

[01:21:07] get 10 shares

[01:21:11] right I'm writing like a child I

[01:21:14] appreciate that

[01:21:16] guys 100 divided by 15 how many shares

[01:21:19] did I buy at that price I bought six

[01:21:22] shares assuming there is no fractional

[01:21:24] Trading

[01:21:25] and at a at seven 100 divided by 7 is 14

[01:21:29] I bought 14 shares so what does I mean

[01:21:33] it means that I bought more

[01:21:35] shares

[01:21:37] when the price was down can you see that

[01:21:40] here so basically at $7 I bought more

[01:21:43] shares whereas in the price was high at

[01:21:45] $15 I bought less shares and that's kind

[01:21:48] of the beauty of the concept so it

[01:21:50] averages you out to a lower price than

[01:21:54] if you had timed it sort of randomly

[01:21:57] generally speaking now will it always

[01:22:00] give you the best outcome no not

[01:22:02] necessarily if you are a investment

[01:22:05] genius and you always manage to time the

[01:22:07] bottom of the market you'll do better um

[01:22:11] but Chance has it and probability is

[01:22:13] kind of against you you will sometimes

[01:22:15] buy at the top of the market rather than

[01:22:16] at the bottom of the market and

[01:22:18] therefore um and you might also simply

[01:22:21] not buy and you might sit on that cash

[01:22:22] for long periods of time

[01:22:25] and then you wait for it to go up and

[01:22:26] then you buy to late which is what most

[01:22:28] people do so it's a particularly good

[01:22:31] method I think to slowly but surely

[01:22:34] build wealth through a fairly simple

[01:22:37] discipline and you can do it with an

[01:22:38] amount of money that isn't a scary

[01:22:40] amount of money for you so you don't

[01:22:42] have to sort of wait till the end of the

[01:22:43] year and say ah now I have $10,000

[01:22:45] $100,000 or $10 million whatever it is

[01:22:47] to you and now I have to invest all of

[01:22:50] this today oh my God what I'm going to

[01:22:51] going to do what if this is a terrible

[01:22:53] day to invest what if the market holds

[01:22:55] down 10% what if I'm buying at the top

[01:22:56] of the market and you know this kind of

[01:22:59] thing that we do at the end of the year

[01:23:01] when we decide that we've saved some

[01:23:02] money so the discipline of it is is one

[01:23:04] of the things that appeals to me about

[01:23:06] it now as I say um it doesn't

[01:23:10] necessarily get you to the better result

[01:23:12] but it massively reduces your risk of

[01:23:17] putting all your money in at the top of

[01:23:19] the market and I'm going to show you

[01:23:21] some examples here and then we're going

[01:23:22] to talk about whether it's a good idea

[01:23:23] to do this with stocks or with funds so

[01:23:25] this is Apple since 2010 and each little

[01:23:29] bar is a month so I'm assuming here

[01:23:32] you're doing this monthly um if you

[01:23:35] therefore bought each month you would

[01:23:37] have averaged out right you would have

[01:23:39] bought I I'm not going to do the exact

[01:23:41] math here but you know you would have

[01:23:43] obviously bought at these price levels

[01:23:45] and you would have probably be you know

[01:23:48] you your average price would be

[01:23:49] somewhere here I I I would I would guess

[01:23:51] I'm sort of making this a little bit

[01:23:52] random but your average price would

[01:23:54] would say be at sort of $70 $65 or so

[01:23:59] which would have been much better than

[01:24:00] perhaps waiting and buying when it was

[01:24:03] you know at $100 now of course in an

[01:24:06] ideal world you would have timed the

[01:24:09] market and you would have bought down

[01:24:11] here and down there and down there and

[01:24:13] we are going to get to that guys in in

[01:24:16] some of the the more advanced uh

[01:24:18] sessions on um for example this little

[01:24:22] indicator here 50-day moving average

[01:24:23] line that's a fairly fairly useful one

[01:24:25] particularly for the NASDAQ and some of

[01:24:27] these growth stocks that can give you

[01:24:29] entry points but uh for the moment we

[01:24:31] are going to look at this at a more

[01:24:33] simple method and that is simply if you

[01:24:36] can't be bothered to dig into charts

[01:24:38] every other day and see is it a good

[01:24:40] time is it not I think um

[01:24:43] dis discount cost averaging is a

[01:24:47] particularly useful method I do it I do

[01:24:49] it every week what do I do it with I

[01:24:51] don't do it with stocks I must say why

[01:24:55] because with particular stocks that I'm

[01:24:56] following I prefer to kind of watch the

[01:25:00] chart but I do it with either with funds

[01:25:03] or with ETFs because if I'm buying say

[01:25:06] uh the NASDAQ or the the S&P 500 or you

[01:25:10] know consumer staples or some sort of

[01:25:12] value fund or something like

[01:25:14] that I think these are companies that

[01:25:17] are not that volatile I don't think they

[01:25:20] go from a PE from 10 to 50 overnight

[01:25:23] they are generally speaking slow movers

[01:25:26] they're giv me my 11 12 13 14 15%

[01:25:30] annually I'm very happy with that and

[01:25:31] it's sort of a rock in my my portfolio

[01:25:34] so I am simply dumping money into them

[01:25:37] every single week no matter what happens

[01:25:40] and I think it's a very useful

[01:25:43] discipline uh and it's very hard to do

[01:25:46] when the market has crashed but that's

[01:25:48] the most important time to do it now

[01:25:50] there are more advanced versions of this

[01:25:52] where you exaggerate the amount you put

[01:25:55] in in down times and you buy less in up

[01:25:58] times but that's perhaps a model we can

[01:26:01] look at separately but this model alone

[01:26:04] I think is the simplest thing to do U it

[01:26:07] does give you an somewhat average return

[01:26:10] Yes but quite frankly nobody times the

[01:26:13] market right in the long run otherwise

[01:26:15] you know you'd all be billionaires and

[01:26:18] and few of us are at this point so I

[01:26:20] think it is a very very good thing to do

[01:26:22] to just do that discipline and do it

[01:26:23] with an amount that you can definitely

[01:26:25] afford to invest so if it's $100 a month

[01:26:29] no worries just do the $100 a month and

[01:26:32] just make sure that what you are buying

[01:26:34] has low fees to buy it and if you are

[01:26:36] buying a fund and it has a minimum fee

[01:26:37] of $50 to buy don't buy that find

[01:26:40] something else that has really really

[01:26:42] low fees and of course check with your

[01:26:43] brokerage what what the fees are for

[01:26:45] buying at that level and a lot of

[01:26:48] brokerages also have an automated system

[01:26:50] where you can set that up and you can

[01:26:52] just say every first of the month you

[01:26:54] are going to buy $100 of the S&P 500 or

[01:26:58] whatever it might be and you know what

[01:26:59] in the long run I I think you you will

[01:27:02] do very well with that if you look at uh

[01:27:05] look at the S&P 500 um this is basically

[01:27:08] it and if you've done that over let's

[01:27:11] make it percentages we don't have to go

[01:27:13] back forever let's go back to whatever

[01:27:15] 2010 say again you would have had a 271

[01:27:19] per um performance which is which is

[01:27:21] pretty good I mean there really is

[01:27:22] nothing wrong with that performance

[01:27:24] whatsoever uh at the moment it's 2021 so

[01:27:26] if we make it 10 years uh that would

[01:27:29] have been 220% in 10 years that's pretty

[01:27:33] good right I mean I I really don't think

[01:27:35] that's something to be sniffed at

[01:27:36] without ever worrying or thinking or

[01:27:39] doing any kind of research of any kind

[01:27:41] whatsoever simply just having that

[01:27:44] automated um $100 going in a month or

[01:27:46] you know whatever amount you're

[01:27:47] comfortable with but just make sure it

[01:27:49] is an amount you can actually do so

[01:27:50] there can't be any excuses oh no this

[01:27:52] month I have to pay for the holiday or

[01:27:54] something no no no no that's not how it

[01:27:55] works it has to be an amount you can do

[01:27:57] absolutely every month and if that means

[01:27:59] sometimes you leave a little bit of cash

[01:28:01] lying over so you can do it in periods

[01:28:03] where you have higher expenditures

[01:28:04] during the year do that but keep going

[01:28:07] with the discipline of it I think it's a

[01:28:09] really good strategy ETFs versus mutual

[01:28:11] funds it's perhaps a question a lot of

[01:28:14] you think you know the answer to and a

[01:28:15] lot of the press in recent years has

[01:28:17] been very favorable to ETFs and there

[01:28:19] are good reasons for that but there's

[01:28:20] also still a place for the good old

[01:28:22] mutual fund so let's let's look into

[01:28:24] really what the differences are I will

[01:28:27] try to make some notes on our whiteboard

[01:28:29] here as we go along so what's the what

[01:28:31] are they both have in common basically

[01:28:33] they hold a lot of a large portfolio of

[01:28:35] different stocks or possibly bonds or

[01:28:38] sometimes other stuff like Commodities

[01:28:40] but they're generally speaking um are

[01:28:42] fairly similarly regulated uh you can

[01:28:45] basically own a lot of stuff through one

[01:28:47] click and both can also be leveraged so

[01:28:50] so far they are fairly similar they can

[01:28:52] both track indices yes there are mutual

[01:28:55] funds that track indices not just ETFs

[01:28:58] uh however ETFs tend to be cheaper and

[01:29:00] we're going to get into why that is um

[01:29:04] mutual funds have of course active

[01:29:06] management and that can be an advantage

[01:29:08] now I hear you saying there are some

[01:29:10] ETFs that are actively managed and that

[01:29:12] is true there are still very few and far

[01:29:14] in between but Arc of course being one

[01:29:16] of the most famous ones that is

[01:29:18] essentially a mutual fund but marketed

[01:29:21] like an ETF and has fees that are closer

[01:29:24] to an ETF than a traditional M mutual

[01:29:27] fund now one of the main differences

[01:29:29] really is that how

[01:29:31] you buy them right so um when you buy an

[01:29:37] ETF you are buying that ETF from a

[01:29:40] seller in the Market On The Exchange

[01:29:43] whereas when you are buying a mutual

[01:29:45] fund you're buying it from the fund so

[01:29:48] that's one of the main differences is uh

[01:29:50] so ETF

[01:29:55] you know we have buyers and

[01:30:00] sellers with the mutual fund we do not

[01:30:03] mutual fund you are typically it's once

[01:30:05] a time a day you put in your order it

[01:30:07] gets sent to the mutual fund they

[01:30:09] typically charge you a fee for that and

[01:30:11] they basically issue with a sort of a a

[01:30:13] share if you will in the fund whereas

[01:30:17] how do ETFs do this well mutual funds

[01:30:21] obviously get your money and then with

[01:30:23] that money they buy more of the

[01:30:24] underlying shares and that way the net

[01:30:26] asset value gets lifted up to the new

[01:30:30] Mutual Fund price so they can kind of

[01:30:32] track that internally but it is a little

[01:30:34] bit more work for them because you know

[01:30:36] you are buying it directly for them

[01:30:38] whereas with an

[01:30:39] ETF you are simply buying it like you

[01:30:42] would a share on the market so the stock

[01:30:43] exchange does that business now the one

[01:30:46] thing the ETF does have to do is that

[01:30:48] when everybody buys that

[01:30:51] ETF it means that

[01:30:54] the there would be a discrepancy between

[01:30:56] the value of the sort of ETF share if

[01:30:58] you if you can call it that and the

[01:31:00] underlying net asset assets therefore

[01:31:02] the ETF issues more shares so that's

[01:31:06] kind of how they manage the difference

[01:31:08] between the net asset value and the ETF

[01:31:11] price so they simply create more Supply

[01:31:13] to basically bring the price back down

[01:31:15] and all of that is done by by by

[01:31:18] software basically there isn't a person

[01:31:19] there sitting like how many shares shall

[01:31:21] we issue today that is not what Cathy is

[01:31:23] up to one of these kind of managers no

[01:31:25] it is all done automatically so it is

[01:31:27] much more cheaper um another Advantage

[01:31:30] typically people site for ETFs is

[01:31:35] tax why well say you reside in the

[01:31:37] United States and it is similar in many

[01:31:40] many jurisdictions um both

[01:31:44] are if you hold an ETF or mutual fund

[01:31:47] you're typically taxed on your gains and

[01:31:49] losses

[01:31:51] incurred however ETFs do a lot less

[01:31:54] trading internal trading um and those

[01:31:57] internal trades create less taxable

[01:31:59] events so unless you are investing

[01:32:02] through this through a sort of 401k or

[01:32:04] some sort of

[01:32:06] taxfree kind of mechanism uh there is an

[01:32:10] advantage because basically your mutual

[01:32:12] funds will distribute taxable gains to

[01:32:15] you even if you did not sell your mutual

[01:32:19] fund so that is a little bit of a mutual

[01:32:21] fund downside whereas with ETF the tax

[01:32:24] is generally only an issue and I'm not a

[01:32:27] tax adviser guys but generally it's only

[01:32:29] an issue once you sell now somewhere

[01:32:31] down the road if you live in a

[01:32:32] jurisdiction that taxes you on on on

[01:32:34] your trading you will still have to pay

[01:32:37] the tax but you can defer it that way so

[01:32:40] that's kind of an important one um to

[01:32:43] understand

[01:32:46] um now what about mutuals then what is

[01:32:49] what is the actual

[01:32:51] Advantage uh mutual funds and I'm

[01:32:54] writing like a child I appreciate that

[01:32:56] uh well the advantage is you have a

[01:32:59] jockey what do I'm what on Earth am I

[01:33:01] talking about I draw a horse here but

[01:33:03] this pen really doesn't allow me to do

[01:33:04] that this little device here well

[01:33:07] basically you have a jockey on the horse

[01:33:09] that is I think a good analogy an

[01:33:11] investment advisor gave me many years

[01:33:13] ago and that is because there is someone

[01:33:16] who's actually actively monitoring that

[01:33:20] that has a positive if they know what

[01:33:22] they're doing and they are intelligent

[01:33:24] and well researched and you know

[01:33:26] rational being it does of course also

[01:33:29] mean that they're going to spend more

[01:33:30] money on analysts and on research and uh

[01:33:34] you know company visits to the companies

[01:33:35] they're investing in all these things

[01:33:37] that is a little bit more expensive to

[01:33:40] run but it can have an advantage and

[01:33:42] there are some very very good mutual

[01:33:44] funds I I do actually buy some mutual

[01:33:47] funds well actually mainly just the one

[01:33:49] um which is is is a UK fund which I've

[01:33:52] talk talked to you about in I we'll talk

[01:33:54] to you about again later on um it's

[01:33:56] called fundsmith in case you're

[01:33:57] wondering um so why because they have

[01:34:00] relatively low fees and they are managed

[01:34:02] by by somebody who I think is is very

[01:34:03] intelligent and and does a very good job

[01:34:06] in keeping an eye on things and it means

[01:34:07] I don't have to so I don't mind paying

[01:34:09] them a little bit of money I wouldn't

[01:34:11] want to pay them 5% a year but I don't

[01:34:13] mind paying them a percent or so so um

[01:34:16] what is therefore kind of our summary

[01:34:17] here

[01:34:18] well if you are just trying to kill a

[01:34:22] sector uh in a sort of lazy approach and

[01:34:26] I like lazy investing I think it's great

[01:34:28] to be lazy it means you can enjoy your

[01:34:29] life and two other more interesting

[01:34:31] things then an ETF is probably the way

[01:34:34] to go um and I wanted to show you again

[01:34:37] let's go back to this tool here FV dop

[01:34:39] putnam.com if you want to find some

[01:34:43] funds or ETFs I think that's is quite an

[01:34:45] interesting one so why don't we go back

[01:34:46] to our value example not because that's

[01:34:49] all we should ever buy but that's what

[01:34:51] we were looking at earlier so if we look

[01:34:53] at large cap value that's the sector on

[01:34:55] here it then shows us funds and ETFs so

[01:34:59] now it shows us quite a lot of them

[01:35:01] 279 of them here so you're thinking oh

[01:35:04] my God how am I going to pick the good

[01:35:05] ones well I'll give you a couple of uh

[01:35:08] pointers first of all expense ratio

[01:35:11] that's really one of the main things

[01:35:12] that matters so let's just take that

[01:35:13] down to say uh well maybe a percent I

[01:35:17] think that would be a reasonable fee um

[01:35:20] that would be I mean actually quite an

[01:35:21] expensive fee for a lot of them and now

[01:35:23] we have 258 all right so a lot of these

[01:35:25] will be ETFs let's take this down then

[01:35:27] to 66 let's say and see how many we've

[01:35:31] got left did it do that no it

[01:35:34] didn't there we

[01:35:36] go apply I need to click

[01:35:39] apply okay now we have 78 left that's

[01:35:42] starting to look a little bit better so

[01:35:44] what we can then do here is performance

[01:35:46] is one thing uh Alpha is another what is

[01:35:49] Alpha it is basically the amount by

[01:35:51] which they outperformed this sort of

[01:35:53] Industry so then we can look at Alpha

[01:35:55] here and why don't we then look at we

[01:35:57] can also filter that we can look at

[01:36:01] those who have well you want positive

[01:36:02] Alpha otherwise you're doing something

[01:36:04] really quite wrong so why don't we take

[01:36:06] the ones that have more than Alpha of

[01:36:09] one so now we left with 14 right you're

[01:36:11] starting to see where I'm heading with

[01:36:13] this you could of course filter a little

[01:36:15] bit more um over here we could perhaps

[01:36:17] take the expense ratio down down some

[01:36:19] more because I hate paying for things I

[01:36:21] don't need to pay for so why don't we

[01:36:23] look at these now by doing this we have

[01:36:25] of course now excluded mutual funds

[01:36:27] because most mutual funds cannot live on

[01:36:29] those kind of fees so now we've got

[01:36:30] three and we've got this one here and

[01:36:33] that one and that one and they have done

[01:36:35] the best so um we can put that on here

[01:36:38] that makes it then a

[01:36:42] reference okay and then the other ones

[01:36:44] tell me like you know how we can do that

[01:36:46] but you basically you get the idea that

[01:36:49] uh you can kind of create an overview

[01:36:51] there let's just do that again very

[01:36:52] quickly so we I haven't lost you here so

[01:36:56] you can do that so let's just take our

[01:36:59] expense ratio back down to you know 0.5

[01:37:02] or

[01:37:03] thereabouts apply that and we want an

[01:37:07] alpha that's say greater than

[01:37:10] two something like that that leaves us

[01:37:13] with four left so now all we can do you

[01:37:15] know we just look at that at these

[01:37:17] basically we just click our way around

[01:37:20] it uh add to comparison can we do that

[01:37:24] uh for some reason not but anyway you

[01:37:26] can write them down and then you can you

[01:37:28] can write down these four tickers uh and

[01:37:30] then you can simply go back to the

[01:37:32] homepage and you can click on compare

[01:37:34] you can type the four in here and then

[01:37:35] you can get that nice overview again and

[01:37:37] you can see everything about them you

[01:37:38] can see what they hold Etc on sort of

[01:37:40] one screen so I think that's always a

[01:37:42] nice place place to start so um the only

[01:37:45] reason really I would buy mutual funds

[01:37:47] is a they have relatively low fees and

[01:37:49] by by that I mean sort of below a

[01:37:51] percent and they have very good fund

[01:37:54] manager so that is something to think

[01:37:57] about and there are not that many great

[01:37:58] fund managers quite frankly most of them

[01:38:00] are dread for but there are always a

[01:38:02] handful who are very good and who are

[01:38:04] worth worth uh paying a little bit of

[01:38:06] money for and again you then if you

[01:38:08] trust that individual all you have to do

[01:38:11] I would say is is read their quarterly

[01:38:12] statements read their annual statements

[01:38:14] a lot of these fund managers Now put on

[01:38:17] YouTube the sort of annual reports and

[01:38:19] things like that do watch those still

[01:38:20] because they are kind of your earnings

[01:38:22] um cord if you will and again I would

[01:38:25] make a list of the at least top five

[01:38:27] Holdings pin it on your wall and pay

[01:38:30] attention to those five stocks as if you

[01:38:31] were invested in them directly because

[01:38:33] you are essentially so that's a quick

[01:38:35] Roundup here on ETFs versus mutual funds

[01:38:37] I wouldn't say mutual funds are over

[01:38:39] there is a place for them but what for

[01:38:42] what most people are trying to achieve

[01:38:44] that is to track a certain index or just

[01:38:46] sort of dump money in discriminant on

[01:38:48] the NASDAQ or the S&P um I think ETFs

[01:38:51] are the the easier way to go and in that

[01:38:53] case the main criteria quite frankly is

[01:38:55] fees so look for fees and look for

[01:38:57] transaction costs that's really the key

[01:38:59] stocks versus ETFs it's a question I

[01:39:02] guess a lot especially from sort of

[01:39:04] fresher investors also some seasoned

[01:39:06] investors who saying what should I do if

[01:39:08] I'm interested in this sector or this

[01:39:10] company should I pick this company or

[01:39:13] should I go

[01:39:14] for the whole sector through an ETF

[01:39:17] what's really the advantage and the

[01:39:19] disadvantages to that so we're going to

[01:39:21] look at that um I will try and run a few

[01:39:24] things on the Whiteboard here with my

[01:39:26] horrific writing that you are used to by

[01:39:28] now um what's the whole point of the ETF

[01:39:31] well I think the first thing is really

[01:39:33] um I

[01:39:35] am

[01:39:36] lazy uh that's the first one and I don't

[01:39:38] mean that in a bad way I just mean

[01:39:40] acknowledging the fact that I cannot be

[01:39:43] bothered to look into the inside of all

[01:39:46] of the say okay what are we going to

[01:39:50] look at say um battery manufacturers or

[01:39:52] something we've been looking at here as

[01:39:54] a community because it's a it's a Hot

[01:39:56] Topic at the moment with green energy

[01:39:58] and with EVS Etc I cannot be bothered to

[01:40:01] dig through the financials and the

[01:40:03] analyst reports and the technology and

[01:40:05] the patterns and the size of the

[01:40:07] companies who their customers are all

[01:40:09] that kind of stuff for say half a dozen

[01:40:12] or a dozen or so B battery manufacturers

[01:40:14] and then pick the one that I think will

[01:40:16] be the best one because quite frankly I

[01:40:18] find it quite hard to understand the

[01:40:20] Battery Technology because I'm not an

[01:40:22] engineer and some of that chemistry goes

[01:40:25] over my head so can I be bothered to

[01:40:27] look through them all no not really I'm

[01:40:29] just too lazy to do it and I think

[01:40:30] that's a very very very good thing to

[01:40:32] admit to ourselves and therefore just go

[01:40:34] all right therefore let me look at an

[01:40:36] ETF so that's that's I think one of the

[01:40:39] main reasons is if you don't want to do

[01:40:42] the research or if you haven't got the

[01:40:44] sector specific Insight now on the flip

[01:40:47] side of that coin is say you are an

[01:40:50] engineer or a manager in for examp

[01:40:53] example an aircraft manufacturing

[01:40:55] company say you work for Boeing or

[01:40:57] Airbus or one of those guys or perhaps

[01:40:59] one of their key suppliers uh therefore

[01:41:02] through your day-to-day knowledge the

[01:41:04] meetings you have the people you see the

[01:41:05] news you get to your your your employer

[01:41:08] you know a great deal about that space

[01:41:10] you know the kind of projects that are

[01:41:12] in the offing you know who your main

[01:41:13] competitors are you probably know quite

[01:41:15] a lot about a supply chain that to most

[01:41:18] other people out there it's just you

[01:41:20] know they don't even know it exists so

[01:41:22] you have insight to a fairly complex

[01:41:25] industry therefore you're probably a

[01:41:27] better stock picker in that sector than

[01:41:30] most but then if you are going to go and

[01:41:32] buy I don't know software companies or

[01:41:35] you know something completely unrelated

[01:41:37] say car manufacturers you probably

[01:41:39] aren't now you might understand the

[01:41:41] principle of it but until you've really

[01:41:42] dug into it you are as sort of clueless

[01:41:45] as the rest of us and that can apply to

[01:41:47] a lot of things so a lot of the time I

[01:41:49] recommend to buy things that you know

[01:41:53] that you are exposed to I don't just buy

[01:41:55] them because you see them and they do

[01:41:57] great advertising but it makes looking

[01:41:59] into that company a lot easier and I've

[01:42:02] kicked myself quite a lot of times over

[01:42:04] the years when I've been using software

[01:42:06] for example for business and then I see

[01:42:08] that that the stock later five years

[01:42:10] later and I'm like H I think I should

[01:42:12] have put that stock because I thought

[01:42:14] the product was fantastic but again I

[01:42:15] didn't do look into their financial so

[01:42:17] um that's I think for me the first part

[01:42:20] um it's lazy the second part is um

[01:42:24] I want to write diversification but I

[01:42:25] don't really like the word so I'm going

[01:42:27] to write volatility

[01:42:31] instead uh why do I not like the word

[01:42:34] diversification because a lot of people

[01:42:36] diversify for the sake of diversifying

[01:42:38] say they find five good stocks but they

[01:42:42] think it's risky to hold five good

[01:42:45] stocks and I should diversify because

[01:42:47] that's what everybody tells us right all

[01:42:48] the financial advisers tell you to to

[01:42:51] diversify why did they do that well the

[01:42:53] more things you have the more

[01:42:54] commissions they make and the more often

[01:42:57] they can trade the more often they

[01:42:58] collect fees on those trades that's my

[01:43:01] slightly cynical take on that industry

[01:43:03] so diversification for the sake of

[01:43:06] diversification is worse than not

[01:43:08] diversifying now if you only own one

[01:43:11] growth stocks I would say

[01:43:14] diversify unless you really love that

[01:43:16] kind of risk and you're a bit of a

[01:43:18] gambler at heart you know you get a kick

[01:43:20] out of that sort of thrill but really

[01:43:23] what is diversification about it's about

[01:43:25] reducing volatility while at the same

[01:43:28] time maintaining uh what the industry

[01:43:31] strangely calls alpha or you know Greek

[01:43:34] Alpha there that's that's a terrible

[01:43:36] Alpha isn't it there it is so why does

[01:43:40] the industry call this alpha alpha is

[01:43:42] basically the indicator that says it

[01:43:44] performs better than the average it

[01:43:46] performs better than the rest of the

[01:43:48] stuff in that sector so generally

[01:43:51] speaking people want to get high alpha

[01:43:53] because then you've outperformed the

[01:43:54] market which is very nice rather than

[01:43:56] just getting the average so the

[01:43:59] advantage of an ETF is that it typically

[01:44:02] has less volatility than its sector uh

[01:44:07] why because you not just picking one

[01:44:10] company in that sector but you're

[01:44:11] picking like 10 or 20 of them therefore

[01:44:13] one of and two of them will be massively

[01:44:15] volatile the other ones will be less

[01:44:16] volatile in most in

[01:44:20] cases there are perhaps exceptions to

[01:44:23] that rule um for

[01:44:27] example if you look at utilities or

[01:44:29] Consumer Staples say let's take Consumer

[01:44:32] Staples so we were looking at momic

[01:44:34] earlier Consumer Staples so stuff that

[01:44:37] basically you buy on every single day no

[01:44:39] matter what happens whether it's it's

[01:44:41] it's sunny or whether it rains so the

[01:44:42] economy is good or it's bad you just buy

[01:44:45] that stuff right so if you look we're

[01:44:47] looking at an example earlier of spices

[01:44:49] people will always buy spices people

[01:44:50] have to be incredibly impoverished

[01:44:53] before they stop buying spices uh

[01:44:55] therefore that's that's a pretty pretty

[01:44:58] safe one to to to go for as as a

[01:45:00] consumer staple it's a good example now

[01:45:02] in consumer staples typically the whole

[01:45:04] sector moves more or less in a kind of

[01:45:08] relatively low volatility basis and

[01:45:10] therefore a lot of people buy an ins out

[01:45:12] sector using an ETF because the main

[01:45:16] advantage of picking a stock is that you

[01:45:19] can pick the one out of the 20 that's

[01:45:21] going to perform well that's going to

[01:45:22] give you more Alpha it's going to give

[01:45:24] you performance above the average if the

[01:45:26] whole sector sort of moves all in tandem

[01:45:28] well why not just buy it an ETF you get

[01:45:31] a little bit less volatility here and

[01:45:34] and at the same time you don't really

[01:45:36] have to do all that much right you don't

[01:45:39] have to look into the individual

[01:45:41] companies as much so um that's I think a

[01:45:45] a good reason to buy an ETF um if you

[01:45:48] look at the more growth stocks at the

[01:45:49] more tech stocks so say biotech or you

[01:45:53] know all that kind of stuff what's

[01:45:54] coming out at the moment um they have

[01:45:58] exceptionally High volatility because it

[01:46:01] all depends on whether your drug or your

[01:46:06] treatment gets approved by the FDA when

[01:46:09] it does you get you know th% plus the

[01:46:12] ones that don't they die so it's fairly

[01:46:15] high risk to pick a winner unless you

[01:46:18] already know something about it say

[01:46:19] again you are some sort of you know

[01:46:21] medical professional bio science God

[01:46:24] knows what type you know researcher then

[01:46:26] you might have the inside track and you

[01:46:28] understand you can look at the research

[01:46:30] and you know who's got more or less of a

[01:46:32] chance and then yes you can stock pick

[01:46:34] if you don't have that knowledge I

[01:46:35] wouldn't bother I wouldn't follow the

[01:46:37] headlines uh but if you still want to

[01:46:39] exposure to that sector you can again

[01:46:40] buy an ETF gives you less volatility but

[01:46:43] it still gives you you know fairly good

[01:46:45] upside

[01:46:47] so really um I also want to show you

[01:46:50] guys a a a really great place to search

[01:46:52] for ETF I'm going to show you that in

[01:46:54] just a second but just as a sort of

[01:46:56] summary basically um the advantage of

[01:47:00] ETFs over stocks is basically you can be

[01:47:03] lazy you get less volatility you can

[01:47:05] still outperform the market if you pick

[01:47:08] a subsection of the market with an ETF

[01:47:11] um it has pretty low fees it is just

[01:47:13] easier the advantage of stocks is if you

[01:47:16] know something about that stock and

[01:47:18] you've spent the time researching it and

[01:47:20] that really is the key thing or you have

[01:47:21] an inherent knowledge of that sector

[01:47:24] then you can you you can you can really

[01:47:26] find a winner and therefore you can get

[01:47:28] a lot of alpha you become the alpha

[01:47:31] investor so that's that's kind of an

[01:47:32] interesting one now let me show you this

[01:47:35] here this is a website called um fv.

[01:47:38] putut namam pnam m.com and it is

[01:47:42] intended in only for financial advisors

[01:47:45] of which I am not one but you can

[01:47:47] register it's free and once you signed

[01:47:50] up you can compare ETFs and I think I

[01:47:52] think also funds and it's actually super

[01:47:55] super handy so for example I was saying

[01:47:57] earlier consumer stapled so so simply

[01:47:59] type in consumer

[01:48:01] staples and then it lists for you here

[01:48:04] uh 18 funds that are Consumer Staples um

[01:48:08] I think it uses the fund term rather

[01:48:10] Loosely because ETFs are also included

[01:48:12] in this so for example you can compare

[01:48:14] the Vanguard one against the Fidelity

[01:48:17] One um and maybe you want to throw in a

[01:48:20] a a a a Bank Of Me melon New York

[01:48:23] maybe you want to throw in Invesco as

[01:48:25] well and there you have it you've got

[01:48:27] these four now you click

[01:48:30] create and then you have to have a

[01:48:31] little bit of patience and here we go it

[01:48:33] gives you a nice comparison and it

[01:48:35] really I find this really super helpful

[01:48:37] so what have we got here well we've got

[01:48:39] obviously what there are uh we have

[01:48:42] morning star ratings I

[01:48:44] don't personally I don't buy on the

[01:48:46] basis of that because I'm not entirely

[01:48:48] sure what they're rating it on you get

[01:48:50] obviously performance overview here uh

[01:48:52] they are fairly similar uh you can see

[01:48:55] there's another one over here um there

[01:48:59] are small differences 2 3% differences

[01:49:01] so that's kind of interesting to see why

[01:49:05] uh and then we can can you can can see

[01:49:07] return versus category so that's

[01:49:09] basically our Alpha does it outperform

[01:49:11] the category yes or no versus the index

[01:49:15] here is our Alpha right is it positive

[01:49:16] is it

[01:49:18] negative um and then you get some other

[01:49:20] ratios we can get into some of those a

[01:49:21] little bit later but again one of the

[01:49:23] key things I look at is expense ratio so

[01:49:27] looking at these three four here uh the

[01:49:30] first one VDC has an expense ratio of

[01:49:32] 0.1 to me that is therefore almost

[01:49:35] automatically a winner compared to the

[01:49:37] other ones because they can convince me

[01:49:39] if they have something truly special in

[01:49:41] there but quite frankly why would I pay

[01:49:43] three times or even seven times the

[01:49:45] price for no real reason also turnover

[01:49:49] ratio that basically is an indicator of

[01:49:52] internal transaction cost that typically

[01:49:54] funds don't disclose to you but every

[01:49:57] single time they trade they are

[01:49:59] encouraging brokerage fees themselves

[01:50:01] and who pays for that well you do it's

[01:50:03] just that they don't tell you about it

[01:50:05] so again uh a huge turnover ratio here

[01:50:08] uh over 119 versus three well for me

[01:50:11] therefore VDC seems to be kind of the

[01:50:13] winner and then we can look through

[01:50:16] through this here VDC is the yellow one

[01:50:19] here so it isn't the best performer PSL

[01:50:22] certainly outperformed so we have to

[01:50:24] look at and find out why they have um

[01:50:28] you can also see that here on a a a a

[01:50:30] bar scale again it tells you which fund

[01:50:32] is which so VDC is our cheapest fund but

[01:50:36] it hasn't performed well over three

[01:50:39] years it's done rather well over 10

[01:50:41] years it's done pretty well but actually

[01:50:44] this fund here PSL the most expensive of

[01:50:47] the lot does seem to be doing better

[01:50:49] possibly they're leveraged or something

[01:50:51] like that so youd have to do a bit bit

[01:50:52] more digging into that and then you can

[01:50:54] compare things like performance standard

[01:50:57] deviations Alpha for example you you can

[01:51:00] kind of see who's done better or worse

[01:51:03] you can also see how correlated they are

[01:51:05] and that's again an interesting one for

[01:51:06] eliminating things if you're looking at

[01:51:08] things that are the same just look at

[01:51:10] the cheaper one because they're obiously

[01:51:11] the same so VDC and FDX have a

[01:51:15] correlation of 97 so at that point what

[01:51:18] am I going to do I am simply going to

[01:51:20] get rid of FDX because it has higher

[01:51:23] fees and it is essentially the same it

[01:51:25] moves almost identically so that then

[01:51:28] leaves me with with with just these

[01:51:30] three um asset allocation for these guys

[01:51:34] pretty similar it's all stock

[01:51:36] basically uh what sector are they

[01:51:38] invested in very consumer defensive so

[01:51:41] here we see a little bit of a difference

[01:51:43] here PSL they have some consumer

[01:51:45] cyclical stocks in there uh and often

[01:51:47] actually you can click down here also on

[01:51:49] the link it gives you a link to the

[01:51:50] prospectus so that can be kind of

[01:51:53] an easy way and here we go we can see

[01:51:56] what they're invested in so VDC and fund

[01:51:59] very similar right Philip Morris mes

[01:52:02] alria EST lorda I mean again to me

[01:52:05] almost the same same thing are these two

[01:52:08] companies so therefore what am I going

[01:52:09] to do well I'm going to get rid of the

[01:52:12] melon fund because again it was more

[01:52:15] expensive in terms of fees and I'm

[01:52:17] getting the same thing so now I've just

[01:52:18] got these two which are really quite

[01:52:20] different there are some overlap here

[01:52:23] things like EST laa company are in both

[01:52:26] um and there are perhaps a couple of

[01:52:28] others but it's quite a different take

[01:52:30] on it so you kind of narrow down of

[01:52:31] course you can do this with more uh

[01:52:34] stocks kind of very quickly the big

[01:52:37] differences here so VDC is a more

[01:52:40] traditional value uh kind of fun or ETF

[01:52:44] rather what I would probably kind of

[01:52:47] shout out as names in terms of value

[01:52:49] stocks whereas PSL is a little bit more

[01:52:52] on the unusual side although there are

[01:52:55] some good stocks in here like momic for

[01:52:57] example some of the pet stocks are good

[01:52:59] so I can see why they are in here so I

[01:53:02] think at that point you'd have to go and

[01:53:03] look at the prospectuses and see really

[01:53:05] what's the difference between these

[01:53:06] companies is this perhaps a little bit

[01:53:08] more of a small cap play versus a large

[01:53:11] cap play or you know so but I just

[01:53:14] wanted to throw this out as an

[01:53:15] illustration if you're wanting to

[01:53:16] compare funds I think put Nam fv. pn.

[01:53:22] com is a pretty interesting one so I

[01:53:25] think that's a good

[01:53:26] resource um what is my sort of final

[01:53:30] word on this well whether you're buying

[01:53:32] stocks or

[01:53:36] ETFs there is one

[01:53:38] rule

[01:53:40] do

[01:53:42] your

[01:53:45] homework and that is regularly because

[01:53:49] just because you bought bought the ETF

[01:53:50] it doesn't mean that the company's in it

[01:53:52] don't change so still having a look at

[01:53:56] just put a list on your wall that's what

[01:53:58] I do with if I buy a fund on ETF I print

[01:54:00] out this the top 10 this is

[01:54:03] 95% well not quite but it's it's it's

[01:54:05] the largest chunk of that holding so I

[01:54:07] look at these top 10 companies um rather

[01:54:10] okay this is the top 50 the top 10 has

[01:54:12] 62% of this fund right so that's really

[01:54:14] all you need to care about print out

[01:54:15] these 10 or print out their logos it

[01:54:17] looks prettier on a wall and then pay

[01:54:20] attention to those maybe have a GOOG

[01:54:22] alert or some sort of tracker for them

[01:54:24] and every once in a while look at their

[01:54:27] performance I would recommend listening

[01:54:30] to the earnings calls maybe not for all

[01:54:32] 10 but at least for the top five uh

[01:54:35] that'll take you yeah it'll take you

[01:54:36] five hours once a quarter but if it is a

[01:54:39] substantial investment for you I think

[01:54:41] it is good to do it because you will

[01:54:43] sort of see any concerns from the

[01:54:45] analyst questions there uh of why are

[01:54:48] things changing or maybe just listen to

[01:54:50] the last 20 minutes of the earnings

[01:54:51] score that typically the analyst

[01:54:53] questions and they will ask questions

[01:54:55] that will give you an indication of

[01:54:56] whether they are concerned or whether

[01:54:58] they're happy or whether they're bullish

[01:54:59] or bearish so that's kind of a good sort

[01:55:01] of early indicator there guys so um I

[01:55:04] think as as a as a wrap really I think

[01:55:06] both ETFs and stocks are a great way to

[01:55:10] invest um just stocks require more

[01:55:13] knowledge on that specific stock don't

[01:55:15] buy things just because it's in the

[01:55:17] headline look at the numbers look at the

[01:55:19] maths look at their performance and if

[01:55:23] it's a growth stock well you're G to

[01:55:25] have to start and understand the tech

[01:55:27] behind it or at least the business model

[01:55:29] behind it how and when are they going to

[01:55:31] make money and how do they stop others

[01:55:34] from copying them and how hard is is it

[01:55:37] is to copy that and I think that's kind

[01:55:39] of what a lot of people don't do

[01:55:41] especially in a bull market again to

[01:55:43] give you another example I bash Airbnb

[01:55:45] quite a lot I think it's a brilliant

[01:55:47] idea um is fantastic service I love

[01:55:50] using it but I think it's a dreadful

[01:55:53] business because it's very easy to

[01:55:55] replicate because there are a lot of

[01:55:57] companies that have the same data and we

[01:55:59] all have search now so every single

[01:56:02] property that is on Airbnb is probably

[01:56:04] also on expedia.com and and a a number

[01:56:07] of other local sort of competing

[01:56:09] services so therefore me as the consumer

[01:56:12] where do I book it well wherever it's

[01:56:14] cheaper I really don't care whether it's

[01:56:16] Airbnb or any of the other sites because

[01:56:18] I'm getting the same apartment or house

[01:56:20] or whatever it is that I'm renting so

[01:56:22] for me that's an example of a great

[01:56:24] business idea but what's the mo in

[01:56:27] theory it's is it is acquiring the

[01:56:30] listings but actually all Airbnb has

[01:56:33] done is they've knocked on the door of

[01:56:34] every property in the world and they've

[01:56:36] told them hey you can make money with

[01:56:37] this property on on Airbnb and then

[01:56:39] everybody thought okay let me do that

[01:56:40] and then they did that for a few months

[01:56:42] and then they realized hang on I can

[01:56:44] also put it on other other sites I can

[01:56:46] put it on this one I can put it on that

[01:56:47] one and it doesn't really cost me any

[01:56:49] anymore I don't really care so why

[01:56:51] didn't I put it on everything and

[01:56:52] therefore they've kind of created an

[01:56:54] industry without protecting themselves

[01:56:56] without creating an asset without

[01:56:58] creating some sort of loyalty and I

[01:57:00] think that would be perhaps a good idea

[01:57:02] for them they should have consumer

[01:57:04] loyalty points the sort of mileage

[01:57:06] program what airlines have and that's

[01:57:08] why Airlines do it because it's a fairly

[01:57:10] similar service Airlines I appreciate

[01:57:12] some are better than others but the

[01:57:14] reason we stick with one typically is

[01:57:16] because that's where we get our points

[01:57:17] from our miles from so that's kind of

[01:57:20] what they're missing that's sort of

[01:57:21] Amazon Prime type thing that's another

[01:57:23] reason why Amazon's doing that because

[01:57:25] it makes it very hard for other people

[01:57:26] to steal those customers because once

[01:57:28] I'm paying for that subscription to get

[01:57:31] that discount and that free shipping

[01:57:33] well I'm going to just buy it there

[01:57:34] aren't I unless Amazon was much much

[01:57:36] more expensive but here I'm I'm

[01:57:38] digressing I'm ranting that is not the

[01:57:40] intention this is ETFs versus stocks I

[01:57:43] think both have a place if you want to

[01:57:45] take the let say fair the I can't be

[01:57:48] bothered approach buy ETFs but if you're

[01:57:51] buying very sector specifics ETFs you're

[01:57:53] still going to have to do some research

[01:57:55] on that sector that's the bad news I'm

[01:57:57] afraid if you are just buying the NASDAQ

[01:58:00] or the S&P 500 well you can just buy it

[01:58:02] and pretty much forget about it although

[01:58:04] we will look at timing uh a little bit

[01:58:07] later here in in this course but if you

[01:58:10] are buying something very Niche you

[01:58:11] still have to understand that Niche

[01:58:13] otherwise you can also fall on your face

[01:58:15] we are going to look at actual income

[01:58:17] statements start to learn to read them

[01:58:19] and a couple of things we're going to

[01:58:21] look at in particular here we going look

[01:58:22] at operating margins we're going to look

[01:58:24] at IID da and we're going to see how

[01:58:26] those things really make an enormous

[01:58:28] difference when looking at um Financial

[01:58:32] so it's important to understand those I

[01:58:34] would say so here we have Tesla's income

[01:58:36] statement for the last three Financial

[01:58:39] years um the most recent one being the

[01:58:41] end end of year

[01:58:43] 2020 so what do they actually include

[01:58:46] let's go through this not entirely line

[01:58:48] by line but the sort of important line

[01:58:50] so uh Revenue well that's simply all the

[01:58:52] money the company received right for

[01:58:54] whatever it was selling all goods and

[01:58:56] services sold that's the amount of money

[01:58:58] received now typically uh these

[01:59:01] statements are in

[01:59:03] millions so people don't add all the

[01:59:06] extra zeros because it just makes it

[01:59:08] hard to read but that's 31 billion um

[01:59:11] Revenue growth that's nice addition here

[01:59:13] but you can see that otherwise you could

[01:59:14] have of course calculated that

[01:59:17] yourself um you then have cost of

[01:59:19] Revenue what is that really well it's

[01:59:22] costs directly associated with obtaining

[01:59:25] the revenue so it's sort of cost of

[01:59:27] sales is another another word for that

[01:59:29] so stuff you had to spend to get that

[01:59:32] Revenue so in the case of Tesla that

[01:59:35] would for example be building the very

[01:59:37] car that would be a direct cost of

[01:59:39] Revenue there buying all those

[01:59:41] components to build that um so that then

[01:59:44] gives you a gross profit so gross profit

[01:59:47] is exactly that it's gross so it is

[01:59:50] before all the sort of day-to-day

[01:59:53] expenses that the company incurs so it's

[01:59:55] basically on a sort of simplified way

[01:59:57] saying okay we bought these 100

[01:59:59] components for a Tesla I know it's a lot

[02:00:01] more than that and we've paid these

[02:00:03] three workers to assemble it in a

[02:00:05] simplified world and that's what we

[02:00:07] spend on it so we we we sold that Tesla

[02:00:11] for 31.5 billion and we spent 24.9

[02:00:15] billion on the paths and these five

[02:00:16] workers and that left us with this gross

[02:00:19] profit numbers that's basically what it

[02:00:20] is what haven't we paid for we haven't

[02:00:22] paid for the machinery for the factory

[02:00:24] for the insurance for the electricity uh

[02:00:27] we haven't paid for the admin staff we

[02:00:29] haven't paid for the HR staff we haven't

[02:00:31] paid for the sales staff we haven't paid

[02:00:33] for delivery Trucking you know all sorts

[02:00:35] of things lots and lots of stuff to that

[02:00:36] we haven't paid any taxes we haven't

[02:00:38] paid any interest we haven't paid for

[02:00:39] any of our loans uh you know all those

[02:00:41] kind of things that are part of the more

[02:00:44] kind of day-to-day expenditure I'm not

[02:00:46] part of gross profit so gross profit it

[02:00:49] basically shows you how profitable the

[02:00:51] product product or services that kind of

[02:00:54] a headline number and then you have to

[02:00:57] look further to see how much money the

[02:00:59] company actually made after they spend

[02:01:01] spend money on everything else marketing

[02:01:03] advertising Etc so and then we have the

[02:01:05] R&D expenses General admin expenses

[02:01:08] other that could be I don't know what um

[02:01:11] some finance charges operating expenses

[02:01:14] that's sort of a very broad brush for uh

[02:01:17] all sorts of other things other

[02:01:19] companies running on a day-to-day basis

[02:01:21] and that then leaves us with an

[02:01:22] operating income and what we could add

[02:01:25] in here if we were so minded we could

[02:01:28] add in here operating margin uh and I

[02:01:32] don't know why they didn't do that but

[02:01:34] you could of course and that would then

[02:01:35] simply be this number divided by the

[02:01:40] revenue so that would be

[02:01:43] 6% percentage figure there we go so

[02:01:47] ignore the formatting but um there we go

[02:01:50] so that will be an operating margin of

[02:01:51] 6% % versus the gross margin of

[02:01:54] 21% why do we look at both of them

[02:01:56] because as you scale up a business like

[02:01:58] Tesla if you make more cars your gross

[02:02:01] margin will improve and hopefully your

[02:02:04] day-to-day expenses your writeoffs on

[02:02:07] the factory your depreciation your kind

[02:02:09] of overheads will not go up as much as

[02:02:12] your Revenue so that's why it's

[02:02:14] interesting to look at the two

[02:02:16] separately then we have here net

[02:02:18] interest expenses um and that then gives

[02:02:21] us ebit uh so earnings before uh taxes

[02:02:26] uh that's 1.1 billion then we have

[02:02:28] income tax expenses and that then gives

[02:02:31] us net income so a lot of people when

[02:02:33] they talk about profits they talk about

[02:02:35] net income this this level so this is

[02:02:38] probably what most people would call

[02:02:41] profit though whoops it is I forgot you

[02:02:45] have to do these things don't you no

[02:02:48] still

[02:02:49] not I I have to put that in front of

[02:02:52] that one there we go now I can call it

[02:02:54] profit so that's what most people would

[02:02:55] call profit but I think you started to

[02:02:58] understand there are layers to

[02:02:59] profitability and it's useful to

[02:03:01] understand each one of

[02:03:03] them

[02:03:06] um you then have Basics earnings per

[02:03:09] share uh so that is uh related to net

[02:03:14] income that earnings per share is

[02:03:16] basically profit and maybe we should

[02:03:18] write uh

[02:03:20] all earnings

[02:03:22] because that's kind of the language most

[02:03:24] sort of journalists will

[02:03:26] use ebit as we saw 1.95 billion um so

[02:03:33] that's earnings before interest and

[02:03:35] taxes um and you can see that here is

[02:03:39] the income and here is the net interest

[02:03:42] expense so together that is uh you know

[02:03:45] near a billion dollars so so hence ebit

[02:03:49] being a bit more than a billion dollars

[02:03:51] above net income right you can see that

[02:03:54] differential here so we can we can do

[02:03:56] the maths if you want to get the

[02:03:57] illustration so we take ebit minus net

[02:04:01] income uh and what is that

[02:04:03] number that number

[02:04:05] is taking net

[02:04:08] interest plus income tax 1046 1089 okay

[02:04:14] there will be a little bit more uh in in

[02:04:17] here somewhere that I've missed but you

[02:04:19] essentially get the point there'll be a

[02:04:21] little bit more tax expense that's

[02:04:22] income tax maybe there are some other

[02:04:24] taxes that they have paid so a bit Dar

[02:04:28] then what is that all about well I

[02:04:30] explained that I think in in a previous

[02:04:31] video you might have seen yet or not um

[02:04:34] it basically strips out the cost

[02:04:36] of uh debt Capital uh in its tax Effects

[02:04:41] by adding back interest and taxes it

[02:04:44] also removes all depreciation and

[02:04:47] amortization um which are non-cash

[02:04:49] expenses and you might be thinking depre

[02:04:51] amortization what okay depreciation say

[02:04:54] I buy a factory right I am Elon Musk I

[02:04:58] buy a factory by all the machines um

[02:05:02] each year I can write off a percentage

[02:05:05] of that value as an expense under most

[02:05:08] tax codes in the world because the

[02:05:10] machines uh only have a useful life for

[02:05:13] I don't know how many years so each year

[02:05:15] I have an expense which reduces the

[02:05:17] value of that Machinery on my balance

[02:05:19] sheet and that isn't a cash expense it

[02:05:21] doesn't cost me anything in fact it

[02:05:23] saves me tax by creating the expense I

[02:05:26] wouldn't have otherwise had amortization

[02:05:29] is sort of the opposite whereas I

[02:05:31] whereby I I buy a machinery and I can

[02:05:34] book the expense over the use for life

[02:05:37] of that of that Machinery or plant or or

[02:05:39] factory or whatever it might be so um

[02:05:42] for Capital intensive Industries like

[02:05:45] car companies for example IID gives you

[02:05:47] a lot more insight into um

[02:05:52] well the profitability if you strip out

[02:05:55] that kind of oneoff capital expenditure

[02:05:57] and and the the depreciation and the

[02:05:59] interest and the tax so it gives you a a

[02:06:02] number that is perhaps a bit more

[02:06:03] favorable to to the company but again it

[02:06:05] reveals quite a lot more um information

[02:06:09] that the some of the other headline

[02:06:11] figures don't show you so um I I hope

[02:06:14] you're starting to get a feel for a this

[02:06:16] is not a scary sheet uh you can break it

[02:06:19] down so you just start with Revenue

[02:06:21] which is just all the money coming in uh

[02:06:23] then you look at the cost directly

[02:06:25] Associated as cost of revenues with

[02:06:28] manufacturing that product or service

[02:06:31] the direct cost related to that

[02:06:33] provision of that service or product and

[02:06:35] that gives you the gross profit and

[02:06:37] gross profit margins are particularly

[02:06:39] useful to look out with growth companies

[02:06:40] because they tend to not be profitable

[02:06:43] on the net or the Eed level because

[02:06:45] they're having to um still hire a large

[02:06:49] number of Staff they have a lot of

[02:06:50] expenditures and they're dividing that

[02:06:52] by relatively few products or services

[02:06:54] that they're actually selling but if you

[02:06:56] can see that the the gross profit margin

[02:06:58] is high on the actual products that they

[02:07:00] are making you kind of think ah okay but

[02:07:02] they are going to be profitable down the

[02:07:04] road I can see that they just need to

[02:07:05] sell more and once they sell more units

[02:07:08] the overheads will be divided by more

[02:07:10] units and therefore it will eventually

[02:07:11] be be profitable um and then you have um

[02:07:15] operating margin so that then throws in

[02:07:18] all the operating expenses um and then

[02:07:21] we have the net income which is what

[02:07:23] most people look at with earnings but

[02:07:24] you're starting to see that the earnings

[02:07:26] per share measure here which would be

[02:07:28] that earnings divided by the number of

[02:07:30] shares isn't all that insightful uh I

[02:07:33] like to see the whole thing I like to

[02:07:35] see all of these numbers um and then

[02:07:37] down here you have IID da which again

[02:07:39] strips out all those things I mentioned

[02:07:40] earlier um tax debt Capital depreciation

[02:07:44] amortization basically all the non-cash

[02:07:46] expenses uh and interest in tax expenses

[02:07:50] which um

[02:07:52] again it's it's I think it's a useful

[02:07:54] way of looking at it of course it is

[02:07:56] also good to see you know how much they

[02:07:58] actually spend on taxes how much they

[02:07:59] spend on interest

[02:08:02] but if you really want to see the

[02:08:04] underlying business how that's

[02:08:06] performing that gets distorted by all

[02:08:09] the stuff that is recorded here in the

[02:08:11] net income or the profit or the earnings

[02:08:13] as people might call it and therefore

[02:08:15] IID D is quite a useful measure to look

[02:08:17] at as well guys so two of the most

[02:08:20] useful Comm most talked about ratios or

[02:08:24] metrics or whatever you want to call

[02:08:25] them price earnings versus EV over ibit

[02:08:30] D and I'm going to explain what they are

[02:08:32] what the upsides and downsides are we're

[02:08:34] going to look actually at some real life

[02:08:36] examples of how they can both be useful

[02:08:39] and what they really mean so the first

[02:08:42] one uh PE what does it mean price over

[02:08:46] earnings that s sounds fairly simple

[02:08:48] right but what is it actually well

[02:08:50] there's two ways of looking at this one

[02:08:51] is uh share

[02:08:57] price

[02:09:00] over EPS earnings per share so that's

[02:09:05] therefore the price over the earnings

[02:09:07] per share another way looking at this

[02:09:09] which basically gives you exactly the

[02:09:11] same result would be market

[02:09:17] cap divided by earnings

[02:09:21] uh and you can find those numbers um

[02:09:24] either in any financial report or simply

[02:09:26] on Google I mean just type it in and

[02:09:27] you'll basically get that that's price

[02:09:29] earnings well what does it really mean

[02:09:31] what is it actually um it's of course

[02:09:33] used very very commonly to compare

[02:09:36] companies and sort of give a snapshot of

[02:09:38] snapshot rather of their their valuation

[02:09:42] um it's really only useful when looking

[02:09:45] at companies in the same industry and in

[02:09:48] the same sector of that industry

[02:09:50] otherwise you're comparing apples to

[02:09:53] oranges and it is no longer particularly

[02:09:54] useful

[02:09:57] um what does it really mean well it

[02:10:00] doesn't mean all that much if you look

[02:10:02] at it sort of globally because you could

[02:10:04] say well if the PE Ratio is low it's a

[02:10:07] bargain it's a steel the price is low

[02:10:09] compared to earnings fantastic I'm going

[02:10:11] to buy it or is it an

[02:10:14] underperforming company where people

[02:10:16] have no expectations of future growth so

[02:10:20] a lot of in investors actually look for

[02:10:22] companies with fairly high PE levels

[02:10:24] because that means the market has

[02:10:26] confidence in their long-term ability to

[02:10:30] provide growth and earning so it's a

[02:10:32] snapshot but it doesn't tell us

[02:10:34] everything why doesn't it tell us

[02:10:36] everything and why do we therefore look

[02:10:38] at the next one well the next one is a

[02:10:42] little bit more complicated um now let's

[02:10:44] start with it's called

[02:10:47] EV over e bit d

[02:10:52] right what is that really well the IID

[02:10:54] da stands for earnings before interest

[02:10:57] tax depreciation and

[02:11:00] amortization so that's a mouthful and

[02:11:03] you're kind of thinking well what does

[02:11:04] that really mean well you're taking

[02:11:07] earnings and you're taking out things

[02:11:10] that distort the actual cash earnings so

[02:11:14] companies that have a lot of assets of

[02:11:16] Machinery buildings things like that are

[02:11:19] typically depending on what tax code you

[02:11:21] under allowed to depreciate the value of

[02:11:25] those assets and that depreciation is

[02:11:28] recorded as an expense now they're not

[02:11:30] paying for that the company isn't

[02:11:31] actually dishing out cash to pay for

[02:11:33] that but it reduces earnings it reduces

[02:11:36] profits under the the earnings measure

[02:11:40] will be used in PE so by excluding

[02:11:44] essentially noncash expenses here um we

[02:11:48] get a clearer picture of the actual

[02:11:50] profit Prof ability of that company

[02:11:53] rather than just looking at the the

[02:11:54] earnings or the earnings per share

[02:11:56] number so it's a useful alternative to

[02:12:00] what you might call net income or profit

[02:12:02] uh when looking at a company's

[02:12:04] profitability especially in certain

[02:12:06] industries where you have a lot of uh

[02:12:09] capital expenditure and

[02:12:11] depreciation now the other part of that

[02:12:14] is EV uh what does EV really mean well

[02:12:17] it's Enterprise Value that doesn't make

[02:12:19] you any any wiser does it really um it's

[02:12:22] also used and that also doesn't make you

[02:12:23] any wiser when people do m&a typically

[02:12:26] people look at the EV the Enterprise

[02:12:28] Value um it um is calculated by um well

[02:12:35] sorry it's the it's basically market cap

[02:12:38] plus

[02:12:39] cash um minus debt that's that's really

[02:12:43] what it is so let me let me write that

[02:12:44] down so

[02:12:47] EV is market cap

[02:12:52] plus

[02:12:54] cash minus

[02:12:57] debt so that's the that's basically what

[02:13:00] that is so then we take EV we divide it

[02:13:02] by the ibid so the the sort of cash

[02:13:06] earnings if you will the non-distorted

[02:13:08] earnings for that and what does that

[02:13:10] mean well I'm going to show you a real

[02:13:11] life example here in just a second of

[02:13:14] how they can both be useful so the

[02:13:17] downside of this measure EV over IID is

[02:13:20] that it doesn't include Capital

[02:13:22] expenditures I was just saying how good

[02:13:24] that was wasn't I a minute ago but for

[02:13:26] some industries that can be very very uh

[02:13:28] significant also so um it can make those

[02:13:31] companies look better than they really

[02:13:34] are and I'm going to show you that

[02:13:36] example just in a second so let's go

[02:13:38] over to that here I've pulled up four

[02:13:41] old car companies Toyota Honda General

[02:13:44] Motors and Ford we look at the P we sort

[02:13:48] them by the PE Ratio here you can see

[02:13:51] that Ford has a minus 39x PE ratio

[02:13:54] you're thinking wow they're losing a lot

[02:13:55] of money what a Rubbish Company um it

[02:13:58] might be a rubbish company but on this

[02:14:00] score it doesn't tell us everything so

[02:14:01] that's the lowest one there Toyota it

[02:14:04] looks like it's the most expensive at

[02:14:06] 15.4 XP and then general motor Honda are

[02:14:10] pretty close right so now we know that

[02:14:13] that the earnings that

[02:14:15] are you know under that e they take into

[02:14:19] account writeoffs

[02:14:22] right of of

[02:14:24] depreciation if we look at the EV over

[02:14:27] iida they exclude those depreciation

[02:14:31] expenses and suddenly Toyota is the

[02:14:34] cheapest out of the lot um which is very

[02:14:37] very different to what it is here right

[02:14:39] so it's it's it's almost turned upside

[02:14:41] down Ford on the other hand is now by

[02:14:44] far the most expensive with a positive

[02:14:47] number here so you can kind of tell that

[02:14:49] that loss here on the earnings is likely

[02:14:51] to do with

[02:14:54] depreciation um so they're writing stuff

[02:14:56] off there they're writing off losses um

[02:14:59] whereas Toyota is now looking rather ra

[02:15:01] rather good why is that well look over

[02:15:04] the the depreciation Toyota has the

[02:15:06] highest number there 15 billion of

[02:15:08] essentially writeoffs of capital of

[02:15:10] their their sort of assets and also they

[02:15:12] are spending 32 billion more than

[02:15:15] everybody else on capital expenditure so

[02:15:18] that drags down their PE or that drags

[02:15:21] up their p PE number it makes them

[02:15:23] appear more expensive whereas as long as

[02:15:26] you think that the depreciation isn't

[02:15:29] something that's going to affect them in

[02:15:30] the long run and that might just be

[02:15:31] because of the size of the company and

[02:15:33] these are just sort of tax writeoffs

[02:15:34] they're permitted to do each year and as

[02:15:37] long as you believe that the capital

[02:15:38] expenditures will result in more

[02:15:42] profitability down the road because they

[02:15:44] are building you know new models they're

[02:15:46] investing in R&D you know whatever it is

[02:15:47] that they're doing uh then actually

[02:15:50] Toyota Le was perhaps more fairly looked

[02:15:52] at on the EV by a bit down number and it

[02:15:55] actually now looks like the most

[02:15:56] appealing out of these

[02:15:58] companies General Motors has um you know

[02:16:02] well Toyota has 50% more capex than to

[02:16:04] than than General Motors and General

[02:16:06] Motors also only has about a third of

[02:16:08] the depreciation so therefore it looks

[02:16:11] fairly expensive on on the score right

[02:16:13] on actually both numbers but certainly

[02:16:16] on the EV a bit Dar number it looks a

[02:16:17] lot more expensive than Honda which it

[02:16:19] was looking almost identical to before a

[02:16:22] lot of that also again has to do with

[02:16:24] capital expenditure so again you have to

[02:16:26] dig into what are they spending the

[02:16:28] money on and you can look that up

[02:16:30] they'll tell you that in the quarterly

[02:16:32] earnings calls they tell you that in the

[02:16:33] financial statements or you might just

[02:16:35] be able to find a Bloomberg article on

[02:16:37] it or something like from some sort of

[02:16:38] reputable Source um whereas Ford is

[02:16:42] looking well they're not spending a lot

[02:16:43] of money um uh yes they have written off

[02:16:46] quite a bit I suppose but they're now

[02:16:48] looking very very expensive so from this

[02:16:50] metric here you can see um the cheapest

[02:16:53] company on the PE Ratio would be Honda

[02:16:57] uh whereas on the EV Abita metric by far

[02:17:00] the cheapest is now Toyota you can kind

[02:17:02] of see here I think how you can look at

[02:17:04] things in a different way and you have

[02:17:06] to unfortunately always neither gives

[02:17:08] you a clear answer it just that it

[02:17:10] provides you more information and if you

[02:17:12] understand what EV over iida means uh

[02:17:15] you can then pull up uh you know the

[02:17:17] capital expenditures and the

[02:17:18] depreciation so um your homework for

[02:17:21] today guys is pull up for your top one

[02:17:25] two three four stocks pull up their PE

[02:17:27] ratios pull up their EV over a bit down

[02:17:30] numbers and you can simply do that by

[02:17:31] typing it into Google uh and also pull

[02:17:34] up their depreciation for the last

[02:17:36] Financial year and their capital

[02:17:37] expenditure for the last Financial year

[02:17:39] that might sound very complicated and

[02:17:41] like a lot of work but honestly it isn't

[02:17:43] it'll take you 10 minutes in a piece of

[02:17:44] paper just just uh do that and then have

[02:17:47] a look at those numbers and sort of see

[02:17:49] is that interesting is it not

[02:17:51] interesting how much money are they

[02:17:52] spending how much money are they writing

[02:17:53] off and then if you have the time in are

[02:17:56] so inclined you could of course then do

[02:17:58] the exercise against at least their

[02:18:00] their number one competitor and then you

[02:18:02] have a much much deeper understanding of

[02:18:06] uh why you are holding that stock or

[02:18:07] perhaps you didn't know why you are

[02:18:09] holding that stock so I think that's

[02:18:11] it's a good exercise to do and I

[02:18:13] encourage you to do it um for of course

[02:18:16] quite a lot of the stocks we always talk

[02:18:17] about on the channel you can simply

[02:18:19] refer to one of my benchmarks files on

[02:18:21] the on the patreon that'll save you

[02:18:23] quite a lot of time so but I think doing

[02:18:26] these benchmarks I'm hoping you can sort

[02:18:28] of see it it can be quite useful to

[02:18:30] really get a deeper understanding in

[02:18:32] these companies rather than just looking

[02:18:34] at the headline PE number there what is

[02:18:37] a Warren Buffett portfolio what is a

[02:18:40] Buffett investment strategy what are the

[02:18:43] key things he looks for and it isn't

[02:18:45] just him nowadays of course there are a

[02:18:47] lot of value investors out there so

[02:18:48] let's get into that so Buffet uh what is

[02:18:53] it all about it is not about lots of

[02:18:55] food and cues um you basically looking

[02:18:59] well for stocks with intrinsic value and

[02:19:02] that I know is entirely a meaningless

[02:19:05] phrase apologies for that what are the

[02:19:08] metrics that we look for and I'm going

[02:19:09] to show you some of the and actually

[02:19:12] show you some actual stocks that he also

[02:19:15] owns and and what those ratios are right

[02:19:18] here right now so there are a couple of

[02:19:20] things we look look at we look at uh

[02:19:23] Price to Book we look at price to

[02:19:27] earnings uh we look at uh return on

[02:19:31] Equity or perhaps Capital we look at

[02:19:35] free cash

[02:19:37] flow um anything else we look at what

[02:19:40] did I forget I'm sure I forgotten

[02:19:42] something well yes yes yes I forgotten

[02:19:45] the key thing

[02:19:47] moot moot is really one of the key

[02:19:49] things here uh and what does that mean

[02:19:52] it means that the company has the

[02:19:54] ability to keep others out of its

[02:19:57] business and I don't mean that in a sort

[02:19:59] of monopolistic manipulation kind of

[02:20:02] abusive sort of way but say cocacola

[02:20:06] right what do you go when you order a

[02:20:08] Coca-Cola well you go and order

[02:20:10] Coca-Cola I appreciate some places might

[02:20:12] serve Pepsi or some other drinks but

[02:20:14] generally speaking they have an

[02:20:16] incredibly dominant position how

[02:20:19] branding they've just branded the hell

[02:20:22] out of the world wherever you go in the

[02:20:24] world no matter how simple it is you'll

[02:20:27] find a Coca-Cola sign somewhere and a

[02:20:30] vending machine or a bar or a sign or

[02:20:32] something they've just managed to

[02:20:34] essentially U outco compete everybody

[02:20:36] else on marketing and they've done that

[02:20:39] very very cleverly and they've done that

[02:20:40] for you know forever basically so that's

[02:20:42] kind of their their core mode it is so

[02:20:45] it can be brand it can be as simple as

[02:20:47] that so let's actually have a look at a

[02:20:49] couple of real life five examples here

[02:20:52] so these are companies that Buffett is

[02:20:56] actually invested in I've put out only a

[02:20:58] couple of them here Coca-Cola aex Bank

[02:21:00] of America and apple and apple is you

[02:21:04] know a little bit of the odd one out

[02:21:05] there you might think but it'll make

[02:21:07] sense in just a moment so what have we

[02:21:09] got here price book you can see that I

[02:21:12] hope I'll make that yeah I think you can

[02:21:15] just about make that out right so Price

[02:21:17] to Book generally speaking you know the

[02:21:18] lower the better that isn't very helpful

[02:21:20] I appreciate that it isn't the be all

[02:21:23] end all because if you have a company

[02:21:24] that's growing a lot you are happy to

[02:21:27] pay a higher price to book than when you

[02:21:29] are not so say Bank of America has a

[02:21:31] Price to Book of only 1.39 it's

[02:21:33] incredibly cheap but then they are also

[02:21:35] not giving us huge growth and we're

[02:21:37] going to look at that but look at the PE

[02:21:39] Ratio here that's perhaps the more

[02:21:40] interesting one they are basically all

[02:21:42] between sort of 29 to well to 40 in the

[02:21:46] in the uh case of ax here but they're

[02:21:49] all in a fair fairly narrow range here

[02:21:52] so let's just take that for so so 29 to

[02:21:55] 40 let's write that down for PE that's

[02:21:58] kind of where we are at the moment so 20

[02:22:01] uh 10 20 to 40 I'm Bly going to write

[02:22:03] down here now of course the lower the

[02:22:05] better but that those are acceptable

[02:22:07] numbers um Price to Book well I think

[02:22:11] apple is a little bit the odd one out

[02:22:12] here because it is a company with very

[02:22:15] very high margins and also still

[02:22:17] tremendous growth ahead of it but

[02:22:18] generally speaking I think you would

[02:22:20] look at uh Price to Book that are closer

[02:22:22] to the other ones here sort of 1 to 12

[02:22:25] or so so I'm going to going to write

[02:22:26] that down here as price to book about

[02:22:29] one to 12 and there are exceptions I'm

[02:22:32] going to put a little star here as a

[02:22:34] reminder that when you have incredible

[02:22:36] growth uh that is sort of our

[02:22:40] um you know exception to that rule the

[02:22:43] higher the growth basically the more you

[02:22:45] are you're going to be willing to pay

[02:22:46] for that and the more you're going to

[02:22:48] have to pay for that dividends perhaps

[02:22:50] another one I should perhaps add

[02:22:52] dividends to this list I don't think

[02:22:54] it's it's that important anymore uh but

[02:22:57] it is still a factor so

[02:23:00] dividends um there are a lot of

[02:23:03] businesses now that are sort of Mor Bond

[02:23:05] and they pay dividend that doesn't

[02:23:07] necessarily make them great stocks so

[02:23:09] it's not not the sole indicator here but

[02:23:11] for example I've highlighted Coca-Cola

[02:23:13] here because they pay 3% dividend and

[02:23:16] that is going to be important in a

[02:23:17] moment when we look at the chart uh are

[02:23:20] lots of other things you can look at in

[02:23:23] terms of uh indicators here and of

[02:23:25] course feel free to look at this uh

[02:23:28] chart I put the link below so you can

[02:23:29] play with it and also see it in a in a

[02:23:32] sort of bigger range here I also put on

[02:23:35] some of the risk um items here uh

[02:23:39] generally speaking Yeah you know less

[02:23:41] debt can be a good thing but then if

[02:23:43] you're looking at Financial companies

[02:23:45] that again isn't really a firm rule so

[02:23:47] let's not highlight that return on

[02:23:50] Equity um is is a big one and generally

[02:23:55] speaking of course the higher the better

[02:23:57] so Coca-Cola has 40% Apple

[02:24:00] 82% return on common Equity that's

[02:24:02] incredible now the banks will have less

[02:24:06] but they are able to leverage that and

[02:24:09] you also paying less for them so a

[02:24:11] little bit hard to come up with a hard

[02:24:13] and fast rule on that but that's really

[02:24:14] one to look at is really is return on

[02:24:17] equity and then free cash flow

[02:24:20] so you can see the numbers here these

[02:24:23] are billions right so it's it's it's 8

[02:24:25] billion Coca-Cola 4 billion for aex 37

[02:24:30] billion for Bank of America and8 billion

[02:24:33] US dollar a year of free cash flow

[02:24:36] for Apple so you can see why therefore

[02:24:39] you're willing to pay more for Apple

[02:24:41] right because there is they're just a a

[02:24:43] Cash

[02:24:44] Generator P exellence Now growth is one

[02:24:48] thing you need to look at at the same

[02:24:49] time so you basically

[02:24:51] want value companies but you also want

[02:24:54] to have growth in there at the same

[02:24:57] time otherwise you you are essentially

[02:25:00] doing a sort of more of a dividend play

[02:25:03] so growth here for these are still EPS

[02:25:06] growth is 19 to 70% so maybe we'll make

[02:25:11] that EPS growth rather than growth that

[02:25:15] is perhaps an easier measure to look at

[02:25:17] here so here what does Buffett have he

[02:25:20] has he has 19 to what was the other one

[02:25:24] to

[02:25:26] 72% that's kind of what what those four

[02:25:29] stocks are so that's pretty pretty good

[02:25:30] growth uh and given that you're paying

[02:25:33] relatively little for them it matters

[02:25:36] now free cash flow I would say basically

[02:25:38] depends on the size of the company of

[02:25:40] course but uh you know you you kind of

[02:25:42] want sort of five billion plus or

[02:25:45] something like that uh the the more the

[02:25:47] merrier really um and return on Equity

[02:25:49] is a little little bit difficult here it

[02:25:51] I would say with that it uh you know

[02:25:57] depends it depends and that is not very

[02:25:59] helpful but you just have to realize

[02:26:02] that a financial institution is going to

[02:26:04] have a lower margin than say apple right

[02:26:07] so it it kind of depends on that you

[02:26:09] want it to be high compared to the

[02:26:11] Pierce and compared to that sector and

[02:26:13] that's really I guess the important one

[02:26:15] there Dividends are are sort of nice but

[02:26:19] they are not essential I would say but

[02:26:22] they will come in when we look at the

[02:26:25] actual chart here so where did my chart

[02:26:27] go my chart is here so I've charted

[02:26:32] these companies so you can see them and

[02:26:35] you kind of course see that Apple this

[02:26:37] is randomly selected since

[02:26:40] 200 10 essentially so starting from 2010

[02:26:43] Apple is down 1, 1800% and that rather

[02:26:47] puts the other three to shame right you

[02:26:50] would think you think well why would I

[02:26:51] buy Coca-Cola then at the bottom there

[02:26:54] so I'm going to hide Apple because I

[02:26:55] think there that's more of a growth

[02:26:58] story let's look at the other three and

[02:27:00] I'll hide my Fibonacci lines here so you

[02:27:03] okay look at Coca-Cola right you say 85%

[02:27:05] growth only over what 10 11 12 years

[02:27:10] that's you know that's not great

[02:27:13] right it's not bad but also it isn't

[02:27:15] great but but there is a big butt do you

[02:27:18] remember the dividend pay 3.1% dividends

[02:27:22] right what does that mean where is my

[02:27:24] dividend calculator here it

[02:27:26] is okay say you invested

[02:27:30] $10,000 in

[02:27:32] Coca-Cola and your portfolio on average

[02:27:34] gets you 8% per year and you've

[02:27:37] reinvested that money um in in into into

[02:27:40] your portfolio overall and you've done

[02:27:43] that for 20 years now every single year

[02:27:46] Coca-Cola paid you $300 right in in in

[02:27:49] interest

[02:27:50] in dividends if you reinvested that $300

[02:27:53] over 20 years imagine how much money do

[02:27:55] you think that made you any any guesses

[02:27:58] I'm taking guesses well I've only hit

[02:28:00] calculate so you started with $10,000

[02:28:03] you got paid $6,000 over the period in

[02:28:06] dividends by reinvesting that money

[02:28:10] together with your initial balance

[02:28:12] you've earned 44,000 Us in interest so

[02:28:16] you have to take account of the uh the

[02:28:20] uh dividends there so you can say okay

[02:28:22] let's ignore the initial balance and

[02:28:24] let's just say you only got the um

[02:28:29] dividends here then then you can see

[02:28:30] just what those dividends did for you so

[02:28:32] the $6,000 became

[02:28:35] $113,000 so therefore you actually got

[02:28:39] quite a bit of extra money right on your

[02:28:41] $10,000 your initial you you got uh you

[02:28:45] know 1.3x on top so you have to take

[02:28:49] that into account when you look at these

[02:28:51] charts because these charts don't price

[02:28:54] in accumulated interest so when you have

[02:28:57] higher interest stocks higher dividend

[02:28:59] stocks rather I should say uh your stock

[02:29:02] can actually underperform somewhat and

[02:29:05] you can still be doing rather well so if

[02:29:08] you compare that then to um you know BAC

[02:29:13] uh we we've actually probably done

[02:29:14] better than BAC now BAC has also paid a

[02:29:17] little bit of a dividend but nowhere

[02:29:18] near as much uh which was I think it was

[02:29:21] 1.2% 1.8% so you know that Still Still

[02:29:24] Still matter in in in the long run here

[02:29:26] so that's I think one thing that to

[02:29:28] really bear in mind but sort of to

[02:29:30] summarize this then uh you basically

[02:29:33] want to look at a low price to book

[02:29:35] value uh one to sort of 12 you can pay

[02:29:38] more if there is substantial growth and

[02:29:41] what's the kind of growth I'd be looking

[02:29:42] for I'd look at probably EPS growth

[02:29:46] because that is earnings per share so

[02:29:48] that actually tells you something about

[02:29:50] you know how much that matters for for

[02:29:52] your share price um PE price over

[02:29:55] earnings 20 to 40 I think would

[02:29:58] generally be a fair number um uh the

[02:30:01] rate of uh um return on Equity rather it

[02:30:04] depends a little bit I mean it's a

[02:30:06] little bit harder to put a real number

[02:30:07] on that what we seeing here generally

[02:30:10] speaking for sort of real world

[02:30:11] companies 40% 80% but then when you're

[02:30:15] looking at financial institutions you're

[02:30:17] going to be happy to take less

[02:30:19] especially if they pay you

[02:30:20] dividends if for free cash flow it

[02:30:23] really is is a question of the more the

[02:30:25] marrier um you know 4 billion 8 billion

[02:30:27] 37 billion 80 billion of course it also

[02:30:29] depends on the size of the company but

[02:30:31] generally speaking the more the better

[02:30:34] and really I think what it's all about

[02:30:36] it's all about Mo here that's really

[02:30:38] what it's about because these are

[02:30:40] companies that have been around forever

[02:30:42] so really one of the nice things to look

[02:30:44] for with mode is look for companies that

[02:30:47] have been around for more than a hundred

[02:30:49] years

[02:30:50] and that might seem like a silly thing

[02:30:52] to say but if they've been around for

[02:30:54] 100 years and they still give you these

[02:30:56] uh kind of return numbers then it's

[02:31:00] probably a pretty good company with a

[02:31:02] probably a pretty good mode I mean

[02:31:03] always look for it but there we have it

[02:31:05] and then EPS growth we're looking here

[02:31:06] at sort of 19 to 17 72% if it's higher

[02:31:09] it doesn't doesn't hurt but if it's

[02:31:12] lower I I would perhaps avoid those ones

[02:31:15] so that's a little bit of a buffet

[02:31:17] takeaway here guys investing to get

[02:31:19] together and that could be your spouse

[02:31:22] girlfriend

[02:31:23] boyfriend or you know any other family

[02:31:26] member for that matter really and why is

[02:31:29] it important well it's only important if

[02:31:32] you do have somebody else in your life

[02:31:34] if not it will become important at some

[02:31:36] point in the future unless you are a

[02:31:39] Hermit and the reason it's important is

[02:31:43] that the wealth of a family or couple

[02:31:49] depends not just on the one person it is

[02:31:51] very very much a a thing you do together

[02:31:55] and I want to look at a couple of things

[02:31:58] they have written on here we're

[02:31:59] investing together what does it really

[02:32:01] mean what do we really need to do well

[02:32:03] the first thing we need to do is we need

[02:32:06] to set uh set some goals and those are

[02:32:09] goals for both parties we need to talk

[02:32:12] about debt uh and we need to talk about

[02:32:16] uh compounding um if I could spell

[02:32:20] compounding um and education and what

[02:32:24] you are doing here is very admirable

[02:32:26] because you are taking time to raise

[02:32:29] your own Financial uh sort of IQ to

[02:32:32] another level and your spouse or

[02:32:35] girlfriend boyfriend may or may not have

[02:32:38] done that and therefore sharing

[02:32:39] information is is going to be very very

[02:32:41] crucial um

[02:32:44] and for goals I would say for each

[02:32:49] because

[02:32:50] we want to do things together but we

[02:32:52] also want to do things separately um and

[02:32:56] the fourth part which is what people

[02:32:59] sometimes are afraid of is a budget or

[02:33:03] not so much a budget but a

[02:33:07] um really a

[02:33:10] record and I think that's where you

[02:33:12] start with a budget so forget about most

[02:33:14] people look at budgeting as some sort of

[02:33:16] penal servitude where they have to you

[02:33:19] know they can no longer enjoy the things

[02:33:20] that they enjoy doing and that's not the

[02:33:22] purpose here at all so we're going to go

[02:33:24] through this together in the spirit of

[02:33:27] investing together and let me pull this

[02:33:30] up for you so the first thing is a very

[02:33:33] quick compound reminder exercise if you

[02:33:37] invest periodically say every month and

[02:33:42] I'd encourage you to set goals every

[02:33:43] month don't set them for the quarter

[02:33:45] definitely don't set them for the year

[02:33:47] if you set them for the year you will

[02:33:49] will fail I guarantee it say every month

[02:33:53] you invest $200 and I mean I'd seem like

[02:33:55] an absurdly small amount or an absurdly

[02:33:57] large amount to you um and then I put in

[02:34:00] here the numbers of periods to save so

[02:34:01] we doing this monthly um because it's

[02:34:04] monthly so say say a 10-year period

[02:34:07] right now interest

[02:34:10] rates this is a confusing one for most

[02:34:12] people but you might have seen some of

[02:34:14] my um how how I invest so you might

[02:34:18] understand a little bit how I got to

[02:34:19] come up to to 11% but if you look at the

[02:34:23] S&P 500 since 1929 it has delivered

[02:34:27] something like 9.6% or something

[02:34:29] annualized there were of course years

[02:34:31] when it was terrible but there were

[02:34:32] years when it was fantastic and on

[02:34:34] average since 1929 something like 99.6%

[02:34:37] the NASDAQ over the last 20 years or so

[02:34:40] has done slightly better 10.6% or so so

[02:34:43] even if you are not picking good stocks

[02:34:46] you were just picking the broad Market

[02:34:50] looking back historically of course past

[02:34:52] performance is no guarantee for future

[02:34:55] performance but let's just assume the

[02:34:58] the you know the world isn't going to

[02:34:59] freeze over and and everything will will

[02:35:01] end you know say you want to be more

[02:35:03] conservative say it make it you make it

[02:35:05] 9% um and you then hit the calculator

[02:35:08] button and then you see that you have

[02:35:11] and again I show you a little chart

[02:35:12] because some people prefer the

[02:35:15] visuals um you will see that over 10

[02:35:19] years you have deposited

[02:35:21] $24,000 and you got

[02:35:24] $114,000 for free on top now that's an a

[02:35:29] 10-year example the beauty of this is to

[02:35:31] make it a 20-year time period uh and you

[02:35:33] look at the calculator and you look at

[02:35:36] the um amount you've invested here

[02:35:39] $448,000 the interest so the free money

[02:35:42] you got was

[02:35:45] $85,000 and the final amount therefore

[02:35:48] is $133,000

[02:35:49] and you only save 48 it's very very nice

[02:35:52] right now sometimes when people look at

[02:35:54] these interest rates or what I call an

[02:35:56] interest rate here or performance of the

[02:35:58] market you have to take into account

[02:36:00] things like dividends for example which

[02:36:01] is why the numbers in reality are the

[02:36:04] numbers I just gave you and perhaps not

[02:36:05] the lower numbers you sometimes read

[02:36:07] about and this depends entirely on you

[02:36:13] keeping up with your $200 a

[02:36:17] month now if you make that number bigger

[02:36:19] or or smaller you will see of course

[02:36:21] that number go up a great deal now this

[02:36:23] calculator is on my website you can see

[02:36:25] the link here at the top Felix finance.

[02:36:26] org so you can you can play with that

[02:36:29] and bear in mind that the number of

[02:36:30] periods uh I would take monthly because

[02:36:33] you must invest and save monthly and you

[02:36:36] must invest that money monthly not just

[02:36:38] sit on it not just put it under a

[02:36:40] mattress because if you do that it

[02:36:42] doesn't earn interest it doesn't

[02:36:43] compound and I used to what interest

[02:36:45] very liberally because to me capital

[02:36:48] gains and dividends received or interest

[02:36:50] from bonds it's all the same it's all

[02:36:53] money I didn't earn and I love money I

[02:36:56] didn't earn even more than the money I

[02:36:58] have earned so use that term interest

[02:37:02] quite liberally liberally essentially it

[02:37:05] is a return on your investment so the

[02:37:08] first thing I would do is sit down with

[02:37:12] your other half and say look I'm doing

[02:37:16] this course I've been talking about it

[02:37:18] I've been reading about it have been

[02:37:20] studying this I figured out if I save a

[02:37:23] relatively modest amount of money each

[02:37:25] month I will become financially

[02:37:28] independent I'll be able to pay for uh

[02:37:30] this or that or the other whatever my

[02:37:32] goal is down the road uh I'll be able to

[02:37:35] retire at this age or I'll be able to do

[02:37:37] you know buy that house buy that boat

[02:37:39] pay for the college education buy that

[02:37:41] house you know whatever it is or you

[02:37:43] know buy you a pony and um it is

[02:37:47] actually relatively simple um all I've

[02:37:49] got to do is I've got to stick to it and

[02:37:52] the other person you're talking to might

[02:37:54] may or might might say that's wonderful

[02:37:56] fantastic that's that's great for you

[02:37:57] well done or maybe I'll do it too or

[02:38:00] they might be like really how does that

[02:38:01] work I thought the market always goes up

[02:38:02] and down how do you know you're going to

[02:38:03] make money okay so show them the

[02:38:07] compound calculator and if they don't

[02:38:09] trust me they don't trust Felix show

[02:38:12] them the US government's calculator and

[02:38:14] again I put the link below guys

[02:38:17] investor.gov go has a calculator and

[02:38:20] it's exactly the same so if you have an

[02:38:22] initial investment of zero you put a

[02:38:24] monthly contribution in of $200 and you

[02:38:27] do this for 20 years and you do it with

[02:38:31] 9% uh you have a monthly period you hit

[02:38:34] calculate and you come up with uh you

[02:38:36] know what is

[02:38:38] $133,000 which is exactly the same

[02:38:41] number that we got here it also gives

[02:38:42] you a lovely chart which tells you

[02:38:44] you've put in 48,000 and you got 133

[02:38:49] ,000 for your money pretty good return I

[02:38:52] would say

[02:38:53] and this is really the key thing people

[02:38:56] need to absorb and what I would do is I

[02:38:59] would print it out I'd stick it on your

[02:39:01] wall I'd pin it on the door you know put

[02:39:05] it where you see it because it takes

[02:39:07] some time to SN in I've literally read

[02:39:09] books on this and it took still some

[02:39:12] years for this to properly sinking

[02:39:15] and once you've done that you will say

[02:39:18] to your other half look I'm going to do

[02:39:20] this I'd love it if you also did this

[02:39:22] and that's of course depends a little

[02:39:23] bit on whether both of you have an

[02:39:25] income if both of you have an income I

[02:39:27] would set this target a separate Target

[02:39:29] for both of you um and everybody has to

[02:39:33] pick their own Target you can't tell

[02:39:35] somebody else what to do it's not a not

[02:39:36] a um a road to to happy uh

[02:39:40] coexistence and I would then take this

[02:39:44] spreadsheet I've made um which I call my

[02:39:47] investment targets and I put that in

[02:39:49] here so you can put in your monthly

[02:39:50] investment amount here $200 now the

[02:39:53] initial investment amount you can leave

[02:39:55] that blank or you might have a lump sum

[02:39:56] you might have a couple of thousand

[02:39:58] dollars lying around somewhere in a jar

[02:40:00] under a bed under a rock or in a bank

[02:40:03] account I don't know which of those is

[02:40:05] worse and you could stick that in there

[02:40:07] too if you wanted to and then you have

[02:40:09] your annual interest rate here and you

[02:40:11] might just say okay I hear what you're

[02:40:12] saying or the 9% but I just don't

[02:40:14] believe it or I believe I'm going to do

[02:40:16] a little bit better than that um for me

[02:40:18] for myself I calculate with

[02:40:21] 11% very confident that I'm actually

[02:40:23] going to exceed that but totally fair

[02:40:26] enough everybody has another level here

[02:40:28] and then you only need to fill in these

[02:40:30] two orange levels really but you can of

[02:40:31] course change the 9% here so maybe I

[02:40:34] I'll also make that orange for you and

[02:40:38] you can leave this number here this just

[02:40:39] makes it monthly and then you can see it

[02:40:42] calculates this here from the beginning

[02:40:44] of time all the way down and you can see

[02:40:47] how much money you would have and you

[02:40:48] keep doing this and look it goes into

[02:40:50] the millions isn't it lovely absolutely

[02:40:53] lovely 20 by 2040 you'll be $4.4 million

[02:40:55] us or saving $200 a month pretty insane

[02:40:59] isn't it and I get very excited by this

[02:41:03] now you might think well I'm not

[02:41:04] starting this on the 1st of January 2021

[02:41:07] so there will be a little bit of

[02:41:08] spreadsheet advice in here how do you

[02:41:11] change that well the simple thing to do

[02:41:13] is you could uh select the the month it

[02:41:17] is so say it is uh as you're doing this

[02:41:19] it is you know I don't know June 2021 so

[02:41:22] you click on the first of that month and

[02:41:24] then for the next month you click on

[02:41:28] the first of the subsequent month so the

[02:41:31] month thereafter so then you can see

[02:41:33] here 1st of June 1st of

[02:41:36] July now those numbers might be the

[02:41:38] wrong way around for you but don't worry

[02:41:40] about it and then you highlight both of

[02:41:42] them and you can do that by just

[02:41:44] dragging it down and you see the little

[02:41:45] blue box here in the corner um if you

[02:41:48] apologize if you are an Excel wiiz and

[02:41:51] then you drag that down and as you drag

[02:41:53] it down you can see the dates change to

[02:41:55] match yours right and obviously you have

[02:41:57] to drag it all the way down um just just

[02:42:00] do that and you know tap your fingers a

[02:42:02] little bit get a cup of coffee and

[02:42:04] literally it it'll change it for you and

[02:42:06] now I'm going to undo that so that it

[02:42:07] just sits back at you know whatever data

[02:42:10] was and um that's how you update that

[02:42:13] you don't need to update the green part

[02:42:15] at all that will always do things

[02:42:18] automatically so if I'm putting in here

[02:42:20] a $500 amount you will see that those

[02:42:23] numbers will increase substantially and

[02:42:25] say you saved $500 a month for example

[02:42:28] uh what would you have in 2040 for a

[02:42:31] laugh here is 2040 you would have $5

[02:42:34] million us um and okay it shows here

[02:42:37] it's pounds and I apologize for that I

[02:42:39] will also change that so when you open

[02:42:42] this spreadsheet it will actually be

[02:42:44] dollars I don't know why it makes that

[02:42:48] um um dollars that's a little bit

[02:42:52] strange format

[02:42:58] um data

[02:43:02] format number here we go all right

[02:43:06] currency uh but we want to change the

[02:43:08] currency we want it to be US Dollars and

[02:43:10] we want to get rid of those little

[02:43:13] decimal places so so there we go so by

[02:43:15] the end of 2040 you will be um

[02:43:18] absolutely uh loaded um beyond all

[02:43:22] recognition so um there there we have it

[02:43:25] there is the sheet and what would I do

[02:43:27] with that I would keep this sheet and I

[02:43:29] would then write next next to it every

[02:43:32] week I would make another column here

[02:43:33] and I would call it actual or or

[02:43:35] something similar like that that makes

[02:43:37] sense to you and you'd say well actually

[02:43:38] in this this week I actually um put in

[02:43:41] 500 this month $500 $90 cuz I had a

[02:43:44] little bit more uh and then in the next

[02:43:46] month actually I was a little bit ahead

[02:43:48] so I was at

[02:43:51] $1,146 whatever and keep a track of it

[02:43:53] and it'll give you a nice feeling of

[02:43:56] where you are um and it'll keep you

[02:43:59] incentivized so that's the second thing

[02:44:01] I would do and if both of

[02:44:04] you have incomes do it twice do it

[02:44:08] separately for each person and if one of

[02:44:11] you is more spreadsheet literate than

[02:44:13] the other one can of course help the

[02:44:15] other and you can do that sit down every

[02:44:18] month and update that number it's quite

[02:44:20] a nice thing to do actually it becomes

[02:44:22] quite a fun thing to do and it also

[02:44:25] creates sort of financial transparency

[02:44:27] which I think is also incredibly

[02:44:30] important now to go back to our little

[02:44:34] notes here um so we've set some goals uh

[02:44:39] We've explained compounding and we've

[02:44:42] done a little bit of education on that

[02:44:43] and you know share some of the videos

[02:44:46] that I've made here there are of course

[02:44:47] also lots of others on the internet

[02:44:49] there are lots of books on it there are

[02:44:50] lots on YouTube just on the magic of

[02:44:53] compounding just keep keep keep watching

[02:44:55] and reading that and you will also then

[02:44:59] start to realize that if I spend $50 on

[02:45:04] something frivolous I don't necessarily

[02:45:06] enjoy if I'd invested that money ah I'm

[02:45:10] starting to see what that money is going

[02:45:11] to be worth 10 years down the road right

[02:45:14] and that's good and bad if you if you

[02:45:17] take it too far you will stop enjoying

[02:45:19] life and you will become a raisin and

[02:45:21] trible up and hope to have some fun in

[02:45:23] 10 or 20 years and I don't encourage

[02:45:25] that but there are certain things that

[02:45:29] we don't need and we're going to look at

[02:45:31] budgeting here in a second but before we

[02:45:33] get to that we should think and talk a

[02:45:35] little bit about debt if you have debt

[02:45:38] there is good debt and there is bad

[02:45:41] debt good debt is asset backed debt so

[02:45:44] you have a

[02:45:46] mortgage generally speaking mortgage

[02:45:48] rates at present up pretty moderate it's

[02:45:50] not really a problem it's actually in

[02:45:52] the long run probably quite a good thing

[02:45:53] that you're doing um so I wouldn't sweat

[02:45:56] that I would however look whether I can

[02:45:59] get a better mortgage rate because if

[02:46:01] you can save 1% on that that's a lot of

[02:46:04] free money that you're freeing up there

[02:46:05] you could invest that uh and you can get

[02:46:08] your 9% or whatever it is uh or on that

[02:46:12] per year makes a huge difference you

[02:46:14] could up your your target ever so

[02:46:16] slightly and upping your target ever so

[02:46:18] slightly makes a huge difference if I

[02:46:21] could save $50 a month

[02:46:23] extra and

[02:46:27] uh if I could make that $250 then in 20

[02:46:31] years time I wouldn't have

[02:46:33] $133,000 I would have $166,000 us do so

[02:46:37] I get $33,000 extra from saving $50 per

[02:46:41] month so therefore big expenses like

[02:46:45] that are are very important now if you

[02:46:47] have other debt now there is bad debt

[02:46:50] there is there student loans they are

[02:46:53] sort of not quite so bad because

[02:46:55] generally speaking the interest rates

[02:46:56] are more moderate um if the interest

[02:47:00] rate is significant and by that I mean

[02:47:03] sort of above two or three% I would

[02:47:06] focus on paying that off um and you

[02:47:09] could do that if it's sort of two or 3%

[02:47:12] you're thinking well if I can get 9% of

[02:47:14] the market in the long run the rational

[02:47:16] person would perhaps say well I'm going

[02:47:18] to keep that debt for as long as I can

[02:47:20] and I'm going to invest my money and do

[02:47:22] that and you can of course do that I

[02:47:25] would at the very least split the money

[02:47:27] half half and pay it off at you know

[02:47:30] half of it and then perhaps invest the

[02:47:32] other half and that way you're kind of

[02:47:34] spreading your risk a little bit if your

[02:47:36] interest rate is substantially higher

[02:47:38] than that get rid of it get rid of that

[02:47:40] debt that is going to be your number one

[02:47:43] first thing to do and that might seem

[02:47:45] like a really difficult thing to do but

[02:47:48] unless you get rid of that debt or at

[02:47:51] the very least if you have uh if you

[02:47:53] have credit card debt or crying out loud

[02:47:57] do not have credit card debt it is the

[02:47:59] worst thing to do interest rates are

[02:48:01] absolutely insane find a way to get that

[02:48:04] interest rate to as close as zero as

[02:48:06] possible you might be able to move cards

[02:48:09] you may be able to consolidate it that

[02:48:11] is got to be the one thing that you do

[02:48:13] don't do anything else with your life

[02:48:14] basically you have to figure out how to

[02:48:16] get that interest rate down and how to

[02:48:18] pay that off as quickly as possible

[02:48:19] because if you don't do that and your

[02:48:21] credit card debt is 12% or 19% or 30% no

[02:48:26] other investment is going to give you

[02:48:28] that kind of return you are just burning

[02:48:30] money and while you're doing that that's

[02:48:33] the only time where I would say stop

[02:48:35] having fun um stop buying Starbucks stop

[02:48:38] buying things you don't need stop buying

[02:48:40] clothes and shoes you don't need just

[02:48:41] stop it cut up those cards and get rid

[02:48:44] of it now you can use credit cards and

[02:48:46] they're wonderful to use but you have to

[02:48:49] pay the balance of every single month

[02:48:51] and it has to be an automated payment

[02:48:53] from your bank account so that's for me

[02:48:55] is the only thing you cannot ever ever

[02:48:59] ever get credit card debt or Store card

[02:49:02] debt or any of those kind of consumer

[02:49:04] debts they are terrible horrible same

[02:49:08] same thing for um um you know any sort

[02:49:10] of higher purchase items get rid of it

[02:49:14] you don't need it you don't want it you

[02:49:16] want to have a happy healthy wealthy

[02:49:19] life and this stuff is setting you back

[02:49:23] decades so so get rid of that stuff but

[02:49:24] that's enough said on on on that dead

[02:49:26] front um

[02:49:29] so provided you can take care of that

[02:49:31] and if you have any questions or issues

[02:49:33] on on on on debt issues guys send me a

[02:49:35] message on the Discord send me a private

[02:49:37] message I'd be very very glad to share

[02:49:39] my my thoughts on that because that's

[02:49:41] really something you need to address

[02:49:43] yesterday um don't sit on it don't hide

[02:49:46] it don't don't not open these credit

[02:49:48] cards builds and things like that that

[02:49:49] is all really really terrible thing to

[02:49:52] do to yourself to nobody else just to

[02:49:55] yourself so um so we've we've gone

[02:49:58] through our compounding uh We've we've

[02:50:00] gone through um setting goals and that

[02:50:04] goal is essentially I'm going to invest

[02:50:06] this amount every month and I now know

[02:50:09] what that will be worth in 10 or 20

[02:50:10] years right that that's my goal and then

[02:50:13] once you've established that goal for 10

[02:50:15] or 20 years and you want that to be you

[02:50:16] know a million or to or or whatever it

[02:50:21] is that is the Big Goal that you write

[02:50:23] on your wall write it on your um you

[02:50:27] know somewhere you see it all the time

[02:50:29] and then your little brain is going to

[02:50:31] start ticking just like mine and it's

[02:50:33] going to try and figure out ways how to

[02:50:34] get there faster and at that point it

[02:50:37] becomes a lot of fun but you're going to

[02:50:39] get into that um now the way to get

[02:50:43] there is to do a budget and I don't like

[02:50:47] the word budget because it sort of

[02:50:49] sounds well we have government budgets

[02:50:51] which are are permanently in deficit so

[02:50:53] that's not not a very good Association

[02:50:55] and then you have sort of budgets which

[02:50:57] kind of say well you're only allowed to

[02:50:59] spend this you're not can't allowed to

[02:51:00] spend that and that's not really what

[02:51:02] it's about what it really is about and

[02:51:05] again this sheet here you were um I'm

[02:51:07] sharing the link with you below so you

[02:51:10] can use this and most budgets are

[02:51:13] monthly and it's useless there is no

[02:51:17] point in doing a monthly budget there

[02:51:19] isn't a single successful business in

[02:51:22] the world that does monthly budgets why

[02:51:25] because they do weekly budgets why

[02:51:27] because there are 52 opportunities to

[02:51:30] correct course and fix it whereas if you

[02:51:33] do it monthly they're only 12 so the

[02:51:35] advantage is simply that you have four

[02:51:38] times more opportunities to amend things

[02:51:41] and you save an enor in in in inordinate

[02:51:45] amount of money doing exactly that so

[02:51:48] the um the simple thing is okay you can

[02:51:51] start here with with uh with January um

[02:51:54] and then you can do Week 1 2 3 4 and

[02:51:57] then for February you can do the same

[02:51:58] thing and I have not made this an

[02:52:01] entirely weekly sheet why because I

[02:52:03] actually want you to become a little bit

[02:52:05] more spreadsheet literate and you might

[02:52:07] think I hate spreadsheets but you know

[02:52:09] what it's it's required it's part of

[02:52:12] life if you really hate it find an app

[02:52:15] on your phone that gives you a weekly

[02:52:17] budget there are plenty of those there

[02:52:18] more fun that look like games you can do

[02:52:20] that otherwise if you are if you can

[02:52:23] handle a spreadsheet and it doesn't you

[02:52:26] know make you heads spin around then

[02:52:27] then do this so what you do I've already

[02:52:30] put the one two 3 four four here um and

[02:52:33] so we can do it for February for example

[02:52:35] also so you highlight the next uh four

[02:52:38] columns

[02:52:39] across

[02:52:41] hello so you highlight four on the right

[02:52:45] of February and you right click on the

[02:52:47] column at the top and you insert four To

[02:52:51] the Left Right of where you are so you

[02:52:53] have four empty columns here now and

[02:52:55] you're going to call these uh or you

[02:52:57] could just call them one week one two 3

[02:52:59] 4 again if if you want it or you could

[02:53:01] use the the calendar week numbers and

[02:53:04] and go on with four five six seven eight

[02:53:07] Etc and what you do then is you copy

[02:53:11] across the uh the totals basically from

[02:53:13] here and you literally just copy and

[02:53:15] paste them in there and you want to

[02:53:17] always check double click on them and

[02:53:18] then you can see does your um formula

[02:53:22] add up the right area right so that's a

[02:53:25] fairly simple thing to do um if you go

[02:53:28] over here for example and you want to

[02:53:30] copy this one

[02:53:32] across so you you take the previous ones

[02:53:35] I I've made here and you copy them here

[02:53:37] and then again you can see it it'll add

[02:53:39] these together

[02:53:42] um perhaps the better way of doing it

[02:53:44] might be to take take the total from

[02:53:45] over here and copy that and then then

[02:53:48] drag it across or you could simply take

[02:53:51] a little that little blue square here in

[02:53:52] the corner so you get a little cross can

[02:53:54] you little say see little cross symbol

[02:53:55] you drag this across and now all of them

[02:53:58] say 106 and you're thinking hang on

[02:53:59] there's nothing in my week yet why does

[02:54:01] it say 106 so what you got to do is here

[02:54:04] at the end um and that's literally the

[02:54:07] the only slightly technical thing I'm

[02:54:09] I'm going I'm going to go through here

[02:54:10] is on spreadsheets you see these dollar

[02:54:12] signs the dollar signs fix the um fix

[02:54:17] the column

[02:54:19] so you go back into your 106 and you get

[02:54:22] rid of the dollar signs you just delete

[02:54:25] the dollar sign um there are other ways

[02:54:27] of doing that but this is the simplest

[02:54:29] way of doing it just delete the dollar

[02:54:30] sign in front of the letter here at the

[02:54:33] end and if you then drag it across uh

[02:54:37] you will see now that they correspond to

[02:54:40] the column that they are in whereas

[02:54:43] before if I C if I pull this one across

[02:54:46] it'll give me $400 because it's always

[02:54:48] is sticking in column D you see so again

[02:54:51] show this one more time I get rid of the

[02:54:54] dollar signs in front of the

[02:54:56] d uh and there we have it and then we

[02:55:01] drag this across and there you have it

[02:55:04] so that's what I would really really

[02:55:06] really really really beg you to do is I

[02:55:10] done your income of course that's

[02:55:11] important but really the important thing

[02:55:14] is expenses and you want this to be as

[02:55:16] detailed as possible so it's groceries

[02:55:20] Child Care dry cleaning hang out you

[02:55:21] know dog walk whatever it is you might

[02:55:23] have other things that are not on here

[02:55:25] yet um add them make it as detailed as

[02:55:28] possible and you have no idea how many

[02:55:31] times I found things on my credit card

[02:55:34] on my PayPal statements I have no idea

[02:55:36] what they were for I don't know why I

[02:55:37] was paying for it I bought something

[02:55:39] online and it was $5 and then I must

[02:55:42] have been a little tick box that made

[02:55:44] that a monthly amount and then I was

[02:55:46] paying $5 for three months in a row

[02:55:48] thankfully I noticed that after three

[02:55:49] months if I hadn't and i' let that run

[02:55:52] for for for 20 years well how much money

[02:55:54] would that have been um over 20 years

[02:55:57] that

[02:55:58] $5 would have been

[02:56:01] $3,339 wasted and that's a tiny tiny

[02:56:03] amount and there are many of those

[02:56:05] examples now if you have a gym

[02:56:08] membership and you never go because you

[02:56:10] don't really like the gym you don't

[02:56:12] really like working out it isn't for you

[02:56:14] cancel it cancel it today if you got you

[02:56:17] know some sort of movie subscription

[02:56:19] some sort of streaming service anything

[02:56:21] like that get rid of it unless you get

[02:56:24] value from it unless you use it um there

[02:56:28] are many of those examples you know

[02:56:31] could be Amazon Prime maybe you don't

[02:56:32] use it very often is it really worth it

[02:56:34] and I'm not saying it's that particular

[02:56:35] one but there are a lot of small things

[02:56:38] that we spend every week and every month

[02:56:42] and you don't really notice it because

[02:56:43] if you look at a month there are so many

[02:56:45] little expenditures you kind of think

[02:56:46] how that many you look at week you'll

[02:56:48] remember because it'll say on Wednesday

[02:56:50] you spent $18.93 on this you will

[02:56:53] remember what it was because you did it

[02:56:55] only three days ago so the weekly

[02:56:57] discipline is really the core thing and

[02:57:01] you might think I have lots of money I

[02:57:02] don't need to do this it's not about

[02:57:04] that it's not about whether you have a

[02:57:05] lot of money or a little money this is

[02:57:07] all relative anyway and the more money

[02:57:09] you have the more you realize that there

[02:57:11] are other people you have a thousand

[02:57:14] times more and to them what you know the

[02:57:16] millions you have are still smaller

[02:57:18] amounts of money so it's not about the

[02:57:19] size of it it's just if it's good enough

[02:57:22] for the world's largest corporations I

[02:57:25] think it's good enough for us and they

[02:57:26] handle billions we might handle hundreds

[02:57:29] of dollars or thousands or tens of

[02:57:30] thousands of dollars it is super super

[02:57:33] super worth doing and you trust me you

[02:57:36] will find stuff that you don't need and

[02:57:38] if you think of those dollars and you

[02:57:41] think that the $5 a month are actually

[02:57:43] worth

[02:57:46] $3,300 you start to pay more attention

[02:57:49] to the little things that you can go

[02:57:51] without without affecting your life I'm

[02:57:54] not suggesting that you know you you you

[02:57:57] give up your car and you now work and

[02:57:59] then you know you live a miserable life

[02:58:00] and you turn all the lights out out but

[02:58:02] there are I can guarantee it there are

[02:58:04] things you spend money on every week

[02:58:06] that you get zero or near zero value

[02:58:09] from that you can do without and you'll

[02:58:11] be much much happier when you put that

[02:58:13] money into into your investment account

[02:58:16] and that of course is the next step you

[02:58:19] have to when you found the $10 saving

[02:58:21] the $100 savings you have to up the

[02:58:24] amount you invest by you have to go back

[02:58:26] to your plan and you know you have to

[02:58:29] say here well actually um you know it's

[02:58:32] not $500 a month now because I found

[02:58:34] actually $19 us that I can save this

[02:58:38] week so let me up this to n $519 because

[02:58:41] if you don't do that you're going to

[02:58:42] squander $19 on something else you

[02:58:44] didn't need and then that's going to

[02:58:46] make a difference and it's going to make

[02:58:48] quite a substantial difference and if

[02:58:49] you are in doubt head back to the

[02:58:51] compound interest calculators and keep

[02:58:53] doing that and that to me is the

[02:58:56] simplest way building a lot of wealth

[02:58:59] and it's so easy and you know it becomes

[02:59:01] fun

[02:59:03] and going back to this together element

[02:59:06] you and your other half might have

[02:59:08] slightly different um risk

[02:59:12] appetites and that's fair enough that's

[02:59:15] fine in a way a lot of the time that

[02:59:16] works off quite well if one of you is a

[02:59:18] little bit more risky and the other ones

[02:59:20] a bit more risk averse actually you

[02:59:21] balance each other out provided you have

[02:59:23] separate incomes and invest separately

[02:59:25] um and if you do have separate incomes

[02:59:27] get two investment accounts uh get two

[02:59:30] brokerage accounts make two plans why

[02:59:33] because if you are investing your money

[02:59:36] and you are in charge of your expenses

[02:59:39] you can control then you have a lot more

[02:59:43] ownership and a lot more dedication to

[02:59:45] it and everybody feel Fields better

[02:59:49] about controlling that and as likely to

[02:59:52] actually invest and save and and do

[02:59:54] better and do more I mean it's sort of

[02:59:56] all together it becomes comes a little

[02:59:58] bit like you know government everybody

[03:00:01] throws a bit of money into it everybody

[03:00:03] feels it isn't really entirely their

[03:00:04] money so they do a bit of this they do a

[03:00:06] bit of that and well you you bought this

[03:00:08] so I'm going to buy that you get into

[03:00:09] that kind of situation so don't do it do

[03:00:11] it for yourself don't do it for anybody

[03:00:13] else and of course do share it I mean do

[03:00:16] be transparent about it I really

[03:00:17] encourag that and it's a fun thing to do

[03:00:20] and print them out have the targets on

[03:00:21] the wall have them somewhere private in

[03:00:23] your bedroom or wherever you wanted to

[03:00:25] be and share it and enjoy it and look at

[03:00:28] it every month and go oh my god look

[03:00:30] look how much more money we made and

[03:00:31] look how much more money we've got now

[03:00:32] than we did when we started this six

[03:00:34] months ago it's it really is a fun thing

[03:00:36] to do and you will keep finding little

[03:00:38] things U that will make you um greater

[03:00:41] and greater investors so guys that's

[03:00:45] that's the the wrap on on this one

[03:00:47] really so

[03:00:48] um set goals for each U debt I talked

[03:00:51] about uh Play Play that back if you if

[03:00:53] you are in debt or or send me some

[03:00:54] messages if you if you want some help

[03:00:56] with that um compounding in education

[03:01:00] really look at those calculators do it

[03:01:02] again and again and again and again and

[03:01:04] again to it really sinks in uh and then

[03:01:07] record what you spend and what as soon

[03:01:10] as you start doing that the budget sort

[03:01:12] of follows because you'll start to

[03:01:14] remember what you spend and you'll start

[03:01:16] to notice hang on why did I spend this

[03:01:19] amount in that week and and why was it

[03:01:21] three times more three months ago or why

[03:01:23] was it half uh you know 3 months ago

[03:01:25] you'll start to notice those things

[03:01:27] because you have a track record and

[03:01:29] without that record you have no idea and

[03:01:31] as I say be super detailed about it it

[03:01:33] really break it down don't have other

[03:01:35] categories don't have sort of

[03:01:36] miscellaneous things or or kind of vague

[03:01:39] descriptions be super specific so you

[03:01:41] remember what it is when you look at it

[03:01:43] again in nine months time all right guys

[03:01:45] um you have lots of homework to do goal

[03:01:48] setting um talking to your other halves

[03:01:51] in a in a friendly and happy manner uh

[03:01:53] and start recording your your

[03:01:57] expenses you're going to enjoy this

[03:01:59] trust me it's it's a little tedious at

[03:02:01] the beginning but you are going to enjoy

[03:02:03] this and you're going to get into this

[03:02:04] Rhythm and you do it every Friday every

[03:02:07] Sunday every whenever it suits you uh

[03:02:10] and stick to that don't ever let that

[03:02:12] day shift no matter where you are in the

[03:02:14] world no matter what's happening if you

[03:02:17] can't do it on that day do it the day

[03:02:18] before bye guys we're talking inflation

[03:02:22] investing that may or may not be topical

[03:02:25] but it does come back every couple of

[03:02:27] years one way or another so it's an

[03:02:28] appropriate subject I think for us to

[03:02:30] cover here we are going to go through

[03:02:32] all the traditional Investments and then

[03:02:36] I'm going to also tell you at the end

[03:02:38] what it is that I do so inflation

[03:02:40] investing what are the options there are

[03:02:43] tips there are I'm just going to write

[03:02:46] bonds there is there is a little bit

[03:02:48] more to that there is um real

[03:02:58] estate and there is also a couple of

[03:03:01] others which I want want to look at

[03:03:03] where did my mouse go here it

[03:03:06] is there of course stocks and not just

[03:03:09] any old stocks but we're going to look

[03:03:10] at exactly what sort of stocks a lot of

[03:03:13] people say gold is a great inflation

[03:03:15] hedge we're going to look at that and

[03:03:17] then we also going to look at crypto yes

[03:03:19] because again a lot of people believe

[03:03:21] that that is a great inflation hch so

[03:03:25] these are the the main ones we were

[03:03:27] going to run through and I'm going to

[03:03:28] show you some historic performance

[03:03:30] charts I'm going to explain what they

[03:03:32] are uh and let's get cracking let's get

[03:03:35] cracking in that case with tips now what

[03:03:38] are tips tips are treasury inflation

[03:03:42] protected securities what does it really

[03:03:44] mean well it basically means that there

[03:03:47] are

[03:03:48] bonds and they are indexed to inflation

[03:03:51] so what it means is that when inflation

[03:03:52] goes up the bond pays out more and it

[03:03:55] does that every six months um you can

[03:03:58] get them at 5 years 10 years 30 years

[03:04:00] they are also a bunch of

[03:04:02] ETFs and you you can buy and this is

[03:04:05] sort of one of the old school things

[03:04:08] that INF you know financial advisers

[03:04:10] tell you to buy Banks tell you to buy

[03:04:13] and nothing wrong with it but I just

[03:04:15] want to show you what the performance is

[03:04:17] of it

[03:04:18] um I've pulled up here so in blue here

[03:04:21] you have the CPI um core Consumer Price

[03:04:24] Index basically for some reason it's for

[03:04:27] all Urban consumers but it's basically

[03:04:29] US inflation um I guess they are because

[03:04:32] they're excluding the whole farming side

[03:04:34] of life now if you turn on tip yeah tip

[03:04:38] is a big ETF I think it's an ishares ETF

[03:04:41] or one of those big ones and they

[03:04:42] basically invest in a range of Tipsy

[03:04:47] inflation protected securities so

[03:04:49] basically these are government bonds as

[03:04:51] I said that were the coupons the coupon

[03:04:54] is the bit that pays you um dividend if

[03:04:57] you will for for lack of a better word

[03:05:00] the that is changes goes up and down

[03:05:02] with inflation so if You' bought that

[03:05:04] since uh the let's see when this this

[03:05:07] particular ETF was created it was

[03:05:08] created in 2004 um if You' bought that

[03:05:12] in 2004 and held it the whole time

[03:05:14] because you are fearing of inflation and

[03:05:17] you wanted to have something in your

[03:05:18] portfolio that gave you more stability

[03:05:21] security that didn't move so much you

[03:05:22] bought this nice basket of tips through

[03:05:25] this ETF you would have made a 24%

[03:05:28] return um over what is that 18 years not

[03:05:33] great right um and you can see already

[03:05:36] that the inflation rate the Consumer

[03:05:38] Price Index went up

[03:05:40] 43% in the same time period so you've

[03:05:44] underperformed the CPI substantially you

[03:05:47] kind of think well how's that possible

[03:05:49] when it's the the amount of um the

[03:05:53] the the coupon the bond pays is is

[03:05:56] linked to it well it's over a long

[03:05:59] period of time they obviously buy a a a

[03:06:01] mix of 5 10 30y year ones and it doesn't

[03:06:05] always work in your favor as much quite

[03:06:08] evidently so so not the greatest thing

[03:06:13] now it has in a sense kept its nominal

[03:06:16] value I mean it's G up 24% it hasn't

[03:06:18] gone down so it isn't a terrible thing

[03:06:20] to hold but it's definitely in my view

[03:06:23] not caught up with

[03:06:25] inflation and the other thing to bear in

[03:06:28] mind with that is that the inflation

[03:06:32] basket and I think I should probably

[03:06:33] start off by explaining that the

[03:06:34] inflation basket the CPI measure that

[03:06:37] the US government has is a fundamentally

[03:06:40] flawed one in my view why because it

[03:06:43] excludes assets that create a return

[03:06:48] so it excludes stocks it excludes bonds

[03:06:50] it excludes crypto it excludes real

[03:06:52] estate and you're kind of thinking hang

[03:06:54] on but isn't isn't some of the biggest

[03:06:57] expenditure for most families real

[03:07:00] estate um aren't they saving and putting

[03:07:03] money into bonds and stocks and whatever

[03:07:06] other financial instruments and

[03:07:08] therefore isn't that a pretty sizable

[03:07:10] chunk of expenditure yes it is but the

[03:07:12] US government doesn't want to track it

[03:07:14] because if they did inflation numbers

[03:07:16] would be much much higher so they have

[03:07:18] this very kind of core kind of inflation

[03:07:21] measure that was created and adjusted in

[03:07:24] my view because it's a pretty old

[03:07:26] measure to make it appear like there's

[03:07:28] less inflation because when it was

[03:07:30] created inflation was a problem now

[03:07:32] where we are right now not quite so much

[03:07:34] the case but um that's kind of what it

[03:07:37] is here so if you me just throw in for a

[03:07:39] second here the s&p500 in the same time

[03:07:42] period

[03:07:44] 275% inflation so if you put all the

[03:07:47] money in the S&P 500 you would have

[03:07:49] gotten

[03:07:50] 275% and you if you um put it in cash

[03:07:54] you would have lost 43% according to the

[03:07:57] inflation measure and you put it in tips

[03:07:59] you would have gone up 24% um now why do

[03:08:02] I say lost or and gained here

[03:08:04] well really what I what I want to

[03:08:06] illustrate with this these two bars here

[03:08:08] the yellow one and the blue one is that

[03:08:10] the inflation measure at 43% isn't a

[03:08:13] truly honest one if you are an investor

[03:08:16] and you are spare cash to invest and

[03:08:19] you're wanting to build more wealth for

[03:08:22] the long run then really I think your

[03:08:25] inflation measure is kind of more like

[03:08:27] the spy uh and not the CPI

[03:08:32] so that's really the the thought there

[03:08:34] on on tips you can do it I mean there

[03:08:37] are are a lot of studies on if you have

[03:08:40] a small percentage of government bonds

[03:08:43] in your portfolio yes they won't perform

[03:08:45] but they reduce volatility

[03:08:48] um some people just buy things because

[03:08:50] they know that they're still going to be

[03:08:52] there if the world ends at least they

[03:08:53] believe they're still going to be there

[03:08:55] um and if there is some sort of

[03:08:57] cataclysmic is that the

[03:08:59] word you know the end of the world is

[03:09:02] sort of coming they think there is a

[03:09:03] greater chance the US government's going

[03:09:05] to pay them than perhaps private

[03:09:07] companies and I mean that's a really

[03:09:10] personal wonder I they could of course

[03:09:13] pay you but they could just print more

[03:09:14] money but you know that takes us a

[03:09:16] little bit off the subject

[03:09:17] now what is the second thing I want to

[03:09:19] look at the second thing I want to look

[03:09:21] at is floating raid bonds and I know I

[03:09:25] put over here just bonds but the bonds

[03:09:29] are two types really there are um they

[03:09:31] are fixed so they are fixed rate

[03:09:36] bonds and there are floating rate

[03:09:40] bonds and and what does that mean well

[03:09:42] fixed means exactly that it means it's a

[03:09:44] bond that comes with a coupon and it

[03:09:46] says it's % or 2% or 8% depending on on

[03:09:49] its risk level and it'll pay you that

[03:09:52] until 2050 or whatever time period the

[03:09:55] bond runs at and the amount of coupon

[03:09:58] the amount of dividend if you want to

[03:10:00] call it that typically Dividends are

[03:10:02] used for stocks for bonds we call them

[03:10:04] coupons but it's essentially the same

[03:10:05] thing just Financial people trying to

[03:10:07] confuse you so let's call it the

[03:10:09] dividend because it's easier so that

[03:10:11] dividend is fixed it'll be the same

[03:10:14] which means if inflation picks up from

[03:10:17] say 1% to 5% and you bought a bond when

[03:10:21] the inflation was 1% that would pay you

[03:10:24] 5% then initially you thought okay I'm

[03:10:26] getting 4% more than inflation that's

[03:10:28] that's that's okay that's pretty good

[03:10:29] I'm happy with that now once your

[03:10:31] inflation reaches 5% you're now getting

[03:10:33] the same amount as inflation so you're

[03:10:35] getting absolutely zero nothing at all

[03:10:38] and that's the risk with long-term bonds

[03:10:42] now of course you can sell the bond I

[03:10:43] hear you but when you do sell that Bond

[03:10:46] you will be selling it at a lower value

[03:10:49] um and if you're really interested in

[03:10:50] bonds guys ask me some questions on

[03:10:52] Bonds on discords um we can of course

[03:10:55] also cover that but at the moment the

[03:10:57] main differential I want to draw is

[03:10:59] fixed bonds fixed rate for the life of

[03:11:01] the bond float floating um raid bonds

[03:11:05] are tied to something and that could be

[03:11:09] hore liore some sort of interbank

[03:11:12] interest rate it'll be that plus a

[03:11:15] certain amount or minus a certain amount

[03:11:17] and that's also how a lot of mortgages

[03:11:19] are priced a lot of mortgages are uh you

[03:11:21] know some sort of interest rate that

[03:11:24] moves every day or every week or every

[03:11:26] month plus minus a couple of percentage

[03:11:28] points and that's how they're calculated

[03:11:30] so that's basically I think the the

[03:11:32] easiest analogy is is a mortgage a fixed

[03:11:34] mortgage you know what you're paying um

[03:11:36] a floating mortgage you don't it might

[03:11:39] be better sometimes it might be worse

[03:11:40] sometimes it's very much the same with

[03:11:42] floating bonds now how have they

[03:11:44] performed historically well again I've

[03:11:46] pulled up here an ETF called flot

[03:11:49] fot and let's be fair to it let's go to

[03:11:51] the start when this ETF was created um

[03:11:54] and you can see here it's given you a

[03:11:57] 1.2% return now In fairness to flot uh I

[03:12:02] think it would have paid you out some

[03:12:04] dividends so it probably wasn't quite as

[03:12:07] abysmal as this but certainly there

[03:12:09] isn't much um capital appreciation here

[03:12:12] but there is probably a couple of

[03:12:14] percent per year um I don't know maybe

[03:12:16] 2% 3% a year so that would over this

[03:12:19] time period perhaps take us up to um you

[03:12:22] know a a a a more substantial period

[03:12:24] what is this this is about 10 years so

[03:12:26] say it was 2% maybe it was 20% so maybe

[03:12:28] it would have beaten the CPI just it

[03:12:31] might have given us a little bit more

[03:12:34] and you can also see that when the CPI

[03:12:36] goes down up here let me highlight that

[03:12:39] for you so when the inflation goes down

[03:12:42] the value of these things also goes down

[03:12:45] and vice versa so it does kind of move

[03:12:47] with inflation but not all that much so

[03:12:49] again a very very stable thing to buy um

[03:12:52] nothing wrong with it again you want to

[03:12:54] look at what is the average coupon

[03:12:55] they've been paying out which perhaps

[03:12:58] isn't isn't um portrayed here in that

[03:13:00] chart so it's kind of been inflation

[03:13:05] hedge but it's a very very very

[03:13:07] conservative one and I I'm not dissing

[03:13:09] conservative things I think there is

[03:13:10] place for conservativeness in every

[03:13:12] portfolio but it depends very much on

[03:13:15] your your mind mindset it depends on on

[03:13:17] your age it depends on your available

[03:13:19] income where are you in life you have

[03:13:21] nine businesses that are paying you

[03:13:23] loads of money every month and you don't

[03:13:24] know where to put it you're probably not

[03:13:26] going to put much into that or are you

[03:13:28] 76 and your income is uh coming from a

[03:13:32] small pension and a bit of a stock

[03:13:34] portfolio in which case you might want

[03:13:36] to be a bit more conservative right so

[03:13:38] it's a different time Horizon there for

[03:13:40] people so that's that's flot really so

[03:13:43] again obviously if I pull up the S&P 500

[03:13:45] it doesn't look very pretty right I mean

[03:13:47] in that time period it went up 26% flot

[03:13:50] basically didn't move at all though as I

[03:13:52] say you probably would have made 20 30%

[03:13:54] return on that so it's still better than

[03:13:55] inflation better than sitting on cash

[03:13:58] better than cash in the bank or cash

[03:14:00] under the mattress but not something

[03:14:03] that's going to make you rich although

[03:14:06] not every investment needs to be that

[03:14:08] now what about real

[03:14:10] estate and I I think if you look at real

[03:14:12] estate you got to look at two things one

[03:14:14] is a lot of people say the house you

[03:14:17] live in uh is a pretty good inflation

[03:14:19] hedge and yes there is something to that

[03:14:22] because um you use a mortgage to buy

[03:14:24] your house um and if you have a

[03:14:26] long-term mortgage which most people do

[03:14:29] rates are pretty low pretty attractive

[03:14:31] at present is so you can lock in pretty

[03:14:34] cheap funding for you know 20 20 years

[03:14:36] 25 years maybe even 30 years and as

[03:14:39] there is inflation at hopefully your

[03:14:41] income your salary your wages your

[03:14:43] business income your other investment

[03:14:45] income picks up over that time period

[03:14:48] that mortgage payment becomes smaller

[03:14:50] and smaller and smaller you get some

[03:14:53] capital appreciation hopefully for your

[03:14:54] house as well though given that you're

[03:14:56] not unlikely to sell it it's not a

[03:14:59] particularly liquid asset because it

[03:15:01] means you have to move out you'd have to

[03:15:02] go find somewhere else to sleep and

[03:15:04] you'd have to buy something perhaps

[03:15:06] similar at which point you might pay

[03:15:07] more or the same unless you at some

[03:15:10] point going to downgrade or move

[03:15:11] somewhere cheaper in the world but

[03:15:14] that's certainly um

[03:15:18] better than renting usually usually in

[03:15:22] most markets and there are some

[03:15:24] exceptions rents go up with inflation or

[03:15:27] ahead of inflation which means that your

[03:15:30] expenditures keep going up alongside

[03:15:32] with inflation whereas if you have that

[03:15:34] long-term mortgage locked in at a decent

[03:15:36] rate you you you it's the opposite

[03:15:38] actually inflation's helping you right

[03:15:42] so that's an interesting one now you can

[03:15:44] of course also look at real estate as an

[03:15:47] investment and I wanted to pull up one

[03:15:50] um see this the

[03:15:53] one I think so I think that was the um

[03:15:58] let me just double check that's the one

[03:16:00] I wanted to pull up eqr re I think it is

[03:16:04] yes indeed so this is a a residential re

[03:16:08] a real estate investment trust which

[03:16:10] let's go back to when when they started

[03:16:12] so we have a nice long comparison Point

[03:16:14] here and that has gone up rather

[03:16:17] dramatically right you can see

[03:16:20] 46% okay since 1994 it's a pretty long

[03:16:23] time Horizon but it has certainly

[03:16:25] performed okay there was the that was

[03:16:27] the housing crash crisis in here but

[03:16:29] that recovered there was um what is that

[03:16:33] here in in 2019 early 20 we have um you

[03:16:38] know basically housing crash here that

[03:16:41] was pretty substantial but other than

[03:16:42] that if you smooth that out over time it

[03:16:46] it it has certainly performed very very

[03:16:48] nicely so real estate generally speaking

[03:16:51] tends to go up faster than inflation in

[03:16:55] most places in the world um there might

[03:16:57] be some exceptions if you live in places

[03:16:59] with a lot of kind of rent control and

[03:17:01] and those kind of things very high taxes

[03:17:03] but generally speaking and this is

[03:17:05] obviously here a a a fairly sizable us

[03:17:08] reate on investing into residential

[03:17:11] property that has performed pretty well

[03:17:14] how can we make that any bigger down

[03:17:15] here let's assume a little bit if you

[03:17:17] can see is there any correlation between

[03:17:20] the two um it's pretty hard to see isn't

[03:17:22] it because one is is is moving so much

[03:17:25] faster than the other so know I think

[03:17:27] quite hard to see an actual correlation

[03:17:29] between these two and inflation um but I

[03:17:33] would say pretty obvious that real

[03:17:35] estate seems to outperform inflation

[03:17:38] most of the time now the next one on our

[03:17:42] lovely list here are stocks then we're

[03:17:44] going to look at gold we're going to

[03:17:45] look at crypto with

[03:17:49] stocks as I pulled up here earlier you

[03:17:51] pull up the

[03:17:52] spy500 which is probably the least

[03:17:55] focused way of investing you're just

[03:17:56] saying the 500 largest US companies or

[03:17:59] us listed companies rather will just on

[03:18:02] average be a pretty decent bet and of

[03:18:04] course there are great companies in that

[03:18:06] and there are so so companies in that

[03:18:08] and there are some fairly terrible

[03:18:09] companies in that but they are you know

[03:18:12] some of the world's largest and

[03:18:14] therefore I'm just going to make my life

[03:18:16] really really easy and that's a totally

[03:18:18] fair way of doing it and since 1994 it

[03:18:21] would have given you a 43% return um

[03:18:24] let's just put back eqr here very

[03:18:26] similar actually right pretty similar

[03:18:28] there's also a a there is I think in my

[03:18:30] view a fairly strong correlation between

[03:18:32] real estate prices and the stock market

[03:18:35] for all sorts of reasons people have

[03:18:37] more wealth to spend more money on real

[03:18:38] estate right and vice

[03:18:42] versa so stocks even the least focused

[03:18:46] way of investing in them is a pretty

[03:18:48] good way to go now what if you went and

[03:18:53] bought just really good companies

[03:18:56] instead and for example let's just say

[03:18:58] Facebook here I think is a really good

[03:19:00] company um and over time that Facebook's

[03:19:04] been listed it has

[03:19:09] uh going here make any sense does it oh

[03:19:12] because sorry I don't have Facebook here

[03:19:14] up in in in percentages so Facebook

[03:19:16] listed here on the left at at 30 and

[03:19:19] it's now at 130 so again it's gone up

[03:19:22] very very nicely what is that uh 3 four

[03:19:25] four and a half times so so so so fairly

[03:19:28] good return there or you could um you

[03:19:31] know look at something like a Microsoft

[03:19:33] or something like that the reason I

[03:19:34] pulled up Facebook is because Facebook

[03:19:37] started as a growth company right and

[03:19:39] now it's really more of a value play

[03:19:42] just the probably the world's largest

[03:19:44] publisher and therefore advertising

[03:19:46] there Inc money recipient and you can

[03:19:49] see that when you know in the early days

[03:19:52] when it was still a Growth Company you

[03:19:54] would think that higher inflation would

[03:19:56] tank the stock you've watched my my

[03:19:58] lecture on how inflation affects growth

[03:20:01] companies and is that the case well it

[03:20:03] certainly was here at the beginning so

[03:20:06] you see here in 2012 inflation picks up

[03:20:09] the stock kind of plummets and then

[03:20:12] similarly here in 2013 inflation goes up

[03:20:14] this stock plummets um but then it sort

[03:20:17] of starts to turn around and people

[03:20:19] start to realize that Facebook is more

[03:20:21] than just grow stocks in sort of

[03:20:25] 2013 and um the relationship no longer

[03:20:28] really becomes that so the growth issue

[03:20:31] is tends to be more of of a of a a

[03:20:34] problem at the beginning of the lifespan

[03:20:36] of a company or certainly at the

[03:20:38] beginning of the listing of such a

[03:20:39] company so you have some of that growth

[03:20:43] trajectory here at the beginning where

[03:20:45] inflation higher inflation causes the

[03:20:46] stocks to tank but in the long run and

[03:20:48] that's also the point I was trying to

[03:20:50] make here make here in the long run you

[03:20:52] know if you just held on for dear life

[03:20:54] from 2012 to 2013 well you would have

[03:20:57] made a very nice return June to June you

[03:21:00] would have okay it would have taken you

[03:21:02] a year to recover and then say a year

[03:21:04] later um you would have been despite a

[03:21:08] bit of a dip up there you would have

[03:21:10] been what at would have made 100% return

[03:21:14] over 322 years so eent return so what

[03:21:19] I'm going to get to as well in my

[03:21:22] conclusion to this will will come back

[03:21:24] to this how about gold and I like gold I

[03:21:28] mean look at this little this little

[03:21:30] friend here can you see him you see how

[03:21:32] shiny he is don't you just want him

[03:21:34] don't you want to buy some you want to

[03:21:35] buy some more look how nice and hard and

[03:21:37] heavy he

[03:21:39] is um there is something quite

[03:21:41] mysterious and mystical and attractive

[03:21:44] and appealing about gold when you see

[03:21:46] and you you feel that weight you just

[03:21:48] like I just want more it's so very shiny

[03:21:51] and as you can see i' I've fallen to

[03:21:54] that you know sort of marketing prey

[03:21:56] also now gold was traditionally seen as

[03:22:01] a safe haven when we had inflation um um

[03:22:04] or even when interest rates are very low

[03:22:07] in sort of both

[03:22:11] scenarios so even when you have negative

[03:22:14] interest rates gold has historically

[03:22:16] done very very well and people sort of

[03:22:18] think it's a great play if we have we

[03:22:21] have tough Economic Times and there is

[03:22:23] all that historic data where it has done

[03:22:25] incredibly well um and it's true now

[03:22:28] there is of course something about by

[03:22:29] buying this which is quite Charming but

[03:22:31] it's also combersome it's probably

[03:22:33] fairly inefficient fairly expensive you

[03:22:35] got to store the thing uh and look after

[03:22:38] it and it could become a problem if you

[03:22:40] become you know sort of a scrooch MAG

[03:22:43] duck Rich you know you need to buy buy

[03:22:45] build bath hous

[03:22:47] that you can jump into them which is

[03:22:49] which is my goal of course so most

[03:22:53] people don't end up buying a lot of this

[03:22:55] they might buy a couple of coins sort of

[03:22:57] for fun or as some sort of uh you know

[03:23:00] if the world ends I still have my little

[03:23:02] gold coins and that's why actually some

[03:23:03] people buy the really small gold coins

[03:23:05] because if they are worth you know $150

[03:23:08] or something like that you could

[03:23:09] actually use them as sort of a legal

[03:23:11] tender equivalent say we get

[03:23:14] hyperinflation you could perhaps use

[03:23:16] that coin or if the financial markets

[03:23:19] industry governments fed everything went

[03:23:21] went up in flames you could probably go

[03:23:24] and buy things with gold if people

[03:23:25] believed it was

[03:23:27] genuine how about though how most people

[03:23:29] are investing in gold nowadays well most

[03:23:31] people buy ETF or rather than Etc which

[03:23:34] is an exchange traded commodity um index

[03:23:38] and this one here which is called gold

[03:23:41] pretty good ticker name isn't it it

[03:23:43] basically goes back or maybe this is

[03:23:46] just actually sorry no no this is not an

[03:23:48] ETF gold this is a a Tracker of the

[03:23:50] value of gold in ounces so you can see

[03:23:53] here since uh basically the end of World

[03:23:55] War II about

[03:23:58] 1947 um we have the price of gold in

[03:24:01] Orange and has it been a good inflation

[03:24:04] hedge well I think you can see the

[03:24:06] answer from this chart right the blue

[03:24:08] line is inflation the CPI which has gone

[03:24:12] up

[03:24:14] 134% and then you have inflation which

[03:24:16] has gone up 650 per. so not the actually

[03:24:22] is that true no apologies guys that

[03:24:25] isn't true at all because it doesn't

[03:24:26] make any sense I put a different um let

[03:24:29] me remove that and make it a percentage

[03:24:31] scale as well because gold should have

[03:24:33] gone up quite a bit more than that so

[03:24:35] let's put this one up here again on the

[03:24:37] same percentage scale and there we have

[03:24:40] it so yeah that makes a lot more sense I

[03:24:42] was thinking that number seems a little

[03:24:44] bit conservative so gold has has gone up

[03:24:46] in that time period

[03:24:48] 3700% CPI has gone up uh what is that

[03:24:52] you know 1,000% or so

[03:24:55] and therefore this theory that gold is a

[03:24:58] fantastic inflation hedge would appear

[03:25:00] to be absolutely true right absolutely

[03:25:03] fantastic so look at the 70s here where

[03:25:05] we had massive inflation in the world

[03:25:08] which is you know o oil

[03:25:09] issues and uh it really really boomed

[03:25:13] that so what if though we look at the

[03:25:15] more recent recent history of gold and

[03:25:18] that's where things start to change a

[03:25:19] little bit so say we start in 2010 or so

[03:25:23] ah there you can see that gold yes it

[03:25:25] went up into

[03:25:27] 2011 12 about 60% or thereabouts and

[03:25:30] then it's been tumbling down and we are

[03:25:34] kind of wondering why why why why why

[03:25:36] wouldn't this have gone up a bit more so

[03:25:38] let me um go back to where we are

[03:25:41] presently we here's present time I'll

[03:25:44] make that a little bit smaller so if you

[03:25:46] then look at yeah so say if you look at

[03:25:49] it from sort of a 2010 point it depends

[03:25:51] a little bit on what point you're

[03:25:52] starting at it so sometimes it does a

[03:25:54] little bit better but the more you look

[03:25:55] at recent history yes it's gone up a bit

[03:25:59] so say just in since 2019 or so it it

[03:26:03] has certainly outperformed most measures

[03:26:05] of inflation in this government measure

[03:26:08] here yeah still still very nice right

[03:26:09] you think okay I went up

[03:26:11] 36% since

[03:26:13] um early 2019 whereas inflation's only

[03:26:17] gone up 5% but and here's the big bat

[03:26:20] I'm going to throw in spy is done better

[03:26:23] and spy has done quite a lot better uh

[03:26:27] after sort of 2009 after 2009 the

[03:26:31] world's really seems to have changed and

[03:26:33] put a lot more money into stocks and a

[03:26:35] lot less money into gold so is it going

[03:26:38] to turn around again well you talk to go

[03:26:40] gold Buffs absolutely I mean as you can

[03:26:42] see I've got some here so I'm not

[03:26:44] entirely against it and it probably has

[03:26:47] a place though bear in mind it is an

[03:26:49] asset that does not give you any income

[03:26:53] and therefore the intrinsic value of

[03:26:55] that thing is just whatever we think

[03:26:57] it's worth it's not like a like a

[03:27:00] Microsoft or a Facebook who are

[03:27:02] profitable you're creating money or like

[03:27:05] real estate which gives you an income it

[03:27:08] gives you a return right or you know buy

[03:27:11] a farm and it gives you food every year

[03:27:13] it just doesn't do that it doesn't give

[03:27:15] you anything other than storage costs

[03:27:17] perhaps

[03:27:19] so how

[03:27:21] about crypto is that the reason that

[03:27:25] gold has not performed well have a look

[03:27:27] at Bitcoin here now Bitcoin of course

[03:27:30] only kicks in um of from late

[03:27:36] 2018 in in in the this particular chart

[03:27:39] here um not saying that's when it was

[03:27:41] created but that's sort of when it

[03:27:42] really started to to pick up uh more on

[03:27:45] the main stream level and again let me

[03:27:48] just make that a percentage chart so

[03:27:50] it's a little easier for us to

[03:27:53] compare and we are going to use the

[03:27:55] coinbase

[03:27:57] one there we are so we me go back a

[03:28:00] little bit more in time yes we can it

[03:28:02] really it it sort of starts to become

[03:28:04] relevant okay maybe by

[03:28:05] 2017 I suppose that's really when it

[03:28:07] starts to kick off and then you see this

[03:28:09] incredible rise here almost 6,000 per to

[03:28:13] the end so if we can go in a little bit

[03:28:15] more um you know is that where gold

[03:28:19] starts to underperform well I think

[03:28:21] really to answer that more visually we

[03:28:25] need

[03:28:25] to um look at this a little bit

[03:28:28] different so let's get rid of Bitcoin

[03:28:31] again and gold and we do a comparison of

[03:28:35] gold not

[03:28:37] bold by the ounce on a new price scale

[03:28:40] and also of BTC USD

[03:28:47] btcusd on a new price

[03:28:51] scale

[03:28:54] and okay now here confusing uh the

[03:28:57] colors are too similar the gold has to

[03:29:00] be a sort of golden color surely let's

[03:29:03] make it yellow make it a bit fatter so

[03:29:05] you can see it more

[03:29:07] easily and Bitcoin is that green one and

[03:29:11] the blue line is inflation which is

[03:29:13] perhaps slightly less relevant here but

[03:29:15] you can see that with the tremendous

[03:29:20] rise of Bitcoin

[03:29:23] here this is Bitcoin going up

[03:29:26] right gold at sort of the same Le time

[03:29:31] starts to kind of Fizz out a bit so I

[03:29:33] this is a

[03:29:34] speculatory announcement for for me but

[03:29:37] I do think there is a bit of an inverse

[03:29:39] relationship between the two now I do

[03:29:41] think that cryptos generally are

[03:29:43] stealing some of the money that would

[03:29:45] have otherwise gone into gold there's

[03:29:46] been a lot of marketing by the Bitcoin

[03:29:49] Miners and everybody out there to say

[03:29:51] that Bitcoin is the new gold

[03:29:54] so there we have kind of the the key

[03:29:57] five assets um classes so we have as as

[03:30:00] a quick recap we have tips uh they give

[03:30:03] you some return but probably not

[03:30:05] inflation beating um you have bonds the

[03:30:08] floating rate once will give you a

[03:30:10] slightly better return than um than

[03:30:12] inflation real estate typically has done

[03:30:15] very very well

[03:30:16] though there is a fairly close

[03:30:17] correlation with stocks stocks quality

[03:30:20] stocks will outperform inflation quite

[03:30:22] substantially then you have gold

[03:30:24] historically fantastic recent years not

[03:30:27] so much and it's quite possibly because

[03:30:30] crypto is stealing its Thunder and

[03:30:32] therefore perhaps crypto is is is is

[03:30:34] something to put a little bit of money

[03:30:35] into as a sort of inflation hedge as

[03:30:38] well now what is it that I do well let

[03:30:41] me let me hide a couple of things here

[03:30:44] and basically the way way I look at this

[03:30:46] is

[03:30:48] uh I don't worry about inflation to

[03:30:50] start with but what I do do is I just

[03:30:53] buy some good companies so something

[03:30:55] like a a Microsoft something like a

[03:30:59] PayPal companies with very very high

[03:31:02] free cash flow with good pricing power

[03:31:07] which means that they have brand loyalty

[03:31:10] so if PayPal's fees go up a fraction

[03:31:12] most people don't notice most people

[03:31:14] won't change it W really make much of a

[03:31:17] of of a difference and if you go back

[03:31:19] let's see when these guys started to

[03:31:21] list we can compare that to

[03:31:23] inflation um okay we can sort of see

[03:31:26] let's be fair and start when all three

[03:31:28] of these stocks have listed it's not

[03:31:29] really about a comparison of these three

[03:31:30] but you can just see they have

[03:31:32] outperformed inflation by you know many

[03:31:34] many times so Microsoft 4 40% PayPal

[03:31:38] 570 and there

[03:31:40] abouts and um inflation at the same time

[03:31:44] time period here in this 5year period so

[03:31:46] has only been about 12% so for me the

[03:31:49] most convincing

[03:31:52] investment when there was inflation

[03:31:54] quite frankly also when there isn't

[03:31:55] inflation is stocks with high return on

[03:31:59] common Equity High free cash

[03:32:01] flow very good profit margins especially

[03:32:06] compared to their peers in this sector

[03:32:08] now software is a great one because it's

[03:32:11] a service so they're going to have

[03:32:12] profit margins gross ones of 70% or or

[03:32:14] thereabouts and and and and that's the

[03:32:17] big thing uh in addition to the profit

[03:32:20] margins you want a good growth so

[03:32:22] double- digit growth you know all of

[03:32:24] these would have 20 30% plus growth and

[03:32:27] therefore with that high return on

[03:32:29] common Equity the way I look at it is

[03:32:32] I'm I'm in the long run with apart from

[03:32:34] some crazy blips here and there I'm I'm

[03:32:37] pretty much near as near a guarantee as

[03:32:39] they can be uh you know guaranteed a

[03:32:41] very very high return each year that

[03:32:43] will far far outstrip any inflation out

[03:32:46] there so therefore I don't worry about

[03:32:48] inflation now what about growth stocks

[03:32:50] growth stocks will get temporarily hit

[03:32:53] we saw that with Facebook right but you

[03:32:55] then if you wait out that two-year time

[03:32:58] period because you've done your homework

[03:33:00] and again you believe that this is going

[03:33:02] to turn into a company with a great mode

[03:33:05] a great product a great technology that

[03:33:07] will be very profitable that isn't so

[03:33:09] easily substitutable so there are lots

[03:33:12] of choices out there and you know look

[03:33:15] at Apple for examp example if you have

[03:33:16] an iPad and you want the new iPad are

[03:33:19] you going to buy it even if the price

[03:33:21] goes up $30 probably you are probably

[03:33:24] not going to go and switch to a Samsung

[03:33:26] or xiaomi or any other brand out there

[03:33:28] because to you only the iPad is

[03:33:31] acceptable and that doesn't apply to

[03:33:33] everybody but it applies to a fair chunk

[03:33:35] of the populace and therefore Apple has

[03:33:38] big pricing power and therefore they're

[03:33:41] likely to continue growing they're

[03:33:42] likely to retain their High margins and

[03:33:45] their High Returns on on on on Capital

[03:33:47] employed so for me short-term inflation

[03:33:52] fears and impacts on growth stocks are

[03:33:54] not really a concern because I believe

[03:34:00] and I hope that I've picked companies to

[03:34:02] start with that will do very well and

[03:34:05] just close your eyes fast forward two

[03:34:07] years down the road and probably the

[03:34:10] Market's forgotten about the inflation

[03:34:11] fears and that early stage growth

[03:34:14] company is now in a two two years

[03:34:16] further ahead they would have sold a lot

[03:34:17] more products they might even be

[03:34:18] profitable at that point so it becomes a

[03:34:20] very very different value proposition so

[03:34:22] also the growth companies mature they

[03:34:26] become teenagers and then they become

[03:34:28] fully-fledged traditional companies that

[03:34:30] are no longer growth stocks so for that

[03:34:32] reason also inflation I think is much

[03:34:35] overhyped the media love it it's

[03:34:37] exciting we can jump up and down about

[03:34:39] it lots of headlines lots of clicks but

[03:34:42] in

[03:34:43] reality I'm I'm kind of with the with

[03:34:45] Buffett here on this one is that ignore

[03:34:48] what economists say most of the time uh

[03:34:50] and changing her whole investment

[03:34:52] strategy because of inflation probably

[03:34:55] isn't worthwhile now there are some

[03:34:58] benefits in in thinking about these

[03:35:00] things why because if you diversify your

[03:35:04] portfolio in these times because perhaps

[03:35:06] your existing portfolio isn't very

[03:35:08] Diversified Perhaps it is 100% One stock

[03:35:12] or perhaps it's just two stocks and

[03:35:13] therefore they maybe they're both gross

[03:35:15] stocks and therefore inflation's hitting

[03:35:17] you rather hard a bit of diversification

[03:35:20] in that holding is probably a good idea

[03:35:22] and it'll help to maintain your wealth

[03:35:25] and your reduce your volatility of your

[03:35:28] portfolio um and therefore you will

[03:35:32] actually get probably better returns in

[03:35:33] the long run now if you just sell

[03:35:36] everything and rotate completely out of

[03:35:38] the sector you were in which you

[03:35:39] believed was a good one let's assume

[03:35:41] you've picked good stocks and then you

[03:35:42] changed to something else well you're

[03:35:44] probably buying the something else like

[03:35:46] the the value stocks at high prices at

[03:35:48] that point so you are increasing your

[03:35:51] risk uh you are diverting away from your

[03:35:53] long-term goals and you are probably

[03:35:56] again creating a portfolio that is very

[03:35:59] overweight in one particular sector

[03:36:03] so the starting point I think is always

[03:36:06] a good strategy and a good set of stocks

[03:36:10] and then a lot of the time the smartest

[03:36:12] thing to do is to do nothing at all and

[03:36:14] that's the hardest thing to do but I

[03:36:16] think short-term inflation fears

[03:36:19] generally overstated generally the

[03:36:21] market overreacts to it so I would go

[03:36:24] back to my long-term strategy of monthly

[03:36:28] buyings into stocks and yes you can

[03:36:31] change them a little bit if you want if

[03:36:32] you see some opportunities but more or

[03:36:35] less blindly keep buying the same stocks

[03:36:38] provided there isn't hasn't been any

[03:36:39] fundamental change to those and a little

[03:36:41] bit of more inflation here or there it

[03:36:43] doesn't really fundamentally affect fect

[03:36:46] 99% of businesses and we are looking at

[03:36:49] the psychology of the financial Market

[03:36:52] um some people call it behavioral

[03:36:55] investing or you know psychology or

[03:36:57] whatever you want to call it it doesn't

[03:36:58] really matter now economic

[03:37:01] theory says that Financial investors and

[03:37:04] all as human beings are profit

[03:37:07] maximizing individuals who will always

[03:37:10] seek the most utility out of our money

[03:37:13] and our actions in our time spent now I

[03:37:17] think most of you probably will realize

[03:37:19] that by now that that isn't really the

[03:37:21] case otherwise the market wouldn't sort

[03:37:22] of overreact and why does the market

[03:37:25] overreact why do most investors hold on

[03:37:28] to losing stocks underperforming stocks

[03:37:31] why do underperforming mutual funds

[03:37:35] rarely have outflows whereas the

[03:37:37] overperforming one immediately have mass

[03:37:40] amount of money flowing in so there are

[03:37:41] quite a lot of kind of Concepts and

[03:37:43] psychological

[03:37:45] problems that we have that we are all

[03:37:48] wired with that I want to address here

[03:37:49] in the next couple of um lectures and

[03:37:53] really with the aim that we understand

[03:37:54] it better and with the aim of turning

[03:37:57] ourselves into more rational beings

[03:38:00] rather than these sort of irrational

[03:38:02] psychotic investors that most of us

[03:38:05] are and so we're going to run through

[03:38:07] through some of that here we're going to

[03:38:09] dive more deeply into it and see what

[03:38:11] can we learn from it how can we become

[03:38:13] more rational or can we profit from the

[03:38:16] irrationality of

[03:38:19] others that part to give it away is a

[03:38:21] lot harder to do but you know just look

[03:38:23] at okay look at look at the do com

[03:38:26] bubble right you most of you will maybe

[03:38:29] you don't remember it maybe you weren't

[03:38:30] around at the time but let me just pull

[03:38:33] it up for you here on the screen as well

[03:38:36] and I'll open that just in a second here

[03:38:38] just to highlight again what a Whopper

[03:38:42] of an event that really was and if you

[03:38:45] look at the chart which I know you

[03:38:47] cannot see yet because I'm only just

[03:38:48] opening it um you will remember that in

[03:38:52] um let me just make myself a little

[03:38:54] smaller here here we go and then we're

[03:38:57] going to throw uh let's throw QQQ at

[03:39:00] this all of them there we go and let's

[03:39:05] get rid of everything

[03:39:07] elseq absolutely everything else so if

[03:39:10] you go back in time a bit here to to

[03:39:13] 2000 you can see that we had that

[03:39:17] massive massive rally here and if you

[03:39:19] bought at the top of that market which

[03:39:20] unfortunately some people did and then

[03:39:22] you got terrified and you never bought

[03:39:24] another security ever since so the whole

[03:39:27] rally down you didn't buy a thing then

[03:39:29] would have taken you from 2000 to well

[03:39:32] really July 2016 to make your money back

[03:39:36] which of course would have been horrible

[03:39:37] because you would have also had

[03:39:38] inflation and that opportunity cost so

[03:39:41] in reality you didn't really make any

[03:39:42] money for for nearly two two decades and

[03:39:47] why was that well because this rally

[03:39:49] here in 2000 was an irrational one I

[03:39:53] remembered very distinctly because I was

[03:39:54] working for a a company at the time and

[03:39:58] we had a palacial office most expensive

[03:40:00] real estate ever built in the city and

[03:40:03] we had probably space to house maybe 200

[03:40:07] 300 staff we had about 20 we had however

[03:40:11] little Sony robot dogs we were sort of

[03:40:14] semi AI powered were kind of our pets

[03:40:17] were walking around to about $10,000 a

[03:40:19] piece and we just had basically

[03:40:21] unlimited budget and every week or every

[03:40:23] month we would meet with the um private

[03:40:25] Equity investors we would look at our

[03:40:27] cash burn rate as the metric for our

[03:40:31] success and anybody who uh basically

[03:40:34] criticized that model and said well you

[03:40:36] can't measure the success of her

[03:40:37] business by how much money it burns um

[03:40:40] you know we would have pointed a finger

[03:40:42] at them and said you don't understand

[03:40:43] how this works you're a dinosa so this

[03:40:46] is the new world you are missing out on

[03:40:49] the greatest um you know invention and

[03:40:52] the greatest acceleration and creation

[03:40:54] of capital and money ever in human

[03:40:57] history and um you just don't get it and

[03:41:02] then of course reality kicked back in so

[03:41:05] I I have I personally have long-term

[03:41:06] faith in markets but in the short run

[03:41:08] they certainly can go absolutely nuts

[03:41:12] and I'm going to give you a couple of

[03:41:14] sort of psychologic

[03:41:15] examples why we act the way we do for

[03:41:20] example if I give you the option of

[03:41:23] either you have to give me $50 right now

[03:41:24] for no real reason but you just have to

[03:41:26] give me $50 right now um you're very

[03:41:28] welcome to PayPal link is below just

[03:41:30] kidding or I'm going to flip a coin and

[03:41:32] I haven't got a coin yet and either you

[03:41:35] give me zero or you have to give me

[03:41:38] $100 what would be the rational thing to

[03:41:42] do well really the rational thing to do

[03:41:45] would be to give me $50 because with the

[03:41:47] flip of a coin you have a 50-50 chance

[03:41:49] of having to give me $100 so your

[03:41:51] potential risk your potential loss it

[03:41:54] can be twice as big but most people will

[03:41:59] go for the coin flip why

[03:42:02] because they hate the loss so much that

[03:42:07] they're willing to accept a potentially

[03:42:09] greater loss to forgo the loss that if

[03:42:12] that makes sense um so that is is is is

[03:42:15] one thing we're going to look at a bit

[03:42:16] more we're going to go into more detail

[03:42:18] in these Concepts in the next couple of

[03:42:20] of of lectures I just want to give you a

[03:42:21] bit of an overview here of some of the

[03:42:23] things that we have in our heads and

[03:42:26] that's exactly the same reason we buy a

[03:42:28] stock and it's a dud and it goes down

[03:42:30] 20% and we hold on to it it goes down

[03:42:32] 30% and we going we are more likely to

[03:42:34] hold on to it it goes down 40% and we

[03:42:36] are even more likely to hold on to it

[03:42:38] does it make sense rationally speaking

[03:42:41] probably not you could probably put that

[03:42:43] money into a better stock but we don't

[03:42:46] because we don't want to realize that

[03:42:47] loss it would be an admission to

[03:42:48] ourselves and we fear the loss so much

[03:42:52] we are so averse to that loss that we

[03:42:55] don't want to realize it therefore

[03:42:56] accepting the possibility that that loss

[03:42:58] could get bigger and bigger and bigger

[03:43:01] now the second part is just the whole

[03:43:04] herd Instinct um people tend to invest

[03:43:09] when the market is near its peak and you

[03:43:13] get you know in in 1999 loads of people

[03:43:15] were throwing money even in beginning of

[03:43:18] 2000s the first two two three months

[03:43:21] just before we managed to crash people

[03:43:23] were putting money into the market lots

[03:43:25] of it and that's because they had read

[03:43:27] about NASDAQ going from 52 to 109 and

[03:43:31] they thought okay I I missed the uh now

[03:43:33] we at 90 I've missed a 100% gain I want

[03:43:37] to get the next 100% gain and ignoring

[03:43:39] the fact of course there could be a risk

[03:43:41] that we might be at the peak of a market

[03:43:43] so people generally speaking we are kind

[03:43:47] of herd animals we like to follow the

[03:43:50] herd we like to do what everyone else is

[03:43:51] doing a fomo might be the the way to

[03:43:53] express it um but you know that that's

[03:43:57] kind of what we do the other thing that

[03:44:00] we do very very badly is that if we look

[03:44:03] at an investor some sort of celebrity

[03:44:05] investor and they picked a stock and

[03:44:07] that's gone up you know 20 times we now

[03:44:10] think that person's a

[03:44:12] genius which probably isn't the case

[03:44:14] we're probably lucky

[03:44:15] unless they've done this over you know

[03:44:17] many many years and that's of course

[03:44:20] what you see in stock rallies that the

[03:44:22] person who just started six months ago

[03:44:24] yes they were incredibly lucky with

[03:44:25] their timing they were not a genius

[03:44:28] observe them over 10 years and you know

[03:44:30] whether he's a genius and there very few

[03:44:31] of

[03:44:33] those and then we of course also always

[03:44:35] tell ourselves that any drop in the

[03:44:36] market is a buying opportunity uh you

[03:44:38] know buy the dip by the bit by the dip

[03:44:40] is is is a popular Mantra

[03:44:43] and we don't necessarily see the longer

[03:44:47] picture that um

[03:44:51] now how does it help us to understand

[03:44:54] the psychology of the market well if we

[03:44:56] can understand when people deviate from

[03:45:00] rational expectations we can then

[03:45:03] ourselves make more rational decisions

[03:45:05] when it comes to our our investing and

[03:45:07] we are going to look at macroeconomic

[03:45:09] indicators so to recap macro is the

[03:45:12] whole economy micro is looking at had a

[03:45:15] specific company so macro the bigger

[03:45:17] thing and what are the main macro

[03:45:22] indicators that

[03:45:24] matter for the stock market and

[03:45:27] investing or not but I'm going to go

[03:45:30] through through the the key ones here

[03:45:32] the core ones and before we do that I

[03:45:34] also wanted to share with you this link

[03:45:36] here guys because I think this is quite

[03:45:38] a useful one if it lets me move

[03:45:41] this make that a little bit bigger I

[03:45:44] think this is pretty good resource if

[03:45:46] you want to keep track of economic data

[03:45:49] tradingeconomics.com

[03:45:51] calendar and I'm going to show you that

[03:45:54] website here it is um if you do look at

[03:45:58] this and I would recommend don't look at

[03:46:00] it too often but there is some value in

[03:46:03] looking at it there's a little impact

[03:46:05] thing here take the three star impacts

[03:46:08] because that way you get the really

[03:46:09] important core stuff you get the retail

[03:46:11] sales fed interest rate decisions GDP

[03:46:14] growth you know payroll numbers the

[03:46:16] really core staff and not too many as

[03:46:18] you can see if you go down into onear in

[03:46:21] terms of they're not that important you

[03:46:24] get all of this I mean you get building

[03:46:26] permits Michigan inflation expectations

[03:46:29] mortgage application you probably don't

[03:46:31] care about any of those and you probably

[03:46:33] don't need to fill your head with a

[03:46:35] Million numbers better I always think to

[03:46:37] look at less important numbers and then

[03:46:39] look at more less important numbers now

[03:46:43] we're going to go through the the key

[03:46:46] ones here and also to discuss each time

[03:46:49] are they actually important are they

[03:46:51] relevant what's the economic theory and

[03:46:53] do they make sense so let me give me a

[03:46:56] clean slate here GDP that's the the

[03:47:00] first one why gross domestic product

[03:47:02] measures all the goods and services of a

[03:47:06] certain period in the economy and

[03:47:09] therefore it is really the core measure

[03:47:12] of uh economic activity if that index

[03:47:16] goes up of course it's growth when it

[03:47:18] goes down it means it's the opposite

[03:47:20] it's it's some sort of you know

[03:47:22] recession type type event happening um

[03:47:25] the theory is the macroeconomic theory

[03:47:27] is that when GDP numbers go up the stock

[03:47:30] market will go up stock prices will go

[03:47:32] up is that the case well sometimes

[03:47:36] that's the that's the easy answer here

[03:47:38] so for

[03:47:39] example on here I've charted in blue GDP

[03:47:44] in red the S&P 500 I've taken the Spy

[03:47:48] ETF and then an orange down below here

[03:47:51] the

[03:47:53] QQQ so therefore the NASDAQ ETF and you

[03:47:57] would think

[03:47:59] when GDP goes up blue line here when it

[03:48:02] goes up you would think that move that

[03:48:05] up a little bit so it's easier to see

[03:48:07] you would therefore think that the

[03:48:09] market would go up right generally

[03:48:12] broadly speaking yes

[03:48:15] but there is always a but um look at

[03:48:19] this period here so when you look at um

[03:48:23] October

[03:48:25] 20077 until the middle of

[03:48:29] 2008 and you can see the blue line is

[03:48:32] going broadly speaking up right we have

[03:48:35] a economic growth in in in that period

[03:48:39] um at least perhaps after at least the

[03:48:42] first half of 2018 So Below

[03:48:45] between my my second and my third line

[03:48:47] here you can see our blue line of GDP

[03:48:50] growth is going

[03:48:52] up what is the S&P 500 doing at the same

[03:48:55] time it's absolutely collapsing um the

[03:49:00] NASDAQ losing quite a bit also perhaps

[03:49:02] not as dramatic as the S&P because 2008

[03:49:05] we remember financial crisis so the big

[03:49:08] Banks make up more of the S&P not the

[03:49:11] NASDAQ so therefore the S&P gets hit

[03:49:13] harder so there is for example a

[03:49:14] situation where your theory of well the

[03:49:16] economy is still growing everything will

[03:49:17] be fine um it wasn't quite the case and

[03:49:20] then it was actually the market that

[03:49:25] tanked GDP so because

[03:49:28] the S&P 500 continue to sell off

[03:49:33] here GDP growth eventually fell off so

[03:49:37] the banking crisis caused a real world

[03:49:41] crisis so they can sometimes work the

[03:49:43] other way around economic theory SS you

[03:49:45] it's the other way around but it isn't

[03:49:47] it isn't always the case and there are

[03:49:48] plenty of other situations where you can

[03:49:50] look at you know March 10 20110 for

[03:49:53] example look at that time period here

[03:49:56] again let me magnify that for you here

[03:49:58] very nice looking GDP growth right that

[03:50:00] num is going up and no the GDP you can't

[03:50:03] really chart the percentage increase

[03:50:05] it's quite hard to do so it charts it as

[03:50:07] an index so at the moment we're

[03:50:09] somewhere in the 20,000 it's basically

[03:50:11] an index that just keeps going up and up

[03:50:13] and up well hopefully the will keep

[03:50:15] going up and up but you see at the same

[03:50:16] time S&P 500 took took a real nose dive

[03:50:19] well the econom is doing doing rather

[03:50:21] well now it did recover so if you smooth

[03:50:24] this out much more on a sort of quarter

[03:50:25] by quarter or Year bye basis then um you

[03:50:28] know you might have more positive

[03:50:30] correlation but you can certainly have a

[03:50:32] shortterm periods and there are quite a

[03:50:35] lot of them here will be another one for

[03:50:37] example um yeah that's perhaps not the

[03:50:40] greatest example but here is another one

[03:50:42] so in October 2018 for examp example

[03:50:45] again nice smooth GDP growth appu and

[03:50:47] blue look at what the S&P 500 is doing

[03:50:49] at the same time NASDAQ also tanking

[03:50:51] similarly in June 2011 GDP growth very

[03:50:54] very nice and something nasty happening

[03:50:56] in the market down here

[03:50:58] so in the long run I would say yes it is

[03:51:02] a decent indicator so say we smooth this

[03:51:05] out to a month level you can see it gets

[03:51:07] a little bit smoother but you still have

[03:51:09] these um irrational

[03:51:11] behaviors of of the two if you believe

[03:51:13] that that theory is right so GDP

[03:51:16] generally speaking good but you have to

[03:51:18] kind of still understand the

[03:51:20] microeconomics of each company because

[03:51:23] you can have a recession like we've had

[03:51:26] Co in the you know second half of

[03:51:30] 2020 and you see a lot of companies

[03:51:33] doing exceptionally well because there's

[03:51:35] a change in consumer habits and consumer

[03:51:37] expenditure there's an acceleration of

[03:51:40] uh technology adoption so there are

[03:51:42] winners and there are losers in this

[03:51:44] situations so again looking at the whole

[03:51:46] macro level is perhaps not that useful

[03:51:50] unless you simply buy the S&P 500 and

[03:51:53] maybe QQQ and you leave it at that in

[03:51:56] which case um GDP numbers will be a fair

[03:51:59] at least over sort of a fiveyear period

[03:52:01] will be a fair indicator for you now

[03:52:05] unemployment rates and job numbers is

[03:52:08] probably the second most looked at thing

[03:52:11] that we look at here so we have um jobs

[03:52:15] basically

[03:52:18] now generally speaking lower un well

[03:52:22] economic theory says that lower

[03:52:25] unemployment means more growth therefore

[03:52:28] stocks should do better um when there

[03:52:31] are more jobs available it means we're

[03:52:33] going to have more growth in the

[03:52:37] market however

[03:52:40] um there is a link here with inflation

[03:52:44] and that's the next one we're going to

[03:52:45] look at but before we do that let me

[03:52:47] just show you the genius of

[03:52:50] um Economist so if we look at um where

[03:52:56] was it on

[03:52:58] here nonfarm payroll for example okay so

[03:53:02] here we had a prediction doesn't really

[03:53:04] matter when this was but this was in uh

[03:53:07] in early May 2021 as I'm recording this

[03:53:11] and you can see that nonf payrolls so

[03:53:15] this is the whole payroll sector

[03:53:17] excluding the agricultural sector why do

[03:53:20] we exclude the agricultural sector

[03:53:21] because it's exceptionally cyclical so

[03:53:24] there is a harvest season when they

[03:53:26] employ lots of people and then they

[03:53:28] don't employ very many people at all for

[03:53:30] the rest of the year so therefore

[03:53:31] generally speaking you exclude Farm

[03:53:34] employment because it really screws your

[03:53:36] numbers quite quite substantially um now

[03:53:40] the forecast was 950,000

[03:53:44] uh people on the on the on the non-farm

[03:53:46] payroll the number we got was 266,000

[03:53:49] so all those smart economists with their

[03:53:52] macro Theory and all their beautiful

[03:53:54] data models we off by you know 700,000

[03:53:58] or so so again macroeconomics not as

[03:54:01] useful as microeconomics now what does

[03:54:03] the market do when it gets a number like

[03:54:05] that well there's two ways the market

[03:54:07] can play it and that's the other

[03:54:10] challenging part of macroeconomics there

[03:54:11] is always two ways of looking at it talk

[03:54:13] to two economists you generally speaking

[03:54:15] get two number two two different

[03:54:17] interpretations of the same fact so one

[03:54:20] you could say well the economy is not

[03:54:22] doing as well as we expected and

[03:54:25] therefore at least your sort of S&P 500

[03:54:28] stocks should

[03:54:30] decline or you look at it the other way

[03:54:34] around and you say well because the

[03:54:36] economy is not doing as well as expected

[03:54:39] inflation will grow less quickly

[03:54:43] therefore interest rates will not rise

[03:54:45] as quickly therefore the present

[03:54:49] earnings of growth stocks is will

[03:54:52] increase the present value of those

[03:54:53] earnings would increase therefore growth

[03:54:56] stocks value which is actually what

[03:54:57] happened here on that day just for one

[03:54:59] day though it was a a bit of a blip but

[03:55:02] you know there are always two ways of

[03:55:03] looking at these numbers is why I always

[03:55:06] say don't overthink the macro numbers

[03:55:10] too much

[03:55:12] now what's next guys what's next is two

[03:55:15] things it is inflation basically now

[03:55:18] inflation is

[03:55:20] CPI and

[03:55:23] PPI and what's the difference one is

[03:55:26] consumer one is producer so the Consumer

[03:55:30] Price Index is a basket of goods that

[03:55:34] the average household According to some

[03:55:37] Bean counters spent their money on so

[03:55:39] it's your groceries your your milk your

[03:55:42] um you know fuel heating costs your

[03:55:45] probably bit of insurance your car all

[03:55:49] that stuff that the core household

[03:55:51] expenditure folds within now there is

[03:55:55] always a bit of politics and that as

[03:55:57] well you can obviously tweak that basket

[03:55:59] and and and governments have done that

[03:56:01] in the past to get lower or higher

[03:56:03] numbers depending on how they how they

[03:56:05] feel about the world at that particular

[03:56:07] time the producer price index basically

[03:56:10] me measures the changes of of goods and

[03:56:12] services costs um

[03:56:15] more related to the manufacturing sector

[03:56:20] um why is it important

[03:56:23] well higher prices can well if you're a

[03:56:28] manufacturer and it increases the cost

[03:56:29] of your inputs the raw materials the

[03:56:32] components you buy your your salaries

[03:56:35] your wages for your employees if there

[03:56:37] is that increase that's inflation for

[03:56:40] you if you cannot increase this price

[03:56:44] prices of whatever you're selling so say

[03:56:46] you're making these pens and they say

[03:56:47] they cost $10 but you can't reduce or

[03:56:51] can't increase the price of them because

[03:56:53] there are another million companies out

[03:56:54] there that make essentially the same pen

[03:56:57] then if the cost of your Inc and

[03:56:59] whatever goes

[03:57:00] up it becomes a problem for you because

[03:57:03] it your your margin gets squeezed your

[03:57:05] profitability is reduced and therefore

[03:57:08] you would expect the stock price to fall

[03:57:12] right so that happens to a lot of man

[03:57:15] facturers on the growth stock

[03:57:18] side we have a situation that's a little

[03:57:21] bit more complex to explain and I will

[03:57:23] do a separate video on that because it

[03:57:26] is a little bit harder to get your head

[03:57:28] around so so so watch out for for that

[03:57:31] one it's coming up down down the list

[03:57:32] below

[03:57:35] um is there a benefit inflation well if

[03:57:40] you are a company that can pass price

[03:57:43] increases

[03:57:44] on then you haven't got an issue with it

[03:57:47] in fact a lot of the time a bit of

[03:57:49] inflation is quite good because it means

[03:57:51] you can increase your prices more than

[03:57:54] inflation so say you're apple and you

[03:57:56] make you know your iPhones or whatever

[03:57:59] it is and you got a pretty strong brand

[03:58:02] you've got very strong customer loyalty

[03:58:05] and not that much in the perceived

[03:58:09] Alternatives in the market of course

[03:58:11] there are other phones that you can make

[03:58:13] calls with but but um your your Apple

[03:58:16] followers who like to use their iPhones

[03:58:18] and they've got you know lots of other

[03:58:20] Apple equipment in their homes and their

[03:58:22] cars and everywhere else they kind of

[03:58:24] want to stay within that ecosystem so

[03:58:25] for them to change Brands is a pretty

[03:58:28] tough pill to swallow therefore if

[03:58:31] inflation is 2% Apple can probably put

[03:58:33] their prices up 5% 6% 8% and people just

[03:58:36] think oh it's just a bit of inflation

[03:58:38] they don't quite realize it's actually

[03:58:39] improving that company's margin so for

[03:58:42] those company stocks it can actually be

[03:58:44] a boon if there is a bit of

[03:58:48] inflation so that's kind of the quick

[03:58:50] quick inflation explanation here as I

[03:58:52] say we will look at growth stocks

[03:58:55] particularly separately because that is

[03:58:56] a little bit more complicated to get our

[03:58:58] head around um what are some other other

[03:59:01] key ones is uh retail sales

[03:59:06] so retail sales is is a is a fairly

[03:59:10] important one um it's a fairly direct

[03:59:15] measure of how consumers feel about the

[03:59:19] economy how confident they are that

[03:59:21] they're going to keep their jobs how

[03:59:23] confident they are in economic

[03:59:25] prosperity in the short term so when you

[03:59:28] see a um a drop in retail sales

[03:59:33] expenditure let me see if we can find

[03:59:35] one here here for example so look at

[03:59:36] this chart here this is um you can still

[03:59:40] see on here at the very beginning okay

[03:59:43] if I'm you move my mouse off it you you

[03:59:45] can no longer see it but you see that

[03:59:47] first bar there that's going down that

[03:59:49] was obviously a a CO related issue and

[03:59:51] apologies guys if you're watching this

[03:59:53] postco there are the occasional covid

[03:59:55] references in here but it the same

[03:59:57] applies to any kind of um external crash

[03:59:59] and then you get a recovery and then it

[04:00:01] sort of you get that kind of slump not a

[04:00:03] lot happening and that kind of tells you

[04:00:05] okay consumers are not really spending

[04:00:07] there all of your Consumer Staples a lot

[04:00:10] of your Brands a lot of your retailers

[04:00:12] will suffer that will event eventually

[04:00:14] feed down into the manufacturers to the

[04:00:17] wholesalers because if you stop buying

[04:00:20] whatever it is pens then the guys making

[04:00:22] the ink making the components will also

[04:00:24] suffer down the line it might takeen

[04:00:26] three months or six months because there

[04:00:27] was a time delay in in in in deliveries

[04:00:30] and inventories but it's kind of an

[04:00:32] early fairly quick indicator of whether

[04:00:35] things are going well or not so well and

[04:00:39] again generally speaking higher retail

[04:00:42] sales should push stock up stocks app

[04:00:45] and the other way around now the other

[04:00:48] one and that's perhaps slightly less

[04:00:51] important is uh

[04:00:54] industrial my you here we go

[04:00:58] industrial

[04:01:01] output so industrial output is um well

[04:01:04] it used to be much more important

[04:01:05] because most western economies used to

[04:01:08] be proper industrial economies and now

[04:01:11] they are much much more service

[04:01:12] economies so therefore a lot of the

[04:01:15] industry sits overseas manufacturing is

[04:01:18] somewhere else so it doesn't matter as

[04:01:20] much but it still gives you a a a nice

[04:01:22] snapshot of the health of basically all

[04:01:24] the factories in the countries and we

[04:01:26] get that number once a month from the

[04:01:28] fed and

[04:01:31] um it can be very volatile I don't know

[04:01:35] if we got a number of it up here um

[04:01:38] actually see they've kind of ignored it

[04:01:39] here which I think is quite sensible let

[04:01:41] me see if we can go back no they've

[04:01:43] igned because they're saying it's not

[04:01:44] that important why is it not that

[04:01:46] important because it's very volatile

[04:01:48] it's very seasonal also because there is

[04:01:50] a huge seasonality to manufacturing you

[04:01:52] know that could be Christmas or a big

[04:01:54] events or you know whatever uh

[04:01:58] seasonality there is in the market for

[04:01:59] example people tend to buy cars in the

[04:02:01] fourth quarter of the year so you're

[04:02:02] going to see a lot more manufacturing

[04:02:05] perhaps towards the end of Q3 and Q4 and

[04:02:08] then you're going to see very little in

[04:02:09] q1 does that mean the economy is tanking

[04:02:12] in in the first quarter of the year no

[04:02:14] it doesn't so when you look at

[04:02:15] industrial output you have to kind of

[04:02:17] look at quite a few months and see if

[04:02:19] there is a trend and definitely

[04:02:22] definitely compare it to the 12-month

[04:02:24] period before because otherwise it's not

[04:02:27] really a very useful indicator there so

[04:02:30] I I I I hope this is somewhat a useful

[04:02:33] over over very macro overview of some

[04:02:36] macro indicators here um I think if I

[04:02:40] was going to look at one or two of those

[04:02:41] it would probably be

[04:02:45] um inflation yes but it's a short-term

[04:02:48] issue I think generally speaking um

[04:02:50] unless you get really really massive

[04:02:53] increases there if you want to kind of

[04:02:55] get a get a shortterm feel for what's

[04:02:57] going to happen in the market I think

[04:02:58] retail Sals are quite an interesting one

[04:03:00] jobs numbers also tend to vary quite a

[04:03:03] lot and there are a lot of incentives in

[04:03:06] there as well say uh unemployment

[04:03:09] benefits get raised then you might have

[04:03:12] less job Seekers you might get Less jobs

[04:03:14] filled because some people think well

[04:03:16] I'm going to stay at home I'm going to

[04:03:17] wait you know get get take that

[04:03:19] government check and look after my

[04:03:20] children or something which is you know

[04:03:22] a a rational response by somebody there

[04:03:24] who's being offered two carrots one

[04:03:26] perhaps slightly smaller but with the

[04:03:28] benefit of all the time in the world and

[04:03:31] the other you have to go to work every

[04:03:32] day so you know you have to really think

[04:03:36] through those numbers and that's why I I

[04:03:39] personally think macroeconomic

[04:03:41] indicators should not really fall the

[04:03:44] basis of of a long-term investment

[04:03:46] strategy um yes they will give you

[04:03:48] shortterm noise and short-terms ups and

[04:03:50] downs and in this kind of fast media

[04:03:53] sector we live in where everybody wants

[04:03:55] content people pounce on these numbers

[04:03:59] and it becomes a big story for that day

[04:04:01] or that week but really in the long run

[04:04:04] it probably doesn't matter all that much

[04:04:07] we are talking economics today I've

[04:04:11] always had a great interest in economics

[04:04:12] I studied economics for three years

[04:04:13] years in London and I want to show you

[04:04:16] some of the basic principles that I

[04:04:18] think can be useful but I want to also

[04:04:20] really highlight the limitations of it

[04:04:23] and wise a lot of the time economists

[04:04:25] get things rather wrong so today this

[04:04:28] particular lesson there will be some

[04:04:29] others of course is about macro versus

[04:04:34] micro and um I remember the first time

[04:04:38] someone told me those two words I

[04:04:39] thought what what does that mean what

[04:04:41] does what does one letter difference

[04:04:42] really mean

[04:04:45] and in invest in particular this

[04:04:46] distinction is very very important so

[04:04:48] there are two types of economic theory

[04:04:52] segments most people who study economics

[04:04:55] sort of split their time somewhat

[04:04:57] perhaps

[04:04:58] evenly microeconomics is the much much

[04:05:02] older Theory and what is micro micro

[04:05:05] looks at the smaller part so micro would

[04:05:08] look at a company and would look at the

[04:05:12] demand and supply say for that company

[04:05:14] and therefore how that's priced and what

[04:05:16] happens if your prices go up 10% what

[04:05:19] happens to your demand what is your

[04:05:20] elasticity all these kind of things very

[04:05:22] much on a small level so it could be a

[04:05:24] household it could be a company and for

[04:05:26] our purposes a company obviously little

[04:05:29] bit more interesting now microeconomics

[04:05:32] couldn't always

[04:05:34] explain everything that was happening to

[04:05:37] say a company and therefore some

[04:05:39] dissatisfied economists decided Well

[04:05:42] let's create this field we call macro

[04:05:45] macroeconomics and that looks at a much

[04:05:47] much bigger area taking into account the

[04:05:49] whole economy or you know the World At

[04:05:52] Large or however want to large however

[04:05:54] want to however big you want to go um

[04:05:58] and that then became a new set of of of

[04:06:01] theoretical rules probably only about

[04:06:03] 100 years old or so the whole macro

[04:06:05] space whereas the microeconomic space is

[04:06:07] a much much older Theory um what is more

[04:06:11] more useful for us as investor

[04:06:14] well there's a lovely Warren Buffett

[04:06:16] quote which says I don't pay attention

[04:06:18] to what economists say frankly and um

[04:06:22] you know he always is a chap who makes

[04:06:24] quite bold statements but he has some

[04:06:27] sense with that and I'm going to show

[04:06:29] you why so macroeconomists you can often

[04:06:33] see them on you know TV stations CNBC or

[04:06:35] whatever and you know one is is is

[04:06:37] preaching the end of the world because

[04:06:38] of inflation and the other is preaching

[04:06:40] on another Channel live at the same time

[04:06:42] about the the r risks and fears of

[04:06:44] deflation both looking at similar data

[04:06:47] both interpreting it completely

[04:06:48] differently so one of the main problems

[04:06:52] with macroeconomics is that the

[04:06:54] economists in that field tend to

[04:06:57] disagree widely and there are theories

[04:07:00] some are more you know left leaning some

[04:07:03] are more right leaning and it subscribe

[04:07:06] to different schools of thought um so

[04:07:09] the trouble with those economists is

[04:07:11] that when they speak they always speak

[04:07:13] like I am right these are facts this is

[04:07:16] science this is what's happening and

[04:07:18] very very rarely are they actually right

[04:07:22] now when you look at predictions from

[04:07:26] economists on statistics that you you

[04:07:28] know economic statistics that we get out

[04:07:30] whether it's inflation or GDP growth or

[04:07:32] any of those they tend to be wrong most

[04:07:34] of the time yet they still get air time

[04:07:37] they still get printed in papers or

[04:07:39] where whatever you're reading and people

[04:07:41] never really seem to Tire of it

[04:07:44] even though most of the time they're

[04:07:45] they're they're actually quite wrong

[04:07:48] now the poor ability to predict what's

[04:07:53] going to happen in the economy or the

[04:07:55] investment Market overall in the long

[04:07:58] term is to me kind of a fact and I'm I'm

[04:08:01] heing a retired if you wish um Economist

[04:08:04] speaking and telling you it's a fact

[04:08:06] it's true but I think you know look at

[04:08:08] the data they're very very rarely right

[04:08:11] so when people ask these questions and

[04:08:15] people come out and speak on TV and say

[04:08:16] hey the S&P is going to hit X by the end

[04:08:19] of the year and the NASDAQ will be this

[04:08:21] and 12 months and you know China's

[04:08:23] economic growth will be you know 8% in

[04:08:26] 2024 those numbers are not very useful

[04:08:30] as an investor day-to-day and they also

[04:08:33] tend to be very inaccurate because it's

[04:08:35] just one person with a model and if you

[04:08:38] look and I'm going to show you in a

[04:08:39] second just how difficult it is to model

[04:08:41] this because of the amount of data out

[04:08:43] there so for me macro is um I wouldn't

[04:08:47] say it's complete nonsense because it

[04:08:49] isn't I mean there is something to that

[04:08:52] and and of course our governments Etc

[04:08:54] use it but I'm going to sort of cross it

[04:08:56] out here a little bit and I would

[04:08:57] encourage you to pay as little attention

[04:08:59] to it as possible and then you might be

[04:09:01] saying but what about inflation what

[04:09:02] about this growth what about that but

[04:09:04] okay we're going to get to that we're

[04:09:05] going to get through that in the next

[04:09:07] couple of of lectures and we're going to

[04:09:09] hit each one of those items to

[04:09:11] understand better and to understand how

[04:09:14] that can and should affect our

[04:09:17] investment strategy um now micro is more

[04:09:23] useful because let me show you here two

[04:09:27] sets of data and I think that'll sort of

[04:09:28] illustrate it a little bit so here is a

[04:09:31] is a nasda large cap Benchmark which

[04:09:33] I've put on our patreon I'm sure a lot

[04:09:35] of you have seen it already basically

[04:09:36] every single a large cap nasda company

[04:09:38] and there I don't know 170 of them or

[04:09:40] something sorry 270 of them and it gives

[04:09:43] you here for example efficiency numbers

[04:09:45] so say I look at um I don't know random

[04:09:49] random company Autodesk I see their

[04:09:51] gross profit margins

[04:09:52] 91% I can see their return on common

[04:09:55] Equity

[04:09:56] 250% I can see um their cash conversion

[04:09:59] which is always quite an interesting one

[04:10:01] and I can see all sorts of things I can

[04:10:03] see their um you know eBid margins

[04:10:05] earnings before interest and tax is 177%

[04:10:08] I can see their revenue I can see their

[04:10:10] and then obviously these are forecasts

[04:10:11] so these then become a little bit bit

[04:10:13] less um factual a but from that I I can

[04:10:19] get a pretty tight set of data on a

[04:10:23] specific company and that could tell me

[04:10:25] quite a lot at least relative to other

[04:10:27] companies are their margins better are

[04:10:29] they growing better um you know what is

[04:10:32] their um profitability like on each

[04:10:35] dollar of Revenue that they get so

[04:10:37] fairly simple set of data to look at for

[04:10:40] a company and that's microeconomics so

[04:10:43] microeconomics will look at an you know

[04:10:45] Autodesk or an Intel or an Airbnb or

[04:10:47] Google or whatever it is and you look at

[04:10:49] that company and you look at how

[04:10:52] profitable are they what are their

[04:10:53] margins how are they growing you know

[04:10:54] what's their free cash flow how much

[04:10:56] debt do they have how much Capital do

[04:10:57] they need to continue growing or all

[04:10:59] these kind of things and then I suppose

[04:11:01] you still need to look at the actual

[04:11:03] business model and the standard and look

[04:11:05] at competition and we're going to get to

[04:11:07] competition because that's what

[04:11:09] economists call elasticity of demand and

[04:11:12] it's a concept we going to look at

[04:11:13] because that's quite a useful

[04:11:16] one now let's look at a macro set of

[04:11:19] indicators here they are so you look at

[04:11:22] retail sales numbers export prices

[04:11:24] industrial production numbers um

[04:11:27] capacity utilization you look at

[04:11:30] consumer sentiment you look at inflation

[04:11:32] expectations you look at you know oil

[04:11:35] output you look at net capital inflows

[04:11:38] outflows you look at housing permits

[04:11:41] building permits you look at mortgage

[04:11:43] applications oil prices um you know all

[04:11:47] sorts of stuff like that manufacturing

[04:11:49] indices jobless claims unemployment

[04:11:52] numbers it's a lot of data right

[04:11:56] and how does it all fit together that's

[04:11:59] really the big problem that

[04:12:01] macroeconomics economists face um and

[04:12:04] there is a lovely little bit with econ

[04:12:05] economics called econometrics that sort

[04:12:07] of tries to take all of these factors

[04:12:10] into statistical models and I studied

[04:12:12] that for a year it's a horrible thing to

[04:12:14] study it's all numbers and and um models

[04:12:19] but each model comes with about 255

[04:12:21] assumptions and when you have that many

[04:12:23] assumptions the output is determined

[04:12:26] largely by your assumptions and not by

[04:12:27] your facts because you know okay look at

[04:12:31] this here we had GDP price index was

[04:12:34] going up corporate profits were going

[04:12:35] down durable goods orders were going up

[04:12:38] at the same time um you know home sales

[04:12:41] were going through the roof which one of

[04:12:43] these numbers do you take as the more

[04:12:46] more most important one you know income

[04:12:48] was going up 20% month on month as that

[04:12:50] mean the economy is booming or does that

[04:12:52] mean the previous month or the

[04:12:53] comparative period was particularly

[04:12:56] horrible um you know why are wholesale

[04:12:58] inventories going up there could be two

[04:13:00] reasons for that less demand from their

[04:13:02] customers or the wholesalers are bullish

[04:13:05] and they're building up more inventory

[04:13:06] because they're expect more demand you

[04:13:08] can look at all those things one way or

[04:13:10] the other and you get two different

[04:13:12] outcomes so

[04:13:14] so you are typically buying equities or

[04:13:19] perhaps uh Bonds in companies right and

[04:13:22] you might do that through ETFs through

[04:13:24] funds or directly and therefore the

[04:13:28] useful thing for you is to pick good

[04:13:31] companies that can pay back the debt or

[04:13:34] can grow and provide returns are

[04:13:37] profitable and can either give you

[04:13:39] dividends or just grow the value of the

[04:13:42] the give you a good return on Capital so

[04:13:46] much much easier to understand is this

[04:13:50] here with numbers specific to a company

[04:13:53] and we can look at the last quarters we

[04:13:55] can look at the forecast for the next

[04:13:57] quarter from management and then yes we

[04:13:59] might want to look at the sector a

[04:14:01] little bit and that's where you your

[04:14:02] micro and macro sort of overlap a little

[04:14:04] bit say you are looking at a at a chip

[04:14:07] company or something you kind of need to

[04:14:09] understand a little bit about the supply

[04:14:11] chain there about the demand for that

[04:14:13] product and you know that's a little bit

[04:14:14] where macro comes in but jobless numbers

[04:14:17] for example pretty irrelevant to that if

[04:14:19] you're looking at Google house prices

[04:14:21] pretty irrelevant inflation I'd say

[04:14:24] largely irrelevant and certainly

[04:14:25] manufacturing numbers and things like

[04:14:27] that are kind of you can just forget

[04:14:28] about it you don't need to worry about

[04:14:30] those things provided that the company

[04:14:32] or the you You' picked for for Equity or

[04:14:35] for for debt is a good one and I think

[04:14:38] that's really what I kind of want to get

[04:14:40] across here before we start delving into

[04:14:42] deeper into the the macro site that the

[04:14:45] market reacts in the short term to these

[04:14:47] macro numbers because these economists

[04:14:50] you know yabber on all sorts of TV and

[04:14:52] news channels all day everyone gets

[04:14:53] freaked out about it but they give you

[04:14:56] very shortterm movements and I generally

[04:15:00] Advocate a more longer term investment

[04:15:02] strategy because as Warren Buffett says

[04:15:05] something like no one's ever gotten rich

[04:15:08] with a with a you know Weather Vein or

[04:15:10] he said something like that so if you

[04:15:12] swing with the direction that the wind

[04:15:14] blows much much harder to make money um

[04:15:17] in the short term it's much much harder

[04:15:19] to make money in the long run it's much

[04:15:21] much easier to make money because you

[04:15:23] don't have to be right on all the little

[04:15:26] things all the time so that's sort of my

[04:15:29] my quick wrap wrap up here on on macro

[04:15:32] versus micro just as a as a as a wrap up

[04:15:35] macro all the big things and the whole

[04:15:37] economy together jobs inflation GDP you

[04:15:40] know output Manufacturing taxes all that

[04:15:44] stuff together that's macro micro is the

[04:15:47] small little company in the middle um

[04:15:49] and I think it makes a lot of sense that

[04:15:52] it's a lot easier to look at one company

[04:15:55] rather than in all those thousands of

[04:15:57] data sets and generally speaking

[04:16:00] macroeconomists are very very rarely

[04:16:02] right so next time you hear somebody is

[04:16:06] speaking on on on a news channel and it

[04:16:08] says Economist most banks have an

[04:16:10] economist and most banks economists

[04:16:12] write lots of papers because they're

[04:16:14] paid to do that in my experience the

[04:16:17] Traders rarely pay attention to it there

[04:16:20] can be short-term plays on things like

[04:16:22] inflation and stuff like that yes but

[04:16:24] they're short-term plays I wouldn't

[04:16:27] change my long-term investment strategy

[04:16:30] just because we get a little bit of

[04:16:31] inflation thrown in the mix or because

[04:16:32] GDP numbers go up or down because your

[04:16:35] good company will do well pretty much no

[04:16:38] matter what so that's my rant here on

[04:16:40] micro versus macro guys and we're going

[04:16:42] to dig deeper into these in the next

[04:16:45] couple of lessons this is the first in a

[04:16:48] series of lessons on technical analysis

[04:16:51] chart analysis might I want to call it

[04:16:53] that what we going to look at today well

[04:16:54] we're going to first of all look at what

[04:16:55] is it what is technical analysis what is

[04:16:57] it good for what are the pitfalls and

[04:16:59] then we're going to look at three basic

[04:17:00] concepts the first is candle bars and

[04:17:03] candle charts it's really important to

[04:17:05] understand what that means um and then

[04:17:07] secondly we're going to look at support

[04:17:08] and resistance lines and then thirdly

[04:17:11] volume and you might think well I want

[04:17:13] to know about more and more and more but

[04:17:14] that's quite a lot of taken already guys

[04:17:15] and then we're going to do a second

[04:17:17] lesson uh on some other wonderful things

[04:17:19] I'm going to tell you at the very end

[04:17:20] here what is that going to be so what is

[04:17:23] technical analysis well it's basically

[04:17:25] using statistical analysis to predict

[04:17:30] the way a stock or index for that matter

[04:17:32] or Forex or anything else really you can

[04:17:34] chart is going to move so it essentially

[04:17:37] predicts and interprets the psychology

[04:17:40] of Traders and our emotions in a some

[04:17:43] sort of technical chart type thing now

[04:17:47] what is it good for well precisely that

[04:17:49] it can give you good um in and out

[04:17:53] options so you can tell you when when

[04:17:54] you might want to buy a stock when you

[04:17:56] might want to sell a stock if you're

[04:17:57] holding things on the long run sorry in

[04:17:59] the short run rather and then for the

[04:18:00] long run it can show you things like you

[04:18:02] know what are the trends have we fallen

[04:18:03] out of the trend are we moving onto a

[04:18:05] new trend um and it can also show you um

[04:18:08] really where those changes are occurring

[04:18:10] so it's quite a useful one I I I think

[04:18:13] now what are the pitfalls well the

[04:18:15] pitfalls are it's a dumb indicator all

[04:18:19] of them what I mean by dumb it means it

[04:18:21] doesn't read the news it doesn't know

[04:18:23] what's happening in the real world it

[04:18:24] doesn't know about you know Co it

[04:18:27] doesn't know about government

[04:18:28] investigations it doesn't know about

[04:18:30] mergers stock splits so basically event

[04:18:34] driven things are not something

[04:18:37] technical analyst can tell you about so

[04:18:39] you can't just stop reading all the news

[04:18:41] and all the basics and the fundamental

[04:18:43] just because you're looking at a

[04:18:44] technical analysis that is still

[04:18:45] something that you need to do so it

[04:18:47] complement rather than replaces that

[04:18:49] sort of stuff so what's the first thing

[04:18:50] here guys well um we're going to look at

[04:18:52] an actual real chart here we're going to

[04:18:54] look at Neo because a lot of us here are

[04:18:57] holding Neo stock now can you see that

[04:19:00] all right let me just move that a little

[04:19:02] bit over there we go so the first thing

[04:19:05] is really candle bars now you're

[04:19:07] wondering why do we use candle bars

[04:19:09] rather than just a simple line chart

[04:19:10] right well it gives you more information

[04:19:13] um and I'm going to explain exactly how

[04:19:15] so a bearish candle a red candle is a

[04:19:17] sell-off candle so it's pretty easy to

[04:19:19] tell red selloff green is by now if you

[04:19:22] are in China it is possibly the other

[04:19:25] way around but that Bobby doesn't apply

[04:19:27] to many of you so um what does it mean

[04:19:30] here so in a beis on a cell of candle a

[04:19:32] red candle you've opened here let me

[04:19:35] just get a little pen here it means

[04:19:36] you've opened here at this line and

[04:19:39] you've closed the day at that line so

[04:19:41] that is the difference between open and

[04:19:43] close now what are these little Tails

[04:19:46] here the top and bottom well that was

[04:19:48] intraday movement so you've moved in

[04:19:50] fact above the price you opened at so

[04:19:53] you moved all the way up to there and

[04:19:56] then at one point you were lower during

[04:19:58] the day down to there but you closed at

[04:20:01] these points here so that actual filled

[04:20:05] in colored candle is the real difference

[04:20:07] between open and close everything else

[04:20:09] is sort of intraday volume now a bullish

[04:20:12] candle so a candle where the stock price

[04:20:14] has gone up that day or that time period

[04:20:16] I should say because you could be

[04:20:17] looking at a 1 hour or even a one minute

[04:20:19] chart if you if you so prefer then you

[04:20:22] are opening down here uh there and you

[04:20:26] closed up there so it's the opposite and

[04:20:29] it makes sense right because you're

[04:20:30] going up and again the tail here just

[04:20:31] means well that was just what was

[04:20:33] happening during the day but it didn't

[04:20:35] really affect the it doesn't tell you

[04:20:37] where we opened and closed so that's

[04:20:39] really why that is useful now the tails

[04:20:41] are quite useful and if you can see here

[04:20:43] for example as an example the last

[04:20:45] trading data I've got got on here so I'm

[04:20:47] going to put a little red arrow there

[04:20:50] under that and and what you can see and

[04:20:51] I'll magnify for you guys there is a

[04:20:53] huge tail at the bottom here right and I

[04:20:56] will get on to that in in in future

[04:20:57] lessons to explain really why but it

[04:20:59] implies to you that we had a massive

[04:21:01] drop in the market and then there was a

[04:21:03] massive buying again and that can be

[04:21:05] useful for example when when calling the

[04:21:07] bottoms of markets I mean not that

[04:21:09] anybody can accurately call it but it

[04:21:11] gives you an indication of just the

[04:21:13] amount of buying there was and therefore

[04:21:15] gives you a new support line as well and

[04:21:17] again we're going to get to support line

[04:21:18] next so that's kind of the real

[04:21:20] Simplicity of bars it just gives you

[04:21:23] more information than if you are looking

[04:21:25] at this because this doesn't tell you

[04:21:27] what happened during the day it just

[04:21:28] gives you a more simplified view now you

[04:21:30] feel free if you if you want to to start

[04:21:32] with that and there are also other

[04:21:35] Candles there are you know Japanese

[04:21:37] candles and there are Hollow candles and

[04:21:41] you know some people like that I think

[04:21:43] the Simplicity really is at the moment

[04:21:45] let's stick with red and green ones here

[04:21:47] that I colored in now let's look at

[04:21:49] support lines so support here this is a

[04:21:51] nice little chart I'm just going to zoom

[04:21:53] in a little bit on so what happens is

[04:21:56] when and I show you this on a real chart

[04:21:58] in just a second when you hit a so

[04:22:01] imagine that this green and red line

[04:22:03] here that horizontal line is a price say

[04:22:05] that's $5 to say right then um you your

[04:22:10] chart your your stock chart is this

[04:22:13] black zigzaggy line now it went uh from

[04:22:17] wherever it was $10 down to five and it

[04:22:20] then stopped at five and it went back up

[04:22:23] and I did it did that once I did it

[04:22:24] twice and then I did it three times so

[04:22:26] you get these V movements and that

[04:22:28] builds a solid support level because

[04:22:30] you've hit it again and again excuse my

[04:22:33] catch he seems to disagree with it it

[04:22:35] you know hits it again and again and

[04:22:36] that is what builds a support line here

[04:22:38] for you so um right where's this cat

[04:22:41] anyway guys

[04:22:43] and resistant works the other way the

[04:22:44] opposite way again so you have a top

[04:22:47] line here that you are hitting again and

[04:22:49] again and your stock price goes up to it

[04:22:52] but it can't break through it it goes up

[04:22:53] to it it can't break through it and that

[04:22:55] builds a resistance now support lines

[04:22:57] actually become resistance lines once

[04:23:00] you've gone through it so if say you we

[04:23:02] at a stock that was at $6 it fell

[04:23:04] through the $5 support line we have here

[04:23:07] and then it wants to go up again the $5

[04:23:10] will act as a resistance and you're

[04:23:12] going to have to work your way to to get

[04:23:14] through that so let's have a look at an

[04:23:16] actual chart here and we can see some

[04:23:19] examples off that so actually um what

[04:23:23] shall we look at well actually this pink

[04:23:25] line that I've got drawn in here already

[04:23:28] that is a real life uh this one here

[04:23:32] that is a real life support line for the

[04:23:36] Neo stock it is at

[04:23:38] 3813 and you can see that over here the

[04:23:41] stock price at this point of me

[04:23:42] recording is 3811 hopefully if you're

[04:23:44] going to be watching this in the future

[04:23:46] you'll be thinking oh my God that was so

[04:23:47] cheap well that's another sa um why have

[04:23:51] I got that support line in here well we

[04:23:53] have hit that line a couple of times so

[04:23:57] you can see here the tail of that green

[04:24:00] bar where that green arrows it hit it

[04:24:03] and then again here's the Red Tail of

[04:24:05] that red bar uh hit it uh and then we go

[04:24:08] back over here and now actually we

[04:24:10] closed at that point which is also so

[04:24:13] somewhat a a support line so I've got

[04:24:15] you know it's a double support that's

[04:24:16] kind of what I would call it it hits it

[04:24:18] twice and funnily enough um on this last

[04:24:22] day of trading uh we fell a great deal

[04:24:24] down and then we stopped the day uh

[04:24:27] exactly pretty much at 3811 well I'm not

[04:24:31] putting my lines in exactly to the scent

[04:24:33] precisely so that's pretty much the same

[04:24:34] thing to me 3811

[04:24:37] 3813 and um so it kind of shows you here

[04:24:41] it is a support and it's a acting

[04:24:43] support um if you wanted to look for a

[04:24:45] resistance for example you could try and

[04:24:48] find something similar um say um let me

[04:24:54] see if we can find one on here that

[04:24:56] would be useful guys okay I can't see

[04:24:59] one this particular moment well say we

[04:25:02] put one in here for example and I'll

[04:25:04] zoom in a little bit of that and you can

[04:25:06] see we had a couple of points here and

[04:25:09] there and there three I would sort of

[04:25:10] call it that where support lines we've

[04:25:13] then fallen through it and then you can

[04:25:15] see on after we broke through it so let

[04:25:20] me get some a little pen out here so

[04:25:23] I'll zoom in on this also a little bit

[04:25:25] guys so it's a bit bigger for you okay

[04:25:28] so we fell through this line where I'm

[04:25:32] putting the first Arrow here right so

[04:25:33] that was when we fell through our blue

[04:25:36] support line there and that support line

[04:25:39] should be ever so slightly lower when

[04:25:41] you zoom in you can kind of see then

[04:25:42] they are slightly off kilter here um

[04:25:46] there we go you know thereabouts a

[04:25:48] couple of sents in and out don't really

[04:25:49] matter and then we saw we know we fell

[04:25:52] through it here and then we tried to go

[04:25:54] up again and that at that point you can

[04:25:57] actually see that the previous support

[04:26:00] now acts a resistance we went through it

[04:26:03] ever so slightly and then we went back

[04:26:04] down again so there is an example here

[04:26:06] of of of of a Neo support and resistance

[04:26:09] line in action now another thing I'd

[04:26:11] like to show us we will look in more

[04:26:13] detail at this guys in some future uh

[04:26:16] lessons in in into more details on this

[04:26:18] and we'll look at some other indicators

[04:26:20] for that um now from a volume point of

[04:26:23] view because that's also a good basic

[04:26:25] thing to understand is when you have an

[04:26:27] upward rally and your volume increases

[04:26:32] so like here for example right so you

[04:26:36] have at the top uh you have a nice

[04:26:39] beautiful rally moving up and at the

[04:26:41] same time your volume down here moves up

[04:26:45] that's a good thing that is a rally

[04:26:47] supported by increasing volume that's a

[04:26:50] very strong rally now when you then

[04:26:52] continue to Rally from there onwards but

[04:26:57] your volume is falling off it kind of

[04:27:00] starts to indicate to you ah this might

[04:27:03] change we are nearing the peak of this

[04:27:05] rally because my volume's falling off um

[04:27:09] and then you know when you get the uh

[04:27:11] for off here and at the same time your

[04:27:15] volume increases then that's telling you

[04:27:18] well this is a serious selloff um

[04:27:20] because there's actually more volume

[04:27:22] into it more people are selling each day

[04:27:24] than the previous day uh and and so you

[04:27:26] know that's kind of what the volume

[04:27:28] indication there means or just more

[04:27:29] Market participants are in this but

[04:27:32] still at the end of each day we are

[04:27:33] selling off so when you get flat volumes

[04:27:37] like we have down here for example we've

[04:27:39] had that for a lot of February and we

[04:27:41] were winging about it and at the same

[04:27:42] time your um stock is essentially moving

[04:27:46] sideways it well it tells you very much

[04:27:48] that it's moving sideways it can also

[04:27:51] give you an indication that the trend is

[04:27:53] changing and that what's coming up might

[04:27:56] well be a a different direction than

[04:27:58] what you had before and that's exactly

[04:28:00] what happened right previously we had a

[04:28:02] nice rally and now we're having a not so

[04:28:04] nice selloff for those of us who are

[04:28:05] long on the stock now you can see here

[04:28:08] towards the end of our rally down here

[04:28:11] um and I should perhaps make that a

[04:28:13] different color so you can see what I'm

[04:28:14] talking about my my red line here is

[04:28:17] again um accompanied by increasing

[04:28:20] volume so that therefore again indicates

[04:28:22] to you this selloff is more serious and

[04:28:25] it hasn't stopped yet so there are ways

[04:28:30] of basically you want to watch out for

[04:28:32] is my volume and my chart moving in the

[04:28:34] same direction if it isn't um I'm near

[04:28:37] an inflection point um and if it is um

[04:28:41] well

[04:28:42] if if you're moving up and your volume's

[04:28:44] going down you kind of think well my

[04:28:46] that rally is going to come to an end

[04:28:47] soon if you're selling off and your

[04:28:49] volume is moving up you know that well

[04:28:52] you don't know but you're predicting

[04:28:54] that the selloff is about is to going to

[04:28:57] continue um if you have a sell off with

[04:29:00] falling volume you are then predicting

[04:29:03] that there will be an inflection again

[04:29:04] and that you are that's going to fizzle

[04:29:06] out fairly soon that set off so I hope

[04:29:08] that makes some sense guys and I'd love

[04:29:10] to hear your feedback and comments below

[04:29:12] of course this is just for our our

[04:29:15] membership Community here guys so so do

[04:29:16] let me know what you think of it on our

[04:29:17] Discord and our patreon um now what are

[04:29:20] we going to cover in the next lesson

[04:29:22] we're going to look at Fibonacci uh

[04:29:24] that's a really really big one I think

[04:29:25] and then we're going to look at uh

[04:29:27] things that I use every single day

[04:29:28] pretty much and that is RSI and macd

[04:29:31] indicators and I'm just going to explain

[04:29:32] how those things fit on and then after

[04:29:35] that we're going to look at some more

[04:29:36] detailed other lovely things that we can

[04:29:38] do with technicals and um just generally

[04:29:41] why I think there are very very helpful

[04:29:42] I think they're very very interesting

[04:29:44] we're starting to look at technical

[04:29:46] indicators here yes we have graduated

[04:29:49] from uh you know I don't know Primary

[04:29:51] School to middle school here to look at

[04:29:53] something a little bit more complex

[04:29:55] though the one we're looking at here is

[04:29:56] a relatively simple one moving

[04:29:59] averages so

[04:30:01] moving uh

[04:30:04] average or often simply ma you'll see

[04:30:08] that quite a lot um what does it do it's

[04:30:11] basically a simple technical tool that

[04:30:14] gives you a trend indication up or down

[04:30:18] it is a lagging indicator because it's

[04:30:20] based on past prices so it literally is

[04:30:23] taking the mean of the last whatever

[04:30:26] time period you select and it gives you

[04:30:28] that it sort of flattens out the line of

[04:30:31] the actual stock price and of course

[04:30:32] we're going to look at some real life

[04:30:34] examples here but you know if you have

[04:30:37] say a 200 day moving average it'll have

[04:30:39] a much much greater degree of of lag

[04:30:41] than if you have say a 10 159 day

[04:30:44] average which be much closer to the

[04:30:46] current stock price um the most common

[04:30:50] periods you see used are I would say 15

[04:30:54] days 20 days 30 days 50 days 100 and 200

[04:31:02] and you're thinking well isn't there

[04:31:04] some sort of rule on this actually no

[04:31:05] there really isn't and we're going to

[04:31:07] get into that the why and the how I

[04:31:09] would actually add to that list I quite

[04:31:10] like looking at the nine moving average

[04:31:12] as well that's sort of one of my

[04:31:14] particular favorites and you might well

[04:31:15] develop your own favorites with these

[04:31:18] because uh there is a bit of a a

[04:31:20] personal aspect to this um generally

[04:31:23] speaking the shorter the time frame so

[04:31:25] if it's you know 9 days or 15 or 20 days

[04:31:28] then it is more suitable for shortterm

[04:31:31] trading if you have a much longer term

[04:31:34] outlook on a stock you might start

[04:31:35] looking at the 00 200 day averages there

[04:31:38] are also situations we look at some

[04:31:40] charts here if you have a very fast

[04:31:42] growing very fast moving stock looking

[04:31:45] at the 200 day line might be a lot less

[04:31:47] useful so say a growth stock might not

[04:31:49] be that useful to look at the 100 200

[04:31:50] dayline whereas if you're looking at a

[04:31:52] sort of a you know 100 year old company

[04:31:55] that just sort of grows very calmly and

[04:31:57] steadily by you know 5 10% a year then

[04:32:00] the 100 and 200 day lines might be much

[04:32:02] much more useful so that's a kind of a a

[04:32:05] quick intro there um let's look at some

[04:32:10] because I think that's really the the

[04:32:11] best way of doing this I'm going to get

[04:32:13] rid of everything that's on here and I'm

[04:32:15] just going to pull up say a 30-day

[04:32:17] moving average line there it is what

[04:32:19] does that tell you well let's go back a

[04:32:22] little bit so when it's going up what

[04:32:24] does it tell you well it it tells you

[04:32:25] you're on an upward Trend then it goes

[04:32:27] down it tells you in a downward Trend

[04:32:29] and then it goes an upward Trend so

[04:32:30] you're thinking well that isn't really

[04:32:31] telling me much more than the stock

[04:32:33] price at this point right and you are

[04:32:35] sort of right with that now if you look

[04:32:38] at well actually let's go back to this

[04:32:41] it it also provides a support and a

[04:32:44] resistance line and you can actually see

[04:32:46] that here quite quite easily so you can

[04:32:49] see it acted as a support line here on

[04:32:52] the 6th of January and I'm going to make

[04:32:54] a couple of copies of these you can see

[04:32:56] it acted as a support line here on the

[04:32:58] 15th of January um it also acted as a

[04:33:01] support line here on the 1st of February

[04:33:03] and

[04:33:05] [Music]

[04:33:06] then again yeah on the 1st of April now

[04:33:10] what about this period where we are

[04:33:13] where we were below the line well you

[04:33:15] could look at it as either it was a real

[04:33:17] significant Trend change or perhaps it

[04:33:20] was the buy opportunity of all buy

[04:33:22] opportunities and what you really see

[04:33:25] here you turn it upside down and you see

[04:33:27] that it also acts as a resistance line

[04:33:30] when you are below it you see that here

[04:33:33] so you can make a very simple strategy

[04:33:36] therefore for QQQ you can say whenever

[04:33:38] it is below the 30-day line I'm buying

[04:33:41] and when it's above it well we we can we

[04:33:44] can work out an exit but at the moment

[04:33:45] we just a long investor here and if you

[04:33:48] go back a little bit in time you can you

[04:33:49] can see quite a lot of points here I'm

[04:33:51] not going to put a million arrows in

[04:33:52] here but you can see you know here and

[04:33:55] there it it has acted as support quite a

[04:33:58] lot of the time and then uh here for

[04:34:00] example it was acting as a resistance

[04:34:02] here was acting as a resistance again

[04:34:03] then we went through it and then on the

[04:34:05] way down again here it is support so

[04:34:07] actually not as unuseful as it appeared

[04:34:12] at a first glance right so you can start

[04:34:14] to see a little bit of value here of

[04:34:16] just having one moving average line why

[04:34:18] am I talking about one because we can

[04:34:20] have two we can have multiple lines as

[04:34:22] many as we wish really and that then

[04:34:26] gives you cross over

[04:34:29] indicators so then it is not just

[04:34:32] looking at one chart because from that

[04:34:33] point of view I think it isn't all that

[04:34:35] useful because you can see whether the

[04:34:36] price goes up or down without drawing a

[04:34:38] line in it but it gives you as I say

[04:34:40] here the support and res resistance line

[04:34:42] so say I'm going to throw in a 15-day

[04:34:44] moving average line into the mix and see

[04:34:48] what happens there so let's go into the

[04:34:50] most recent example here um and let me

[04:34:54] get rid of a couple of these arrows

[04:34:55] because there are just too many this

[04:34:57] Arrow here I am going to keep because it

[04:34:59] is in the perfect position I'm going to

[04:35:01] make it purple why am I making it purple

[04:35:03] because my 15-day moving average line up

[04:35:06] here is is is purple and if you're

[04:35:08] wondering how to get these in let me

[04:35:10] delete one for you show you so you can

[04:35:12] go to indicators you can save them as

[04:35:16] favorites as I have or you could simply

[04:35:17] type in um moving

[04:35:21] average uh and uh and there it is moving

[04:35:23] average and it then pops up uh up here

[04:35:27] uh and you can see in this case it's

[04:35:29] done it automatically as a N9 day moving

[04:35:32] average and it's done it in blue right

[04:35:35] you can maybe you can't see that but

[04:35:37] there it is 90 moving average in blue so

[04:35:39] what you can do is you can click on that

[04:35:40] little um set settings symbol and you

[04:35:43] can change the length of it I mean for a

[04:35:45] laugh let's look at 15 days and you can

[04:35:48] change the style as in you can change

[04:35:50] the color so I'm going to make it purple

[04:35:51] it's a bit brighter I um sadly you can't

[04:35:55] seem to make this one any thicker but um

[04:35:59] there it is there are also other options

[04:36:01] you want to look at the length of it you

[04:36:02] can open as the close or the open the

[04:36:04] high there are variations to it but

[04:36:07] probably don't need to play with those

[04:36:09] unless you really want to get into this

[04:36:11] in on a much deeper level I would leave

[04:36:13] all those settings as they are press the

[04:36:15] okay button and then here it is so what

[04:36:17] happens with that then is when the

[04:36:21] purple line crosses From Below above the

[04:36:26] longer moving average so the black one

[04:36:28] is 30 days the pink one or the purple

[04:36:31] one is 15 days so when the shorter one

[04:36:34] crosses From Below above you get a Buy

[04:36:37] Signal the other way around when the

[04:36:40] shorter time period process cuz the

[04:36:42] short I think of it it's the faster

[04:36:43] moving one I think that's really the

[04:36:45] best way to think about it short time

[04:36:47] period was more quick it gives you a a

[04:36:49] more rapid movement then the longer what

[04:36:52] the longer the time period the slower

[04:36:53] the more smooth out this curve is so if

[04:36:55] it comes from above to below it gives

[04:36:57] your sell signal and the other way

[04:36:59] around

[04:37:00] um the Buy Signal here for example was

[04:37:03] certainly it's certainly a pretty good

[04:37:05] one I think it's pretty obvious to say

[04:37:07] that would have given gotten you in on

[04:37:09] QQQ at 316 and as we speak we're sitting

[04:37:13] at 342 and it hasn't given us a cell

[04:37:16] signal yet why not because this whole

[04:37:21] area here in between these two lines you

[04:37:24] can see that is actually the

[04:37:26] differentiator between the shortterm

[04:37:29] trend and the longer term Trend and that

[04:37:31] is therefore continues to be a positive

[04:37:34] one now uh when you it goes the other

[04:37:37] way around so say up previously here you

[04:37:40] can see that distance there it gets

[04:37:42] smaller over time and then you get to a

[04:37:45] point where you get a sell

[04:37:47] indicator and so that's kind of you know

[04:37:50] the way this happens so I'm going to get

[04:37:52] rid of all of those marks and let's add

[04:37:55] in one more we're going to add in

[04:37:59] another moving average and this one this

[04:38:02] time we are going to leave it at 9 days

[04:38:05] so the nine days is the blue line now

[04:38:08] and why am I doing that because I want

[04:38:11] to confuse and obfuscate no not really I

[04:38:15] actually want to make things clearer um

[04:38:19] so to start with I'm going to hide our

[04:38:22] 15-day line and then you can see that we

[04:38:26] got a sell signal here I'm going to put

[04:38:28] a line in here this vertical line that

[04:38:32] is our 9

[04:38:34] Day cell signal right and we're going to

[04:38:37] write that next to it so it's clear

[04:38:40] where is our little

[04:38:43] here's our little call out so this

[04:38:47] is this is the uh 9 Day

[04:38:53] cell uh

[04:38:56] crosses crosses 15 day sorry crosses

[04:39:03] 30-day 9 day ma basically gives us a

[04:39:07] sell indicator as AC crosses the 30-day

[04:39:09] ma that's what happens uh

[04:39:11] at this particular line

[04:39:14] um if we put in back the 15-day line you

[04:39:18] can see that also gives us a sell signal

[04:39:21] but a little bit later uh and similarly

[04:39:24] I'm going to put that in here to explain

[04:39:28] so that is the

[04:39:31] 15

[04:39:32] Day

[04:39:34] cell crosses 30-day Ma

[04:39:42] what can you see from that is that the

[04:39:45] shorter the moving average line the more

[04:39:49] sensitive it is to giving you a cell

[04:39:52] indicator um which was better here well

[04:39:55] that one gave us a cell signal somewhere

[04:39:59] around

[04:40:00] 315 uh that so the the nday one around

[04:40:03] 315 and the 15-day one around

[04:40:09] uh little bit higher I would say it's a

[04:40:12] little hard to tell on this chart

[04:40:14] probably around 310 or so so it isn't

[04:40:17] always necessarily better to be sooner

[04:40:19] or later but certainly you wouldn't want

[04:40:22] to have been any later than that right

[04:40:24] one day later say if we changed the

[04:40:27] 15-day one perhaps a 20day

[04:40:31] line you would then see it would have

[04:40:33] given you a sell signal a few days later

[04:40:36] at that point you were sitting at 300

[04:40:38] and 300 or there about so there is an

[04:40:41] importance in especially if the stock

[04:40:45] you're looking at is very fast moving

[04:40:47] and NASDAQ is relatively fast moving

[04:40:49] even though it's an index because it's

[04:40:51] all growth stocks so it makes sense

[04:40:54] again the faster the higher the

[04:40:56] volatility of your stock the shorter are

[04:40:59] the time frames you're comparing here

[04:41:01] now you could take it one step further

[04:41:04] and I'm going to hide the black 30-day

[04:41:07] average line and now we are just looking

[04:41:09] at the 9 and the 50 15-day line and that

[04:41:12] also gives you buy and sell signals

[04:41:15] it'll give you them more frequently and

[04:41:17] more rapidly so that would have gotten

[04:41:18] you out of the stock here at around

[04:41:22] 317 up up here um and then it would have

[04:41:27] gotten you back

[04:41:29] in

[04:41:32] down down here at um is that 317 or so

[04:41:38] so you would have gotten out hang on you

[04:41:41] would have gotten out at about 323 and

[04:41:44] you would have gotten in uh at about 315

[04:41:48] or so so that would not have been you

[04:41:51] know that would have been quite a nice a

[04:41:54] nice trade really here um and then it

[04:41:57] would have gotten you out again here it

[04:41:59] would have gotten you in again so it

[04:42:00] makes you trade more and so that's

[04:42:02] really one thing to realize is that the

[04:42:04] faster you make them the more you trade

[04:42:07] now let's turn this around and let's

[04:42:09] make these really really really long one

[04:42:11] so let's make uh our moving average line

[04:42:14] here make it a 100 day line we're going

[04:42:17] to make this one

[04:42:20] a 200 day line not 2,000 that would just

[04:42:24] be silly and we make this a 50-day line

[04:42:28] so then we have three pretty long lines

[04:42:31] and I can unhide them here for you are

[04:42:35] they all on yes they are so let's see

[04:42:38] then on a longer basis uh you know where

[04:42:41] does that take us what does that

[04:42:43] actually how useful is that for us so

[04:42:46] you can see the purple one is the 200

[04:42:50] day moving average

[04:42:51] line how often does that give you a sort

[04:42:54] of you know we are in Bargain Basement

[04:42:56] prices situation not all that often so

[04:42:59] in the last year or so it's only done it

[04:43:03] once uh when we were here in our uh Co

[04:43:06] crash which hopefully by the time you're

[04:43:08] watching this you will no longer recall

[04:43:10] distant

[04:43:11] memory so that's I'm going to make that

[04:43:13] purple that is our 200 day buy

[04:43:16] opportunity now our black line is our

[04:43:20] 100 day buy opportunity and I actually

[04:43:21] really like that for for the NASDAQ I

[04:43:23] must say I think that's a really good

[04:43:25] one for for buying in the NASDAQ because

[04:43:28] it gives you enough trade opportunities

[04:43:31] but not um you know to to actually buy

[04:43:35] every once in a while but not so many

[04:43:37] that you are doing nothing but trading

[04:43:39] NASDAQ so

[04:43:42] that here for example on the 30th of

[04:43:45] October or thereabouts that would have

[04:43:47] been our 100 day one again in March of

[04:43:50] this year we've dropped below it so

[04:43:51] there would have been pretty good entry

[04:43:53] points and of course this uh if it's a

[04:43:56] if it's a buy signal on a uh 200

[04:44:00] day uh line moving average is also going

[04:44:03] to be one on the 100 day moving average

[04:44:04] but if you go back a little bit in time

[04:44:06] you see a lot

[04:44:09] more opportun

[04:44:11] here where we crossed below the black

[04:44:14] moving average line and each one of

[04:44:16] those I think would have been rather

[04:44:18] brilliant buy opportunity so that I

[04:44:21] think goes to show the benefit of these

[04:44:25] longer slower lines not on an everyday

[04:44:28] basis because you simply won't be doing

[04:44:29] very much but there is also real wisdom

[04:44:32] and doing very little I think a lot of

[04:44:34] the best Traders trade very very rarely

[04:44:36] if if ever then if you look at our fast

[04:44:39] one the blue one well it makes you a

[04:44:41] much more active Trader really doesn't

[04:44:42] it it gives you a lot more opportunities

[04:44:45] absolutely but it also moves much much

[04:44:47] more closely to the

[04:44:49] actual stock chart and therefore also

[04:44:52] gives you less benefit for each trade so

[04:44:55] I think there is you have to find a

[04:44:57] happy medium and this is different for

[04:44:59] every stock so QQQ is an average of a

[04:45:01] whole index say you look at something

[04:45:04] like Tesla for example and again let me

[04:45:07] remove my annotations here so that's

[04:45:10] obviously a much more rapidly moving

[04:45:12] stock that has had a huge uptick

[04:45:15] Therefore your

[04:45:17] pink 200 day line is virtually useless

[04:45:20] with the exception of what is

[04:45:23] undoubtedly

[04:45:25] Co the black under day moving average

[04:45:29] line also really only was useful during

[04:45:32] Co and now in the sort of March

[04:45:35] correction where we had you know a move

[04:45:38] towards sort of safer tech stocks than

[04:45:42] these and you can also see the three

[04:45:44] lines Don't Really Ever Cross they're

[04:45:46] not really telling you much much there

[04:45:48] either so on the short-term basis this

[04:45:50] also isn't that useful if you want to

[04:45:51] trade something like Tesla more

[04:45:52] shortterm look at 9 days 15 days 20 days

[04:45:56] 30 days look at some of those you know

[04:45:59] shorter ones and and look how often they

[04:46:02] cross and look at back test how sensible

[04:46:06] was it to have traded at those and

[04:46:08] you'll find this is different for every

[04:46:10] stock every stock has a sort of

[04:46:12] technical personality if you will so you

[04:46:15] can't simply apply the same thing to

[04:46:17] everything within a sector you will find

[04:46:19] that they will be quite similar but it

[04:46:21] isn't always that useful um to to apply

[04:46:24] exactly the same strategy for everything

[04:46:26] so I hope that's an interesting guidance

[04:46:28] on moving averages I'd like to move one

[04:46:31] step further we're going to advance here

[04:46:34] as a class to the moving macd and you're

[04:46:38] wondering well what the hell is that is

[04:46:41] the moving average convergence

[04:46:43] Divergence and yes that's not me

[04:46:45] mumbling that is actually what it's

[04:46:46] called people seem to call it macd or

[04:46:49] macd which I don't really like it sounds

[04:46:51] like McDonald's for some reason so how

[04:46:55] does that work quite similarly so it

[04:46:58] gives you well first of all to one thing

[04:47:01] to understand you go into the settings

[04:47:03] and you understand that the fast length

[04:47:05] of the moving average is 12 days the

[04:47:07] slow length is 26 uh so we can therefore

[04:47:11] replicate this up here I'll get rid of

[04:47:12] one of them and we make one 12 days and

[04:47:16] we make

[04:47:18] one 26

[04:47:22] days and it should then well it doesn't

[04:47:26] quite work like that because it Smooths

[04:47:27] it out so okay that that that effort was

[04:47:29] was a feeble one to show that anyway we

[04:47:32] we'll hide those for the moment and

[04:47:33] we'll just look down here at macd so

[04:47:35] I'll try to make this as big as I can

[04:47:37] while you can still see the stock price

[04:47:39] above um

[04:47:41] The Simple Theory is fairly simple you

[04:47:44] have a blue line and orange line of

[04:47:46] course you can change the colors if you

[04:47:47] want to confuse yourselves the orange

[04:47:49] line is the macd line and the blue line

[04:47:52] is basically the sort of um well one is

[04:47:55] the signal line one is not I can never

[04:47:57] remember which one's called which but it

[04:48:00] doesn't really matter basically as the

[04:48:02] Blue Line crosses the orange macd line

[04:48:06] from above down below it gives you a

[04:48:08] selloff signal and it crosses From Below

[04:48:10] to above it gives you a Buy Signal so

[04:48:12] let me put an an arrow here as a Buy

[04:48:15] Signal I make that green and then I'll

[04:48:18] also put an arrow up here and I'll make

[04:48:21] that red so you can see what I am

[04:48:26] talking

[04:48:27] about you can see here the Blue Line

[04:48:29] crosses below the orange macd line

[04:48:32] that's a cell of signal and the other

[04:48:34] way around blue line from below to above

[04:48:37] you get a Buy Signal helpfully it also

[04:48:40] tells you gives you these volume bar

[04:48:42] chart indicators which also tell you

[04:48:45] very clearly what it means if it's green

[04:48:46] it's buy if it's red it isn't now what

[04:48:49] does that mean to the stock up here so

[04:48:51] let's put in some vertical lines we put

[04:48:53] in two here uh the first one will be red

[04:48:55] and the second one I will make green to

[04:48:59] make the illustration a little easier

[04:49:03] so up here you can see it would have

[04:49:05] told you to sell there what would have

[04:49:08] happened well yes you would have sold

[04:49:09] you would have missed that dip and you

[04:49:11] would have bought in again there so what

[04:49:13] would have been your your profit let's

[04:49:15] put in some horizontal lines here would

[04:49:17] have gotten you in there so it would

[04:49:19] have gotten you out at this red line

[04:49:22] again I'll make that red and in at that

[04:49:24] line and the difference between the

[04:49:27] two we can measure that on here would

[04:49:30] have been can we can the difference

[04:49:33] between the two would have been uh 17%

[04:49:38] 150 us

[04:49:41] pretty good call right but simply

[04:49:44] following just the one indicator now my

[04:49:47] big word of warning is actually there

[04:49:49] two big words of warning one is macd

[04:49:51] tends to lack why because it takes

[04:49:54] moving averages from the previous time

[04:49:57] periods which inevitably lack you can

[04:49:59] see that if okay if you set it to zero

[04:50:01] or or to you know near zero then yeah it

[04:50:04] would move like the stock price but it

[04:50:05] would defeat the purpose so it tends to

[04:50:07] be a little bit too slow that's

[04:50:09] something to bear in mind and the second

[04:50:12] and the more important uh kind of Word

[04:50:15] of Wisdom warning here is don't trade on

[04:50:17] one indicator because it's risky you

[04:50:21] want to look at several indicators

[04:50:23] together you want to build sort of pairs

[04:50:25] that work for you and you can do that

[04:50:27] for example simply by throwing in some

[04:50:29] moving average lines so you can say well

[04:50:32] uh you know I have moving average lines

[04:50:34] say I use nine days and 30 days or nine

[04:50:37] days and 20 days which I do quite often

[04:50:39] for these sort of the fast moving growth

[04:50:42] stocks and then let me make the stock a

[04:50:45] little bit quicker up here and we can

[04:50:49] see no we don't get a sell signal for

[04:50:52] that here for some time we get the sell

[04:50:56] signal here on the 5th of February so

[04:50:59] the sell signal from the moving average

[04:51:01] lines crossing is right there on the 5th

[04:51:04] of February you can just about see that

[04:51:06] I think um where the pink line Falls

[04:51:09] below the blue line that's the signal so

[04:51:11] you could have said okay I've got one

[04:51:13] indicator telling me to sell but I need

[04:51:15] another one now I have another one now

[04:51:17] these two unfairness are fairly closely

[04:51:19] correlated so they're perhaps not the

[04:51:21] best pair but I will show you more

[04:51:24] technical indicators down the road um

[04:51:26] one of my favorites for mscd is the RSI

[04:51:28] or the Williams R because it's it's

[04:51:30] quite a nice pairing for statistical

[04:51:32] reasons is

[04:51:34] similarly uh the uh Buy Signal let me

[04:51:38] put another arrow here from the moving

[04:51:40] averages lines crossing it would have

[04:51:43] been there and I'll also make that green

[04:51:45] and I'll show it to you on a bigger

[04:51:46] screen you can see that the purple line

[04:51:49] crosses the blue line and gives you a

[04:51:51] Buy Signal now it very quickly again

[04:51:53] gives you a sell signal and then then

[04:51:54] another Buy

[04:51:55] Signal but again if you had then bought

[04:52:00] in there at

[04:52:02] 681 uh or here later at 665 still would

[04:52:07] have been a pretty good trade move so

[04:52:09] how do you know that you've got your

[04:52:10] your indicator set up right how do you

[04:52:12] know it's working back testing really

[04:52:15] the best thing to do is take a chart

[04:52:17] like this come up with your strategy and

[04:52:18] you think hey this worked really well

[04:52:20] last time go back as far as time will

[04:52:23] allow you to there are also some

[04:52:25] Services allow you to do that

[04:52:27] capitalized. a for example is is one of

[04:52:29] them where you can run them back um I'm

[04:52:33] just writing this down so I'll give you

[04:52:34] the link uh in in our little list of

[04:52:37] clever resources that only goes back 90

[04:52:39] days though there might be one or two

[04:52:40] others I can find and I'll throw them

[04:52:42] into our resource list otherwise you can

[04:52:45] do it manually in here or if you an

[04:52:48] absolute genius then you can actually

[04:52:52] write a bit of code in here and back can

[04:52:54] back test that but that might be Beyond

[04:52:57] most of our abilities I I have not spend

[04:52:59] the effort to to to try that I I

[04:53:02] actually simply go back on the charts

[04:53:04] and if you follow a stock for a longer

[04:53:05] period of time you'll also start to

[04:53:07] remember and understand what works and

[04:53:09] again maybe keeping a little notebook

[04:53:10] and saying hey now look at Tesla this is

[04:53:13] what worked for me leave your

[04:53:15] annotations in save the charts I'd

[04:53:17] encourage you to do that or at the very

[04:53:18] least take some screenshots and dump

[04:53:20] them into a Word file or something like

[04:53:22] that so you have a reference if you

[04:53:23] don't want to pay for a um I think you

[04:53:27] might have to pay for it if you want to

[04:53:28] save for these charts here so that's the

[04:53:32] lesson so far guys so what am I going to

[04:53:34] tell you to do play around with moving

[04:53:36] average lines find some indicators that

[04:53:39] give you a consistent and reliable buy

[04:53:42] and sell signals for some of the stocks

[04:53:44] and ETFs and indices and whatever it is

[04:53:46] that you trade you can do it with

[04:53:48] commodities with Bitcoin with orange

[04:53:50] juice anything at all and then once you

[04:53:53] set that up throw in the macd and see

[04:53:57] whether they give you the same kind of

[04:53:59] signal or it would have would it have

[04:54:00] been better to wait for both signals

[04:54:03] together and I think in most cases it

[04:54:05] certainly is the case we're going to

[04:54:07] look at two more technical indicators

[04:54:09] which you see me using all the time the

[04:54:11] first one is

[04:54:13] RSI and the second is

[04:54:18] Williams r or often there's a percentage

[04:54:23] in there as well and we're going to go

[04:54:25] through both of them and I'll explain

[04:54:27] the difference as well in a nutshell

[04:54:29] Williams R is a bit faster than the RSI

[04:54:32] so there are stocks of they're highly

[04:54:34] volatile then Williams R can be a more

[04:54:38] useful item now what is RSI really do

[04:54:40] well it measures the consistency with

[04:54:43] which prices increase or decrease over

[04:54:46] time so a high RSI reading basically

[04:54:49] means prices have increased with greater

[04:54:51] frequency than they have declined over

[04:54:54] the particular time frame that you're

[04:54:55] looking at um Williams are on the other

[04:54:58] hand um it compares the most recent

[04:55:02] closing price with the highest high of a

[04:55:06] particular period you're going back to

[04:55:09] and that will become more clear as we

[04:55:11] look at the actual chart so I'm looking

[04:55:13] at the same chart here that you might

[04:55:15] have seen in in a previous lesson on um

[04:55:18] on macd and moving averages and I'm

[04:55:21] going to hide the macd for here for for

[04:55:24] a moment and I'm going to call up the

[04:55:25] RSI and how do you do that you just type

[04:55:28] RSI into pretty much any piece of

[04:55:30] software trading view of course here

[04:55:32] relative strength index and then it

[04:55:34] pulls up this chart for you and I'm

[04:55:35] going to make it a bit bigger there are

[04:55:38] three elements to this I think as you

[04:55:40] can see uh let me see if I can write a

[04:55:45] note here so this bit up here is the

[04:55:49] over

[04:55:51] overbought

[04:55:53] area that go there yeah brilliant so

[04:55:57] that is

[04:55:59] overboard this

[04:56:01] one hides it that's not very useful is

[04:56:03] it all right let's just keep it as text

[04:56:06] then that'll be easier so

[04:56:08] overboard is a above that dotted line

[04:56:11] above that purple area and down here

[04:56:15] is there we have it over

[04:56:22] Sal that's down here and we going to

[04:56:24] drop that in here so one thing I'm also

[04:56:27] going to do is I'm going to make that

[04:56:29] one of my favorites so now I can access

[04:56:32] that tool down here in that favorites

[04:56:34] tool well which is quite quite useful

[04:56:36] now what's happening in the middle here

[04:56:37] what does it really say what does it

[04:56:38] really do it was all so you can look at

[04:56:41] initially when you are in the overboard

[04:56:44] area up here that that at some point you

[04:56:48] know you are basically overvaluing the

[04:56:49] stock it should come down again

[04:56:51] shouldn't it well it can but it mustn't

[04:56:54] I mean it can but it doesn't have to

[04:56:56] that's really what I was trying to say

[04:56:58] because you can be in the overbought or

[04:57:00] in the oversold territory for quite some

[04:57:02] time so for example here this stock

[04:57:05] being Tesla between 10th of December and

[04:57:09] 5th of February 2020 it was in the

[04:57:12] overboard territory it was quite happy

[04:57:14] living up there so that you then think

[04:57:17] well that isn't terribly useful is it I

[04:57:20] don't really use it for that very much

[04:57:22] it's kind of an indicator yes it might

[04:57:24] help your conviction if you're looking

[04:57:26] at some other things on other indicators

[04:57:28] already or on the chart Fibonacci your

[04:57:30] exit entry strategies uh absolutely but

[04:57:33] really what I look for is the halfway

[04:57:36] mark at 50 I put in a horizontal line

[04:57:41] and what does that really mean uh well

[04:57:44] that really gives us a trade signal and

[04:57:48] that's what I like it for when we go

[04:57:50] from below to above we get a Buy trade

[04:57:54] trade signal when we cross the 50 point

[04:57:57] line when we go in the opposite

[04:57:59] direction here so when we are going in

[04:58:01] that direction crossing over the halfway

[04:58:05] mark then that is a sell signal when we

[04:58:09] go in this step Direction then that is a

[04:58:12] Buy Signal and the Buy Signal happens as

[04:58:14] we cross that line now let's go back how

[04:58:18] how useful has this been so say this was

[04:58:20] a Buy Signal here so let's put a put a

[04:58:23] vertical line into that that was a Buy

[04:58:25] Signal uh here is also well that's sort

[04:58:28] of a bit of a choppy Buy Signal so let's

[04:58:30] look at just look at this one here that

[04:58:32] would therefore have been the cell

[04:58:35] signal so I'm going to make that line

[04:58:37] red if it allow me to will it allow me

[04:58:39] to make that

[04:58:41] red

[04:58:44] no sometimes these charts are a little

[04:58:47] bit temperamental here we go so that's

[04:58:49] the sell signal so you can see the Buy

[04:58:51] Signal would have gotten you in a Tesla

[04:58:52] at about 400 and a bit and it would have

[04:58:55] gotten you out at about 800 and 10

[04:58:59] 820 pretty good pretty good call right I

[04:59:02] mean that would have been fantastic

[04:59:04] trade in a very short period of time so

[04:59:08] I ignore all the bids above and Below

[04:59:10] all that zigzagging I don't ever trade

[04:59:12] on don't ever act on those yes you can

[04:59:14] keep an eye on it it tells you what

[04:59:15] momentum is doing in the very short term

[04:59:17] but for me I look for that 50o line

[04:59:20] occasionally you will find a stock that

[04:59:23] never ever crosses the 50o line and it

[04:59:26] just lives between say 50 and 70 or

[04:59:29] below between 30 and 50 if you're

[04:59:31] wondering what those numbers are they

[04:59:32] are down here on the side in which case

[04:59:35] you are going to have to set your 50o

[04:59:37] line a bit higher or a bit lower and

[04:59:40] that is also but for the vast majority

[04:59:42] of stocks 99% of stocks this is

[04:59:44] basically the strategy now would I act

[04:59:47] on this on its own no I wouldn't I would

[04:59:50] never trade on one indicator

[04:59:54] alone but now I have my RSI up here I

[04:59:58] still have my moving average lines up

[05:00:00] here right and I get pretty much at the

[05:00:01] same time a Buy Signal here pretty much

[05:00:04] at the same time as sell signal there so

[05:00:06] now I have two indicators telling me the

[05:00:08] same thing so one why don't I pull back

[05:00:11] up macd and macd and RSI are a really

[05:00:15] nice pair they work quite differently

[05:00:17] and therefore sort of confirm strategies

[05:00:20] quite nicely now if I

[05:00:23] make our macd a bit bigger you can see

[05:00:27] that it agreed with the entry point here

[05:00:31] more or less we got a Buy Signal there

[05:00:32] you can see the bars go from red to

[05:00:34] Green so now we have a triple indicator

[05:00:37] telling us to buy at this particular

[05:00:39] point that's starting to look a little

[05:00:41] more confident now don't forget all the

[05:00:43] fundamentals you still have to research

[05:00:44] the company and do all that

[05:00:45] understanding part you know what other

[05:00:47] the business model what is you know what

[05:00:48] is their moot all that kind of stuff

[05:00:50] what is their prospects growth

[05:00:51] competition margins all those things you

[05:00:53] still need to understand but here you

[05:00:56] get a very very nice entry point on one

[05:00:58] two three indicators at the same time

[05:01:01] now on the sell side we have one

[05:01:02] indicator telling us to sell we have

[05:01:04] another one telling us to sell macd

[05:01:06] doesn't for ages um um actually no I'm

[05:01:11] absolutely wrong apologies I've just

[05:01:13] phased it out because I made it too

[05:01:15] small it actually tells us to sell

[05:01:17] earlier it tells us to sell on the 22nd

[05:01:20] of January which uh was that first line

[05:01:24] I'm putting in here and let me make that

[05:01:27] a dashed line so you can see that is

[05:01:29] what macd said it said sell sooner and

[05:01:32] what would that have meant on the

[05:01:35] 22nd of January that would have meant

[05:01:38] selling at about 8 30 versus

[05:01:42] 8840 which is what RSI and the moving

[05:01:46] average lines recommended so again it

[05:01:48] therefore validates our model we have

[05:01:50] this one here telling us to sell and it

[05:01:52] doesn't change its mind right you can

[05:01:54] see the red bars there is getting bigger

[05:01:56] and bigger and bigger it's basically say

[05:01:58] saying get out get out get out get out a

[05:01:59] little bit louder every single day so

[05:02:02] then when you get that and then you next

[05:02:04] indicator tells you the same thing a

[05:02:06] couple of days later and your moving

[05:02:08] average lines also told you that in

[05:02:09] between the two basically then now you

[05:02:11] have three indicators so that's kind of

[05:02:13] how you can build a combination of

[05:02:16] indicators that work for you and again

[05:02:19] back tested and that is your homework

[05:02:23] guys it doesn't have to be Tesla it can

[05:02:25] be any stock any ETF any commodity any

[05:02:28] crypto absolutely anything at all use

[05:02:31] these three uh um indicators RSI macd

[05:02:35] and some moving average lines and see if

[05:02:38] you can find a good pattern that you can

[05:02:40] back test three four five six seven

[05:02:42] times as as long as you have time and

[05:02:45] then you can leave that on and you can

[05:02:47] watch that moving forward and it it'll

[05:02:49] give you some interesting trade ideas

[05:02:52] now before I close this off I'm going to

[05:02:55] close the RSI and I'm going to pull up

[05:02:58] another indicator which is called

[05:03:00] Williams R Williams percentage R it

[05:03:03] works very similarly to uh

[05:03:07] RSI but a little bit differently um it

[05:03:10] basically looks at the most recent

[05:03:14] closing price and Compares it to the

[05:03:17] highest price in a particular period uh

[05:03:19] the standard uh Williams r that we get

[05:03:22] here can we see the standard settings

[05:03:25] for

[05:03:25] this normally it shows us anyway it it

[05:03:28] doesn't at this particular juncture I

[05:03:30] don't know why absolutely no idea

[05:03:33] why for some reason it doesn't but

[05:03:35] anyway it what it does is it is a little

[05:03:38] bit faster than R SI I it is essentially

[05:03:41] the the Speedy brother and it is

[05:03:45] therefore more useful if you're trading

[05:03:46] more rapidly more quickly more

[05:03:48] frequently and when you're looking at

[05:03:50] stocks that are highly volatile so

[05:03:53] especially I mean Tesla is fairly

[05:03:54] volatile but there are other stocks that

[05:03:56] go up 10 20% up and down each day at

[05:03:59] which point RSI will take too long to

[05:04:01] catch up the trade signal will always be

[05:04:03] lagging a day or two as well macd so on

[05:04:07] this one here for example when did did

[05:04:09] they tell us to sell well they told us

[05:04:11] to sell actually a little bit later

[05:04:13] interestingly enough in this case um

[05:04:15] right here that was the um I'm going to

[05:04:18] make that a dotted rather than a dash

[05:04:20] line and the Buy Signal for the similar

[05:04:23] period was on the 17th of November here

[05:04:27] let's make that a green line um green

[05:04:31] dash line apologies it's very very faint

[05:04:33] but that would have gotten you in at 460

[05:04:36] and would have gotten you out at 840 uh

[05:04:39] versus this um

[05:04:41] RSI I think got you out a little bit

[05:04:44] higher so you have to kind of do the

[05:04:46] tradeoff and the comparison and see

[05:04:48] which works better for the particular

[05:04:50] stock as I say Tesla is Vol volatile but

[05:04:53] not insanely volatile so Williams are

[05:04:55] sorry RSI might actually work better

[05:04:57] here in this case though checking at

[05:04:59] once doesn't really count you have to

[05:05:01] put in the work and back test it or find

[05:05:04] a smart friend who will back test it for

[05:05:06] you VI via script which you can do in

[05:05:08] trading View and perhaps we should we

[05:05:10] should find somebody who can do that and

[05:05:12] pay them to write some scripts for us we

[05:05:14] could share that as a community I think

[05:05:15] that might be an interesting idea so um

[05:05:19] for now guys that is a wrap I hope you

[05:05:21] find this interesting and useful and of

[05:05:23] course your homework is to use these

[05:05:25] three indicators combined moving average

[05:05:28] with macd and with RSI and or Williams R

[05:05:33] and see what works best for at least one

[05:05:36] hopefully two or three of your stocks

[05:05:39] and then you'll start to really

[05:05:41] understand um technical analysis you

[05:05:43] don't really need to know much more than

[05:05:45] that I think these tools already really

[05:05:48] get you quite a long way so thanks for

[05:05:51] watching guys and please do share your

[05:05:53] homework your screenshots anything

[05:05:54] interesting you find share them with the

[05:05:57] community over on the on the patreon

[05:05:59] channel for this course I'm sure a lot

[05:06:01] of people would like to know and see

[05:06:03] what you've also found and you can also

[05:06:05] of course chat with everyone and see

[05:06:07] whether it makes sense in this lesson we

[05:06:09] looking at Fibonacci or the golden ratio

[05:06:13] and a lot of people always wonder what

[05:06:15] is that all

[05:06:17] about U fibach an Italian chap lived in

[05:06:23] Italy around

[05:06:25] 1,200 so a fair time ago and he

[05:06:28] basically came up with this I don't know

[05:06:29] if he came up with it but he certainly

[05:06:30] documented uh this kind of magical

[05:06:34] Financial sequence or number sequence

[05:06:37] and uh how does it really work it's

[05:06:39] basically a there's a sequence of

[05:06:41] numbers and it says that after each zero

[05:06:44] and one uh the sum of the next two of

[05:06:49] the previous two numbers makes out the

[05:06:51] first one so the sequence goes 0 1 1 2 3

[05:06:55] 5 8 13 21 34 35 89 144 233 and and so

[05:07:01] forth always combining the previous two

[05:07:02] numbers together and that means that

[05:07:05] each number is about

[05:07:08] 1.618 and that's an important number to

[05:07:11] understand

[05:07:13] 1.618 times the previous number and

[05:07:16] that's kind of the ratio the lot this is

[05:07:17] based on a lot of the time you also see

[05:07:19] the golden ratio expressed as

[05:07:24] 0.618 and and that is kind of what we're

[05:07:26] going to be be using here um what is

[05:07:28] this really this uh this is this 1618 or

[05:07:31] golden ratio well you see it in a lot of

[05:07:34] art you see it in a lot of architecture

[05:07:36] you see it in lots of things nature all

[05:07:39] of these uh um you know flowers plants

[05:07:43] the way they're laid out always follow

[05:07:45] the Fibonacci sequence um most buildings

[05:07:48] that are aesthetically pleasing follow

[05:07:51] the Fibonacci sequence um trees do too

[05:07:55] the number of branches on trees as you

[05:07:57] go up follow the Fibonacci sequence is

[05:07:59] absolutely incredible if you want to do

[05:08:00] a bit of Googling or or you know watch

[05:08:02] some videos on that it really is one of

[05:08:04] the most fascinating piece pieces of

[05:08:07] mathematics that you could ever come

[05:08:09] cross and if you want to design

[05:08:11] something as some of you know I I paint

[05:08:13] for example I I I I look at exactly

[05:08:15] those ratios too and I think it just

[05:08:17] makes uh layout actually very very easy

[05:08:21] because you kind of know you follow that

[05:08:23] proportion 618 um in terms of shape and

[05:08:27] size you are likely to end up with

[05:08:29] something that is fairly pleasing at

[05:08:31] least on the bigger scale buildings also

[05:08:33] the proportions of Windows proportions

[05:08:35] of doors to the whole building the width

[05:08:38] of the building to the height of the

[05:08:39] building all that stuff it all follows

[05:08:40] Fibonacci but that's not what you're

[05:08:42] here for you didn't come from an

[05:08:43] architecture lesson right but there are

[05:08:45] many examples you know Leonard dain's

[05:08:47] paintings of the monisa the pathon um

[05:08:50] lots of flowers I said you know the uh

[05:08:53] galaxies spiral galaxies uh hurricanes

[05:08:57] and I I said I would stop with the

[05:08:58] examples but I find it hard to it all

[05:09:00] follows fibach so it is incredibly

[05:09:02] interesting and useful and we use it in

[05:09:05] financial markets a lot and if you

[05:09:07] follow me on the YouTube Channel you see

[05:09:10] me looking at support and resistance

[05:09:12] levels from Fibonacci pretty much every

[05:09:14] single day now how does it work well um

[05:09:19] the easiest thing to do is well there

[05:09:22] are different indicators and some

[05:09:23] softwares you have to draw them in and

[05:09:25] then you're always wondering where do I

[05:09:26] put it and what do I do the wonderful

[05:09:29] thing about trading view here and I I am

[05:09:30] not selling it in any way shape or form

[05:09:33] perhaps I should start hey you can throw

[05:09:35] in an auto FIP retracement and that

[05:09:39] shows you in exactly what I have in here

[05:09:40] already so all of these numbers are Auto

[05:09:43] FIP retracements and if you want to you

[05:09:46] can go into the settings and you can see

[05:09:48] here you see that 382 618 that's what I

[05:09:51] was talking about just and then you have

[05:09:53] more and more of those uh numbers you

[05:09:54] can throw in lots of these um you can

[05:09:58] extend them to sort of a fairly lengthy

[05:10:00] degree depending on how significant your

[05:10:03] crash or rally really is and then you

[05:10:05] get all these numbers pulled up these

[05:10:07] lines that I've gotten here so how does

[05:10:09] it really all work uh basically they

[05:10:12] give you support and resistance lines

[05:10:15] and also a trend to some extent so say

[05:10:18] we start let me zoom in a little bit get

[05:10:21] rid of that we start here this is the

[05:10:23] Neo chart by the M by the way it doesn't

[05:10:26] really matter what stock it is it works

[05:10:27] the same for all of them but what we see

[05:10:31] here is so you have this is the height

[05:10:33] of this the peak of that particular

[05:10:36] period and you tend to draw them from

[05:10:38] the peak down to the next trough so from

[05:10:41] top to bottom that that dotted line here

[05:10:43] in the background is how you would draw

[05:10:44] it if you were drawing it yourself the

[05:10:46] trading view does a fairly good job of

[05:10:48] putting them in sometimes you might want

[05:10:49] to draw them yourselves so you want to

[05:10:51] look at longer periods or things like

[05:10:52] that but for now I think that is a

[05:10:54] pretty good place to start so you we

[05:10:56] started at 4629 we went down to 34 here

[05:11:01] which is the zero mark on

[05:11:04] fibon that acts as a very very strong

[05:11:08] support line

[05:11:10] and we can see here that we have the

[05:11:11] next rally up so we break well let me

[05:11:14] magnify that for you we try to break

[05:11:17] through the next now resistance line

[05:11:19] above so the support lines on the way

[05:11:21] down become resistance lines on the way

[05:11:22] up which is about 36.9 so the number in

[05:11:26] front is the Fibonacci number what you

[05:11:29] what generally as Traders or investors

[05:11:31] want to look at is the number in

[05:11:32] Brackets because that's really what

[05:11:34] matters to you so that's the red line

[05:11:36] here and that was you know the was the

[05:11:38] low of that day here the candle there

[05:11:41] and then here we have two days where we

[05:11:42] don't quite manage to break through on

[05:11:44] the third day we do um and then on the

[05:11:46] fourth day we break through the next one

[05:11:48] when you go through two lines in the

[05:11:50] same direction continuously you have a

[05:11:53] trend you build momentum that works in

[05:11:55] both directions up and down and

[05:11:58] therefore you can see that the next day

[05:12:00] we know we we managed to go quite a bit

[05:12:02] uh higher than that well we certainly

[05:12:05] opened a lot higher we and then we

[05:12:07] closed a bit lower but we opened very

[05:12:08] very

[05:12:09] higher on that momentum basis here the

[05:12:12] following day we go down again but we

[05:12:14] get stopped the low of the day again the

[05:12:16] Fibonacci line 3690 now the next day uh

[05:12:20] we open at just above which is about

[05:12:24] that thick candle that's the opening of

[05:12:26] the day again above that green Fibonacci

[05:12:29] support line and so on the day after

[05:12:31] that we sell off a bit but where do we

[05:12:33] stop the sell off well we stop it at

[05:12:35] 3690 which is the Fibonacci support line

[05:12:38] so you can sort of to see here it is

[05:12:40] plays a an important role or here our

[05:12:43] last trading day as we speak we the low

[05:12:46] of the day was what well it was $34 and

[05:12:49] that is precisely the Fibonacci support

[05:12:52] line here the zero Fibonacci support

[05:12:54] line that we were talking about so it is

[05:12:57] incredibly

[05:12:58] bizarrely

[05:13:00] strangely fascinatingly accurate when it

[05:13:03] comes to support and resistance levels

[05:13:06] now how do you trade on it I supp that's

[05:13:09] what you're thinking the short answer is

[05:13:12] I

[05:13:13] wouldn't on its own I don't think it

[05:13:15] it's enough on its own it gives you the

[05:13:19] intervals and it allows you therefore if

[05:13:21] you are trading rather than long-term

[05:13:23] investing um or if you are long-ter

[05:13:25] investing it gives you helps you with

[05:13:27] entry points it gives you points where

[05:13:29] you can space out your where I'm going

[05:13:31] to take profits where I'm going to say

[05:13:33] set stop losses also because if you

[05:13:36] break through two of them in in a row so

[05:13:38] say you know you were buying a Neo here

[05:13:41] at um say you bought Neo right here for

[05:13:45] a particular reason at $38 it then goes

[05:13:50] actually sorry I need to go one Higher

[05:13:52] okay say here my example you bought Neo

[05:13:54] at say 3961 where I put that blue arrow

[05:13:57] it then goes down one Fibonacci line

[05:13:59] here that light green one and then the

[05:14:01] next day it goes through the next one um

[05:14:03] you might then want to set a stop loss

[05:14:06] at the next support line which is $34

[05:14:10] and just say well if I go below that I

[05:14:12] know we in trouble because we are we we

[05:14:14] were likely to go down as low as 3110

[05:14:17] I'd rather not take that loss I'd rather

[05:14:18] get out at 34 and wait for this to

[05:14:20] recover so you know you can do things

[05:14:22] like that obviously you can also do that

[05:14:23] the other way around so how would you

[05:14:26] combine this with other things well um I

[05:14:29] would combine it with well you could

[05:14:31] certainly combine it with trend lines if

[05:14:33] you had a stock that was broadly TR you

[05:14:35] know moving on a trend Neo not so much

[05:14:38] because it's too vol volatile but if

[05:14:39] you're looking at something like QQQ uh

[05:14:42] we could look at certainly volume

[05:14:44] patterns what volume is doing um so for

[05:14:47] example uh let's see see you know you

[05:14:50] have this rally

[05:14:53] here this little mini rally here what

[05:14:55] I'm painting in red and at the same time

[05:14:57] your volume is falling off right so you

[05:15:00] kind of know this is going to fizzle out

[05:15:03] fairly soon and then you can say well

[05:15:05] where am I going to get out well where

[05:15:07] am I going to get out I'm going to get

[05:15:08] out at the next Fibonacci point so that

[05:15:11] could have been 43 something I can't see

[05:15:13] that here or it could have been 4629 and

[05:15:16] you could have actually gotten out at

[05:15:17] 4629 it would have gotten you out

[05:15:19] exactly at the top of that rally so it

[05:15:22] is very very useful in in in in

[05:15:25] therefore combining it with something so

[05:15:27] you spotted yes an upwards Trend but

[05:15:29] Falling volume so you think this is not

[05:15:31] going to last I'm going to get out of

[05:15:32] this rally and therefore you could have

[05:15:35] um you know pinpointed any one of these

[05:15:37] fonci numbers here 43 60 that's the blue

[05:15:39] one would have been the more

[05:15:40] conservative one to wait for the next

[05:15:42] one would have been a bit more more well

[05:15:45] a little bit more risky uh also you can

[05:15:47] look at moving averages and we will get

[05:15:49] to that and we will also get to

[05:15:51] indicators you see me using things like

[05:15:53] RSI macd Williams R things like that and

[05:15:56] I will get to those in in different

[05:15:58] sessions but why don't we look at one

[05:16:00] more say we look at a QQQ here to sort

[05:16:04] of uh illustrate the point of this a bit

[05:16:07] more so say you are

[05:16:09] whoops say you are

[05:16:13] right

[05:16:15] um see what would make

[05:16:19] sense okay so say we are living

[05:16:21] somewhere in in

[05:16:23] um let me see how much well we haven't

[05:16:26] really got a sort of a clear Trend here

[05:16:28] have we but what we could do and that's

[05:16:30] perhaps something that might might make

[05:16:31] sense we draw a longer

[05:16:34] term uh Trend channel here so we are

[05:16:37] drawing this here pretty broad Trend

[05:16:41] channel that takes in most of

[05:16:45] qqq's um movements

[05:16:55] and and say you know we are we are

[05:16:58] buying here in in somewhere around the

[05:17:00] 320 Mark or so and you know we we are

[05:17:03] holding it and we are wondering hang on

[05:17:05] how low is this going to dip should we

[05:17:07] get out is it going to go to the bottom

[05:17:09] of the channel or are the opportunities

[05:17:11] to get out before and really what you

[05:17:14] want to look for you want to look for

[05:17:16] double indicators so points where the

[05:17:19] two um indicators combine or are at

[05:17:23] least close to combining so there is one

[05:17:26] here for example I can spot I'm pointing

[05:17:29] an arrow at it here that was the 25th of

[05:17:31] March and you can see here the low of

[05:17:34] that day it broke through the bottom of

[05:17:38] of our Channel and it also broke through

[05:17:42] here FCI line which was a support line

[05:17:45] then and then as you see that trade

[05:17:47] during the day moving back up the little

[05:17:50] tail here because obviously that's what

[05:17:52] it did it moved all the way up to the

[05:17:53] top of that green bar you can be like ah

[05:17:56] okay we've called a bottom here from two

[05:17:58] sides one my channel which perhaps I'm

[05:18:00] not 100% confident with but I also have

[05:18:02] the FIB natur support here so um what

[05:18:05] I'm going to do is this is for me a good

[05:18:07] dip to buy some more Q Q at um and that

[05:18:10] would have been a valid strategy and you

[05:18:12] could have done the same thing here for

[05:18:13] example at predose before I think that's

[05:18:15] the 7th of March or thereabout you see

[05:18:17] again the you had that sell off on the

[05:18:20] previous day also actually it went it

[05:18:21] touched the line and the next day it

[05:18:22] went even lower it broke out of the line

[05:18:24] and maybe your strategy is I only buy

[05:18:27] QQQ when it's a real bike basement

[05:18:29] Bargain Basement prices when we've

[05:18:31] fallen out of my big green channel here

[05:18:34] and it went down to the uh number one

[05:18:38] Fibonacci line here at

[05:18:40] 29745 and I was like ah okay that

[05:18:42] support held and now I'm moving back up

[05:18:45] into the channel um now it's actually

[05:18:47] time for me to get in you could have

[05:18:49] also seen that and and waited for it to

[05:18:52] cross one two more Fibonacci lines here

[05:18:55] which would have been the 303 and the

[05:18:57] 306 and then you would have really

[05:18:59] established momentum also from that

[05:19:01] point of view two lines crossing so

[05:19:03] that's an a fairly straightforward way

[05:19:05] to combine two indicators that we have

[05:19:07] looked at so far we will look at some

[05:19:09] more in the coming lessons moving

[05:19:11] average lines and things like that so uh

[05:19:15] what are you going to do for your

[05:19:16] homework guys H have have a bit of a

[05:19:18] play with fat reach rements go to

[05:19:19] tradingview.com um let me show you

[05:19:23] exactly how you get that in here let me

[05:19:24] just delete that so now you haven't got

[05:19:26] any lines you go to indicators and you

[05:19:29] type in Auto

[05:19:32] FIB uh and you generally want the

[05:19:34] retracement one don't worry about the

[05:19:35] extension one for now that is more for

[05:19:38] setting

[05:19:39] uh profit targets I wouldn't worry about

[05:19:42] that too much for for now just go for

[05:19:43] the auto FIB retracements that is what

[05:19:45] 99% of Traders look at so there you have

[05:19:48] it it pops it in for you automatically

[05:19:50] and it keeps moving it over time as well

[05:19:52] each time you you you you know the chart

[05:19:54] pattern move so now that we've covered

[05:19:55] the real basics of technical charts

[05:19:58] we're going to get into a little bit

[05:19:59] more details we're going to look at some

[05:20:01] actual indicators and what they mean

[05:20:03] what are we going to start with well

[05:20:04] we're going to start with simple stuff

[05:20:07] really but quite useful stuff and the

[05:20:09] first one is trend

[05:20:11] line and then we're also going to look

[05:20:13] at

[05:20:16] channels and I'm going to show you why

[05:20:19] they're both quite useful each in their

[05:20:21] own right so what is a trend line well

[05:20:24] it is it is pretty much that it

[05:20:26] basically helps

[05:20:28] you um determine the current direction

[05:20:31] of where the share price is going and if

[05:20:34] you are a Believer a believer of

[05:20:37] technical analysis and statistics the

[05:20:40] trend is essentially your friend that's

[05:20:42] kind of the the theory so you can use

[05:20:45] that on different time frames and I

[05:20:47] think that's a question often asked do I

[05:20:50] look on this is for example here the

[05:20:52] nasda QQQ at a one minute chart which is

[05:20:55] I don't actually know where it went you

[05:20:57] have to reset it here it looks like that

[05:20:59] it looks pretty erratic um you know with

[05:21:03] little gaps in between for each day or

[05:21:04] do I look at the day perhaps or I could

[05:21:07] look at the month in which case the

[05:21:09] whole thing would be a hell of a lot

[05:21:11] smoother right now there's no hard and

[05:21:14] fast rule really uh on this it depends

[05:21:18] on your trading pattern so if you are

[05:21:20] trading intraday 25 times a day looking

[05:21:23] at a minute or five minute chart might

[05:21:25] make a lot more sense if you are looking

[05:21:27] to time things more for weeks and months

[05:21:30] ahead I I would generally recommend

[05:21:31] looking at a day chart you can make it

[05:21:34] weeks or months but then well you are

[05:21:37] sort of easing smoothing out a a a great

[05:21:40] deal which perhaps actually with an

[05:21:42] index like this QQQ might not be such a

[05:21:44] bad thing but it does give you a

[05:21:46] different kind of a a pattern so if you

[05:21:48] look at this for example here since 2019

[05:21:50] this is NASDAQ and we say we make that a

[05:21:53] week and we look at the same time period

[05:21:57] also 2019 well in fact what we could do

[05:22:01] is we could pull up the same chart twice

[05:22:05] might be I think an interesting exercise

[05:22:06] and you can kind of see a little little

[05:22:08] bit for

[05:22:10] yourself what would happen if that was a

[05:22:15] weak chart now down here so here we are

[05:22:18] and we're just going to move it so that

[05:22:19] 2019 matches up with 2019 there on the

[05:22:23] left or you know thereabout so you can

[05:22:25] basically see similar chart um one is

[05:22:28] slightly bigger than the other which

[05:22:30] doesn't help it is always quite tricky

[05:22:31] to get them to line up perfectly you'll

[05:22:34] start to understand that so it looks

[05:22:35] looks pretty similar so so far right if

[05:22:38] we then make this say a month chart and

[05:22:41] then again we kind have to zoom back

[05:22:43] quite a bit because of course now there

[05:22:45] is a lot less information to look at and

[05:22:47] to play with so then it looks like this

[05:22:51] so you you are missing out on some of

[05:22:54] the finer bits here you're missing out

[05:22:56] on some of these little dips here that

[05:22:58] we have for example this one here

[05:23:01] corresponds with the one down there you

[05:23:03] can see it's linked didn't line it up

[05:23:05] entirely and the little you know sell

[05:23:07] off there becomes it teeny tiny almost

[05:23:09] invisible one on the month by month

[05:23:11] chart so it depends very much I'd say on

[05:23:13] your time frame generally speaking I

[05:23:16] would say I look at things on a day

[05:23:18] basis uh because I I think it's it gives

[05:23:21] us a little bit more detail and more

[05:23:23] information is is generally your friend

[05:23:26] now what is a trend line well the way

[05:23:29] you draw a trend line is and again I I

[05:23:31] recommend play with a tradingview.com

[05:23:33] guys it is entirely free and you can

[05:23:36] simply pull up a trend line here it's

[05:23:38] called the trend line if you select it

[05:23:39] up there you can then set Little Stars

[05:23:42] so you can make your sort of favorite

[05:23:43] list which is what I've done because

[05:23:45] typically most of us only ever use you

[05:23:47] know three or four or five of these so a

[05:23:49] trend line say okay say for example you

[05:23:52] bought in the NASDAQ um let me just move

[05:23:55] this out of the way a bit so you bought

[05:23:57] the NASDAQ here on the 15th of June for

[05:23:59] example that's when you bought it so

[05:24:01] what's your trend line well you're going

[05:24:03] to go back in time you're going to go

[05:24:05] back say to the previous low and you're

[05:24:08] going to connect the lowest point

[05:24:12] with where you are here because that's

[05:24:15] all the data you have up up till then

[05:24:17] right so then you think well actually

[05:24:18] I'm only connecting two points perhaps I

[05:24:20] shouldn't take that dip because the

[05:24:23] market has changed somewhat perhaps I

[05:24:25] should look at the more recent lows and

[05:24:28] that way you can see that you've

[05:24:30] connected one two

[05:24:33] three of four points really and that

[05:24:36] give us gives us the trend and so you

[05:24:40] have two options when you connect lows

[05:24:42] you have the option of and I zoom in

[05:24:45] here either connecting which is what

[05:24:47] I've done a little bit roughly uh of

[05:24:50] connecting the low Tails so the the

[05:24:53] lowest part of that candle which

[05:24:56] basically means it was the lowest price

[05:24:58] point during that day here which is kind

[05:24:59] of what I've well is attempted to do

[05:25:03] that's a bit more it's a bit more

[05:25:05] accurate um so that's what you you can

[05:25:07] do here it some analysts also like

[05:25:11] connecting

[05:25:12] the open opening or

[05:25:15] closing of of of of the uh the day so

[05:25:18] that means ignore the tail and you would

[05:25:20] go for the points where the thick part

[05:25:24] of the bar basically connect so you

[05:25:25] would then connect These Bars doesn't

[05:25:29] make a huge difference to be honest with

[05:25:31] you I I I think either way is fine I

[05:25:33] tend to go for the for the for the

[05:25:35] bottom of the market now how useful is

[05:25:39] that really well you're here and then

[05:25:41] what happens well the stock does

[05:25:44] actually really well you're really happy

[05:25:45] it's sort of Bobs along a little bit

[05:25:47] here and then it goes to there and then

[05:25:49] you're thinking huh can I extend are we

[05:25:51] still on this trend or is this a new

[05:25:54] trend now so you can extend this and you

[05:25:56] sort of come to the conclusion okay we

[05:25:58] dipped very briefly below my Trend but

[05:26:01] it still looks like it is my Trend I'm

[05:26:03] happy I'm not going to do anything and

[05:26:05] then the stock goes up here and I think

[05:26:07] at that point you realize okay the trend

[05:26:10] has changed and that's kind of the

[05:26:11] limitation of Trends Trends change and

[05:26:14] particularly when you look at volume at

[05:26:16] the same time um if you were looking at

[05:26:19] a stock you might not see quite such

[05:26:21] even volume so for for an index like

[05:26:24] this volume is pretty smooth um it it

[05:26:26] doesn't vary vary all that much so I

[05:26:29] will also show you just in a second a

[05:26:32] stock so say we pull up um let's pull up

[05:26:35] xan for example here on a date chart for

[05:26:39] no particular

[05:26:41] reason

[05:26:47] on okay reset price scale uh two hours

[05:26:52] no let's make a days so there we go so

[05:26:55] say here negative Trend fair enough say

[05:26:57] you bought uh

[05:26:59] xang here on the 11th of February for no

[05:27:02] particular reason and you wanted to know

[05:27:04] about the the trend was so you might

[05:27:06] connect uh the

[05:27:08] lower end of these with that and you

[05:27:11] kind of think ah okay we above the trend

[05:27:13] so why did you buy at that point it

[05:27:15] doesn't make a great deal of sense does

[05:27:16] it really so um well you you basically

[05:27:20] would have to draw a couple of different

[05:27:21] trend lines here that's really the

[05:27:23] answer to that because you can see here

[05:27:25] the trend is kind of moving sideways and

[05:27:27] then a few days later your Trend would

[05:27:30] start to uh do this rather dramatically

[05:27:35] it would fall off rather dramatically

[05:27:36] and that's when you pull in vol volume

[05:27:38] you will start to see there are quite

[05:27:40] big changes in volume down here where we

[05:27:44] have um you know pretty flattish falling

[05:27:48] off volume here and then here also

[05:27:51] pretty low volumes and the whole if we

[05:27:53] go back a little bit the only time this

[05:27:55] rallies is when our volume does that so

[05:27:57] we have very volatile volumes down here

[05:28:00] you can see you know ups and downs and

[05:28:02] ups and downs and that basically means

[05:28:04] that your Trends keep changing all the

[05:28:06] time so if you have a stock stock with

[05:28:08] high volume volatility trend lines will

[05:28:11] only ever take you so far I think that's

[05:28:13] that's something that's quite important

[05:28:14] to understand now let's uh graduate a

[05:28:18] little bit then

[05:28:20] onto um

[05:28:24] channels what is a channel what's the

[05:28:26] difference is it just two lines well

[05:28:28] sort of um there is actually a tool on

[05:28:31] that here as well called parallel

[05:28:32] Channel you can find that uh here as

[05:28:35] well I've started again so it's on my

[05:28:37] little favorites list so you can connect

[05:28:41] the lower ends similarly like what we've

[05:28:43] done here say we take it for this time

[05:28:45] period um and then connect also the

[05:28:50] highs now do you need to connect all the

[05:28:53] highs well this is I think where a

[05:28:54] little bit of experience comes in so you

[05:28:56] can draw very wide channels to take in

[05:28:58] all the the Peaks and troughs but really

[05:29:01] what you actually looking for is for um

[05:29:06] entry and exit points so if this is your

[05:29:10] Trend and I'm going to zoom in a little

[05:29:12] bit on

[05:29:13] this then you can see that when you are

[05:29:18] you know near the bottom end of that

[05:29:20] channel so say you're here uh

[05:29:23] or

[05:29:25] there or in fact youve Fallen below it

[05:29:29] they would be if you are long on that

[05:29:31] stock for the long run there'd be better

[05:29:33] entry points than say you know the one

[05:29:36] up here or you know the ones here so it

[05:29:39] gives you kind of a visual uh of well

[05:29:42] that's the trend it's kind of the the

[05:29:44] dotted line in the middle and if we are

[05:29:47] far away from that and we are near the

[05:29:49] top of that channel then it is perhaps a

[05:29:53] little bit more expensive relatively

[05:29:55] than if I buy on on on the dip here

[05:29:57] below um and we're going to get in

[05:29:59] future lessons also onto moving averages

[05:30:01] which is kind of a similar story which

[05:30:04] also can can give you good entry points

[05:30:06] um that you want to get now can that's

[05:30:09] why I saying there is no real science

[05:30:10] here with the with these um charts you

[05:30:14] can for example if you wanted to say you

[05:30:16] started this channel a little bit

[05:30:17] earlier you started this sort of down

[05:30:19] here in the December period when the

[05:30:21] channel was a bit more more narrow then

[05:30:24] you could have you could stick to your

[05:30:25] narrower Channel and you could then see

[05:30:28] more clearly perhaps the uh the

[05:30:31] breakouts or the dropouts if you will

[05:30:34] down here where you have perhaps have

[05:30:36] three rather interesting entry points or

[05:30:37] you know perhaps there's another one

[05:30:39] here and then this one I suppose could

[05:30:41] also be counted as one but not quite as

[05:30:43] good as these three and then if you

[05:30:44] wanted to exit you know the the two

[05:30:46] arrows I pointed up here again might be

[05:30:48] quite good ones and you could swing

[05:30:50] trade and that is kind of what swing

[05:30:51] trading is a channel is a very nice

[05:30:54] representation of a swing trade now do

[05:30:57] these channels last absolutely forever

[05:30:59] no of course not there are essentially

[05:31:02] trend line so they do indeed change and

[05:31:05] you can look at stocks in a very kind of

[05:31:08] long-term fashion and say well what's

[05:31:11] really the the long-term Trend here and

[05:31:14] you can do sort of a a rough kind of

[05:31:17] General trend line which will miss some

[05:31:20] of the Peaks and troughs and sort of say

[05:31:22] well 80% or 90% of the time we are

[05:31:27] actually in this channel here this new

[05:31:29] channel can I make that a different

[05:31:31] color I think I can let's make it that

[05:31:33] lovely green color so you know you can

[05:31:36] actually say okay we are within that and

[05:31:38] then uh that will again help you to time

[05:31:41] entries and exits you can see that here

[05:31:44] and I'm going to change the color of

[05:31:45] these as well to Green that would have

[05:31:48] been a fairly good entry point uh this

[05:31:51] perhaps would have been a good exit

[05:31:53] Point uh so I make that red so it's

[05:31:55] clear that is an exit can I copy and

[05:31:58] paste these yeah brilliant so here is a

[05:32:01] another exit Point um that up here well

[05:32:06] somewhere this whole range in fact would

[05:32:08] have been a good exit Point uh and then

[05:32:10] similarly down here on this basis you

[05:32:12] would have also had you know a few more

[05:32:14] entry

[05:32:15] points down well that perhaps not quite

[05:32:18] as strong that one but you know you can

[05:32:20] you sort of get the get the idea I think

[05:32:23] the value of looking at long-term trends

[05:32:26] and a lot of Traders and lot of analysts

[05:32:28] look at that and because a lot of people

[05:32:29] look at the same Theory it kind of

[05:32:31] becomes becomes true so for timing

[05:32:33] things this is an interesting way of

[05:32:35] looking at it and as I said I will show

[05:32:37] you a little bit bit later down the road

[05:32:39] how we can achieve a similar situation

[05:32:41] by looking at moving average lines um so

[05:32:45] as I said if you look at very short time

[05:32:46] periods they

[05:32:48] become less useful I would say I'd say

[05:32:51] I'd always look at this as a more of a

[05:32:52] medium term um eventually your chart

[05:32:55] will deviate from it so say if I go back

[05:32:59] a little bit here in time you can see

[05:33:01] for example that we would have had a

[05:33:03] different Trend uh you know sort of

[05:33:05] heading in this direction here that was

[05:33:08] a different one it's a bit bit of a bit

[05:33:10] of a rough draw there or you know you

[05:33:12] would have had had one here that sort of

[05:33:14] went perhaps in that direction and then

[05:33:17] another one that started I don't know

[05:33:20] somewhere here perhaps and then it went

[05:33:23] up to here and that's when we really

[05:33:24] broke out so you know trend lines don't

[05:33:27] last forever if you smooth it out more

[05:33:29] on a weekly or monthly basis especially

[05:33:31] with kind of ETFs or indcs you can get a

[05:33:34] much much longer term Horizon and then

[05:33:37] you will ignore the kind of breakout so

[05:33:38] say I wanted to extend this one here

[05:33:43] till you know 2019 or so you you you can

[05:33:47] do that it's just the you usefulness of

[05:33:49] it becomes a little bit smaller because

[05:33:52] you are going to have to make this

[05:33:54] channel a bit wider but it can be

[05:33:56] sometimes helpful to visualize just what

[05:33:58] is the long-term trend of this what's

[05:34:00] really the pattern if I if I ignore all

[05:34:02] the the little crashes the little

[05:34:04] disasters and the all the you know

[05:34:06] little bits of fantastic news what's

[05:34:08] really our long long longterm trajectory

[05:34:11] here for these stocks though if you do

[05:34:13] that if you want to go re really far

[05:34:15] back in time I would then recommend

[05:34:17] smoothing it out on a weekly or even

[05:34:19] monthly basis and that way you you get a

[05:34:21] lot less of these um these kinks in here

[05:34:24] so you can see here that's that's QQQ

[05:34:26] smooth out on a monthly basis and then

[05:34:27] you can actually see it is a fairly

[05:34:30] smooth story here with with an

[05:34:33] acceleration starting from about um the

[05:34:36] summer of 2019 right so um I hope that's

[05:34:39] kind of gives you a nice overview of of

[05:34:41] of what the usefulness of these are it

[05:34:43] really is I think largely to time

[05:34:46] entries and exits I think that's kind of

[05:34:48] the benefit and to also observe visually

[05:34:51] is this stock still on track and if you

[05:34:54] don't draw the channel in it's kind of

[05:34:55] hard to tell because things can go up

[05:34:57] and down quite a bit but if you do have

[05:35:00] the channel painted in then it does tell

[05:35:03] you pretty clearly whether we are within

[05:35:05] or below or substantially above that

[05:35:07] Channel and therefore whether it might

[05:35:09] be worth looking at have the

[05:35:10] fundamentals change I mean technical

[05:35:11] analysis does not exclude fundamentals

[05:35:14] or simply if it's something like QQQ

[05:35:16] that you're you're perhaps buying every

[05:35:18] month or so you might be thinking ah

[05:35:20] okay this is a good time to jump in

[05:35:22] which perhaps you know March 2020 would

[05:35:24] have been right on on this kind of scale

[05:35:27] and it really also helps I I find take

[05:35:29] the emotions out of it if you if you

[05:35:31] just sort of forget for a moment what

[05:35:33] your portfolio is doing uh and instead

[05:35:36] look at what the opportunity might be

[05:35:39] from this point of view so the whole

[05:35:40] period from March to you know may 2020

[05:35:44] of course was a very very a good buying

[05:35:46] opportunity but there have been others

[05:35:48] as we can see you know September October

[05:35:51] 9th of March they were all interesting

[05:35:54] buying opportunities I have now as you

[05:35:55] can see made that channel a little bit

[05:35:57] wider because we were looking at

[05:35:59] something U else here so that's also

[05:36:01] something to bear in mind when you mess

[05:36:02] with them do them in different colors

[05:36:04] rather than sort of keep adjusting the

[05:36:06] ones that you are you're messing with

[05:36:07] and that way you you can keep them and

[05:36:09] also another interest good thing I think

[05:36:11] to do is uh write something next to it

[05:36:14] put a date next to it or or little note

[05:36:16] and you can do that in here quite easily

[05:36:18] um there is somewhere in here a uh a

[05:36:22] text

[05:36:24] option you can either do it by

[05:36:26] handwriting which is what I T typically

[05:36:27] do or yeah you can do it an anchored

[05:36:29] text for example so you can say you can

[05:36:32] put in here um you know I don't know

[05:36:34] April 2021 um

[05:36:38] Channel maybe day you you know that it's

[05:36:42] it's on a day basis and then you have

[05:36:43] that in here and you can move that about

[05:36:45] and you can leave it in there which is I

[05:36:47] think always a good thing to do and do

[05:36:49] save different charts for yourself and

[05:36:51] that's again why having I think a

[05:36:52] trading view account which is utterly

[05:36:54] butterly free is is is a good idea with

[05:36:56] with with a sign up guys so I'll see you

[05:36:58] on the on the next uh ta class there is

[05:37:01] lots more excitement to come what I

[05:37:03] would recommend you do in the meantime

[05:37:05] look at a couple of your stocks draw P

[05:37:07] some of these channels in and see where

[05:37:10] it would have been good to buy or sell

[05:37:12] on and you know where are you right now

[05:37:14] or do you think it is perhaps an

[05:37:16] opportunity to get in on something at a

[05:37:19] good rate compared to the long-term

[05:37:21] Trend um and though if you do have

[05:37:24] breakouts in One Direction or another

[05:37:26] you also have to go back to the actual

[05:37:29] fundamentals look at the news look at

[05:37:30] the numbers and see has something

[05:37:32] fundamentally changed what are we

[05:37:34] looking at today well we're going to

[05:37:35] look at triple top and triple bottons so

[05:37:39] you might be thinking triple what is

[05:37:41] that a drink or something so

[05:37:45] triple uh

[05:37:49] bottoms and tops I'm not going to write

[05:37:53] a triple twice because my handwriting as

[05:37:55] you can see is already strained with my

[05:37:57] pen what does that look like well I'm

[05:37:59] going to show you an actual chart but a

[05:38:01] triple top would be something like that

[05:38:04] and then you have one top two tops three

[05:38:08] tops um a a triple bottom so that would

[05:38:12] mean you are you basically you came up

[05:38:15] this way and and then that reverses the

[05:38:17] trend the other way around if your chart

[05:38:19] is sort of zigzagging around here and

[05:38:21] then Falls once twice three times you

[05:38:25] would then expect it to recover but you

[05:38:26] don't have to rely on my horrible

[05:38:28] drawings I actually have found exactly

[05:38:31] the pattern and guess where on a Neo

[05:38:33] chart isn't that convenient so Neo is

[05:38:36] doing as a really good service here

[05:38:38] actually giving me both formations in

[05:38:40] the space of a couple of months can you

[05:38:42] see it I suppose that's that's the first

[05:38:44] question well let me paint it in for you

[05:38:47] so it is a little bit easier to identify

[05:38:50] so if you look

[05:38:52] at this trade let me use a

[05:38:56] highlighter you look at this movement

[05:38:58] here so we had this massive rally in

[05:39:00] November uh 2020 we then went down once

[05:39:05] up again struggled down again went up

[05:39:08] again a little higher the the Bulls were

[05:39:10] still fighting and then here's the third

[05:39:12] one and then up to the Moon right that

[05:39:16] was the pattern so what you have here

[05:39:19] therefore very clearly is you have one

[05:39:23] two

[05:39:26] three bottoms right and that what does

[05:39:30] that indicate well it basically means it

[05:39:33] is a change in Trend so a triple bottom

[05:39:38] tells you that the selloff trend that

[05:39:40] was this one here is being reversed and

[05:39:44] what you also I dearly want to see at

[05:39:46] the same time you want your volume to

[05:39:48] fall off so in this situation here I'm

[05:39:51] exaggerating this slightly but you can

[05:39:53] see down there that our volume it

[05:39:57] certainly didn't get any bigger there is

[05:39:59] a a decline in volume here over that

[05:40:01] time period and that basically means

[05:40:03] that the Bulls won over the Bears here

[05:40:07] in in these three instances it's always

[05:40:09] a power struggle essentially between

[05:40:11] buyers and sellers trying to reverse the

[05:40:14] trend in this situation and they failed

[05:40:17] on the first attempt here and then we

[05:40:19] know we went that down again to the

[05:40:21] second dip and then that failed again

[05:40:24] that rally but it isn't really a failure

[05:40:27] so because you have one bottom the

[05:40:29] second one and then the third trough or

[05:40:32] bottom here um on the third one the

[05:40:36] market basically the sellers give in

[05:40:38] because they see the trend is clear and

[05:40:40] this is a fairly common Trend pattern

[05:40:43] actually not that common I would say but

[05:40:44] it is a quite a powerful one and at the

[05:40:46] same time it's accompanied by less

[05:40:48] volume which just means that as the

[05:40:51] stock is selling off less people are

[05:40:55] selling and that then gives us the

[05:40:57] momentum for the next rally to the top

[05:41:01] um

[05:41:03] so what is important in terms of inter

[05:41:07] in these well first of all of course you

[05:41:09] have to actually spot it I suppose

[05:41:11] that's that's that's the first starting

[05:41:12] place and one way to do that is to draw

[05:41:16] trend lines I would say so if you wanted

[05:41:18] to draw a trend line connecting these

[05:41:21] three lower points here and I'm doing

[05:41:23] that a little bit roughly I'll make that

[05:41:25] a different color and make that purple

[05:41:27] and then you also drew a trend line from

[05:41:30] the top through to here you see these

[05:41:32] sort of triangle patterns emerging and

[05:41:35] we are going to talk about that down the

[05:41:36] road in some lesson

[05:41:38] which also gives you a sort of you know

[05:41:40] identifies sort of a a a force the

[05:41:44] market basically has to decide are we

[05:41:46] going to go up or we going to go down

[05:41:47] you can't dip up and down like 1 2 3 4 5

[05:41:51] 6 seven eight forever typically you see

[05:41:53] two or three Max and then you actually

[05:41:56] the market makes a decision here so

[05:41:58] that's one way of identifying them and

[05:41:59] then literally counting of course the

[05:42:01] bottoms taking a pen and and drawing it

[05:42:04] and there are some indicators called

[05:42:06] zigzag for example

[05:42:07] here's one here I don't find it

[05:42:09] particularly helpful but if you like it

[05:42:12] can help you identify things perhaps a

[05:42:14] bit more clearly it isn't always 100%

[05:42:16] accurate I think but you can use it and

[05:42:19] then once you've looked at that um look

[05:42:21] at the amount of volatility basically if

[05:42:23] your pattern was let me get a pen if our

[05:42:27] pattern instead of this rather dramatic

[05:42:29] movement which we have here was more of

[05:42:31] a two three kind of a pattern that would

[05:42:36] give you much less momentum and you'd

[05:42:38] likely see that sort of a pattern

[05:42:39] because there wasn't very much

[05:42:41] volatility in between the tops and the

[05:42:44] bottoms basically the more volatility

[05:42:47] you have in that um the more likely that

[05:42:51] once the price does break out will you

[05:42:53] see a significant price movement in this

[05:42:55] case upwards because these are these are

[05:42:57] triple

[05:42:58] bottoms

[05:43:00] um in terms of volume uh the other thing

[05:43:05] of course to look for for out for is is

[05:43:07] that if your volume activity changes

[05:43:10] substantially from what it has been

[05:43:11] doing in the previous period that also

[05:43:14] indicates that something is changing so

[05:43:16] when you have as we do down here this

[05:43:18] sort of very dramatic buildup of volume

[05:43:21] I I I'm referring to the red and green

[05:43:23] bars right at the bottom here and then

[05:43:26] it does that that actually tells you

[05:43:30] hang on this rally is going to fizzle

[05:43:32] off because the volume is falling off

[05:43:34] while the stock price is rallying and

[05:43:36] then we entered this period of kind of

[05:43:40] indecision where the sellers and the

[05:43:42] buyers are fighting with each other and

[05:43:45] we form this pattern of these three

[05:43:47] bottoms and therefore the bias won on

[05:43:50] that score now let me get rid of this

[05:43:52] green line here because the next pattern

[05:43:55] that is basically the opposite of that

[05:43:57] is a triple top and a triple top is

[05:44:00] exactly the opposite you just sort of

[05:44:01] flip it around and as is very very

[05:44:04] convenient here thank you neo um we have

[05:44:07] that here we have here is one here is

[05:44:10] two and here is number three so let me

[05:44:13] also write that here one

[05:44:15] two and three so you have exactly the

[05:44:19] opposite pattern to what we saw over

[05:44:21] here and what does that tell you well it

[05:44:24] says says to you exactly that that the

[05:44:26] trend is being reversed but what was our

[05:44:30] Trend the trend is what happens before

[05:44:32] top number one so we were on an upward

[05:44:36] Trend here where was previously from the

[05:44:38] previous pattern our Trend was a

[05:44:40] downward Trend right that one there so

[05:44:42] I'm going to delete that line here so I

[05:44:44] don't confuse you so that was a downward

[05:44:47] Trend in fact let me make that red so

[05:44:50] it's clear whereas now over here we are

[05:44:53] in an upward Trend and we have one high

[05:44:59] we struggle down to here we manag to

[05:45:02] Rally back up again the buyers are be

[05:45:04] feeling rather bullish it doesn't quite

[05:45:05] work out we go up to the third one and

[05:45:08] that is when the buyers basically throw

[05:45:10] in the towel and you see this you know

[05:45:13] pretty substantial selloff in in this

[05:45:16] direction here and that's precisely what

[05:45:19] what what the pattern predicts so the

[05:45:20] pattern here it was quite unusual

[05:45:22] actually that you have this pattern

[05:45:23] happened here like that but some stocks

[05:45:25] are susceptible to these patterns once

[05:45:27] you've identified a pattern in one stock

[05:45:29] quite often you see it reoccurring quite

[05:45:31] a lot now the interesting thing is that

[05:45:35] as live as I'm recording this here in

[05:45:37] the um sort of mid-end of April you can

[05:45:40] actually see possibly the same thing

[05:45:43] happening again down here we have one

[05:45:45] dip we have two dips I'm not going to

[05:45:47] put in the third dip and why not now you

[05:45:50] might think this is a case of one two

[05:45:52] three but you haven't got three yet you

[05:45:55] know why because well I what if this

[05:45:59] goes further south uh that's the

[05:46:01] possibility right the possibility is

[05:46:02] that it goes further south which in

[05:46:05] which case you your third dip wasn't

[05:46:08] really a bottom it was just a falling

[05:46:11] knife so to speak so you have to kind of

[05:46:13] allow a little bit for this to sort of

[05:46:16] pattern its way back up here um now you

[05:46:18] might ask how far there isn't really a

[05:46:21] hard and fast rule on that I mean

[05:46:23] putting some trend lines in I think does

[05:46:25] help so you know that was is sort of our

[05:46:29] trend line from the second bottom the

[05:46:30] moment we are we are kind of here so

[05:46:32] perhaps if it drops below a horizontal

[05:46:36] line here um because it has already

[05:46:39] dropped below this kind of pattern here

[05:46:42] that is when you would say well I'm I'm

[05:46:43] kind of giving up on this triple bottom

[05:46:45] slightly at least you have to wait for

[05:46:47] it to um you know it it could be a lower

[05:46:51] bottom and then it could shoot back up

[05:46:53] in which case I would wait for it to

[05:46:55] cross at least the level of the second

[05:46:57] bottom here so I would wait at least for

[05:47:00] it to um to sort of stop at at this

[05:47:03] level there and that is when I would

[05:47:05] call it a rally

[05:47:07] as a predictor very very dangerous thing

[05:47:10] to do I think is to predict the

[05:47:13] predicting indicators it tends to land

[05:47:15] you very much on hot water so don't

[05:47:17] think I looks almost like that therefore

[05:47:19] it's going to be like that no no it

[05:47:20] could go either way at that point still

[05:47:22] it's about 50/50 so really it's it's

[05:47:25] it's important to have a little bit of

[05:47:26] patience um um so what's a summary here

[05:47:31] basically um the triple bottom as we

[05:47:33] have here and the triple toop here at

[05:47:35] the top they basically signify that an

[05:47:38] established trend is weakening it's

[05:47:40] changing there is that power struggle up

[05:47:42] and down three times and you have a

[05:47:45] shift in in this case where you have

[05:47:47] bottoms from sellers to buyers so let me

[05:47:51] also write that in here so the this is

[05:47:54] the bottom right and that basically

[05:47:55] means you are moving from sellers to

[05:48:00] buyers and then you get that rally in

[05:48:02] the opposite in this case here where you

[05:48:05] have a triple top you have a um a move

[05:48:09] from buers because we are previously a

[05:48:11] green rally you are basically moving on

[05:48:14] to Sellers and this one down here is

[05:48:18] it's potentially heading in that

[05:48:19] direction where we are going to see the

[05:48:21] trend reverse but it's a potential so I

[05:48:24] I personally wouldn't act on it I've

[05:48:26] made that mistake before and I've always

[05:48:28] regretted it so now I I am a little bit

[05:48:30] more patient it's kind of taught me that

[05:48:33] um and what you typically also see

[05:48:36] that's the the the why the volume is

[05:48:38] important to to watch is when we have

[05:48:42] the rally up here the green rally you

[05:48:43] can see our volume increases at the same

[05:48:46] time when we have that triple top or

[05:48:48] triple bottom sector our volume tends to

[05:48:52] be rather flattish right it's probably

[05:48:54] actually even less than that it's sort

[05:48:55] of down here and then as you are selling

[05:48:58] off as you get that major Trend reversal

[05:49:01] you get volumes increasing and then when

[05:49:04] the volume once again falls off uh that

[05:49:09] is when you get that that sort of

[05:49:11] sideways struggle and then here again

[05:49:13] volume's pretty flat so you tend to see

[05:49:15] that kind of pattern um at the same time

[05:49:18] so watching volume is an incredibly

[05:49:21] powerful tool in addition to the real

[05:49:25] indicators above or the patterns above

[05:49:28] and I think making sure that you

[05:49:29] understand both of them and look at both

[05:49:30] of them quite frankly a chart without

[05:49:33] the volume turned on is is is is near

[05:49:35] near useless so always turn that on guys

[05:49:38] that is super super important so there

[05:49:39] we have it um now I would say to you

[05:49:41] find some of these um these these triple

[05:49:44] chops in Bottoms uh certainly in the

[05:49:47] tech space if you look at sort of uh

[05:49:50] November 2020 to March April 2021 you'll

[05:49:54] find quite a few of these so see if you

[05:49:57] can spot one of two of them and see if

[05:49:59] you can draw them in and therefore think

[05:50:01] about what that would mean for where

[05:50:04] would you have bought and sold and just

[05:50:07] you can sort of you know write down okay

[05:50:11] it gave me that indicator here so

[05:50:13] perhaps I would have sold once I was

[05:50:16] really clear that it was a triple top so

[05:50:19] I would have sold somewhere along here

[05:50:21] the 56 line uh and then where would I be

[05:50:23] getting out you know where is it telling

[05:50:25] me that signal or getting in rather if

[05:50:27] you're not short selling to just so you

[05:50:30] can you can write out a couple of kind

[05:50:32] of hypothetical trades and just see well

[05:50:35] am I just speculating here on hindsight

[05:50:37] or could the facts at the time have

[05:50:40] actually told me that so it depends

[05:50:43] exactly on when you trade a little bit

[05:50:45] on how bullish you are so some people

[05:50:49] let's just zoom in again here on the

[05:50:52] triple bottom which is perhaps the more

[05:50:54] common pattern of the two um some people

[05:50:58] will wait for the last bottom to go up

[05:51:03] again at least to the previous top so it

[05:51:06] means you can put a line in here

[05:51:07] horizontally that green line and then

[05:51:09] you would have traded up here you would

[05:51:11] have bought in at say 4980 or

[05:51:13] thereabouts rather than buying just as

[05:51:17] that scrapped up if you are a bit more

[05:51:19] of a of a risk taker you could of course

[05:51:21] also have bought a few dollars earlier

[05:51:23] but I think drawing in these um these

[05:51:25] kind of horizontal lines or

[05:51:28] actually the the the sort of triangle

[05:51:31] patterns and we're going to get to that

[05:51:32] that would have been the other place to

[05:51:33] buy so I think really here from an

[05:51:35] indicator point of view you had two

[05:51:37] options to buy in here either it was

[05:51:39] here where it crosses the green line or

[05:51:42] it would have been here where it crosses

[05:51:45] our triangle line and and both obviously

[05:51:48] valid strategies ones is a little bit

[05:51:50] more conservative than the

[05:51:51] other as I say we're going to look at

[05:51:53] some of those more in the pre next

[05:51:55] lesson so guys uh do share with the

[05:51:57] community uh what your uh what you found

[05:52:00] say we see where you've spotted some

[05:52:02] triple tops triple bottoms perhaps

[05:52:04] you've spotted sort of double bottoms

[05:52:06] and double tops and they're actually

[05:52:08] also useful and valid and see if you're

[05:52:10] going to find the third one down the

[05:52:12] road so Shar some screenshots of that

[05:52:14] with our community guys for the course

[05:52:17] I'm sure a lot of people would find that

[05:52:18] quite interesting we're looking at

[05:52:20] another one of the more popular art

[05:52:23] patterns that you'll hear people talk

[05:52:24] about quite a lot and again it's very

[05:52:26] good at predicting Trend reversals both

[05:52:29] in both directions so it's going to is

[05:52:30] quite a useful one and what is it called

[05:52:32] it's called Head and Shoulders

[05:52:40] and that has nothing to do with with

[05:52:42] perfume with with shampoo rather it has

[05:52:46] more to do with a particular pattern

[05:52:48] that looks a little bit like a Head and

[05:52:49] Shoulder I'm looking here at the by do

[05:52:51] chart for no particular reason other

[05:52:53] than I can find here a fairly clean

[05:52:56] looking Head and Shoulder and I will

[05:52:58] show you a couple of others as well that

[05:52:59] are perhaps a little bit less clean

[05:53:01] after that because in in theory um you

[05:53:04] know these patterns are always very very

[05:53:06] clear and and by clear cut I mean a Head

[05:53:09] and Shoulder would look something like

[05:53:10] that then a bigger head maybe make that

[05:53:14] zigzag so you do that you do that and

[05:53:17] then you have a shoulder so you have

[05:53:19] here the left shoulder you have here the

[05:53:22] right shoulder and in the middle you

[05:53:24] have the head that's kind of the

[05:53:26] theory in reality charts very very

[05:53:30] rarely look that perfect so what I mean

[05:53:32] by perfect is that here the Peaks are

[05:53:35] pretty much at the same level

[05:53:37] as are these two the same same level

[05:53:40] exactly that very rarely happens in the

[05:53:42] real world you will see them a little

[05:53:44] bit skewed so you have a slightly

[05:53:46] hunched Head and Shoulder or you know

[05:53:48] somebody who needs to go and fix their

[05:53:50] back or shoulders or something a Taylor

[05:53:53] wor worst nightmare basically so this is

[05:53:55] a pretty clean one here and can you see

[05:53:57] it I think you might be able to you can

[05:53:59] see here left

[05:54:01] shoulder

[05:54:03] head right shoulder right so

[05:54:07] left

[05:54:09] head and right shoulder um over there

[05:54:16] um why is it not quite as perfect as I'd

[05:54:19] like it to be because if you if I draw a

[05:54:22] line in here horizontally where the left

[05:54:26] shoulder has its high point over here

[05:54:31] where's my

[05:54:32] arrow over there in an Ideal World the

[05:54:35] right shoulder would be a exactly at the

[05:54:36] same level but as I say that very very

[05:54:38] rarely happens so you have to sort of

[05:54:40] take it as it comes and be a little bit

[05:54:43] more forgiving with charts it's still

[05:54:45] the same valid pattern here so that's

[05:54:47] the right shoulder and then of course up

[05:54:49] here is the is the head so what really

[05:54:51] happens well what happens is that you

[05:54:54] have a long bullish Trend and that is

[05:54:58] here a long bullish Trend right that is

[05:55:01] the bull Trend me find a smaller pen so

[05:55:05] here you have

[05:55:08] basically

[05:55:09] your full

[05:55:13] run you can such b make that out um and

[05:55:17] it goes up to a peak the price then

[05:55:21] declines slightly down to here in this

[05:55:23] case to down to 213 and it forms this

[05:55:26] trough here that's the first step right

[05:55:28] so that way we formed our shoulder here

[05:55:31] this is our shoulder the price then

[05:55:34] rises again fairly sub substantially

[05:55:37] above this peak here so that's our first

[05:55:40] Peak we then have this rally again to

[05:55:42] the top and that is basically caused by

[05:55:46] buyers just going no no no keep keep

[05:55:48] buying this keep pushing this has been

[05:55:50] going up for so long I do not believe

[05:55:52] that this can tank let's keep pushing it

[05:55:55] um and it causes this new Peak here at

[05:55:58] the

[05:55:59] top however then there is a selloff a

[05:56:03] bigger selloff than the first one so

[05:56:05] that's what forms our head here right so

[05:56:07] this up here is basically our head you

[05:56:09] could put some eyes in here if you

[05:56:11] wanted to making a oneeyed monster wow

[05:56:15] why let go let

[05:56:16] go um why does it do that sometimes um

[05:56:20] anyway so my attempt of dra drawing

[05:56:22] drawing a a a a laughing man did not

[05:56:25] succeed but you you you see the point

[05:56:27] this is here our head and then over here

[05:56:30] we get our next shoulder so there you

[05:56:32] have a second attempt by people who just

[05:56:35] do not want to believe and typically you

[05:56:37] have the two lows of basically your neck

[05:56:43] um line here at the same more or less

[05:56:46] the same line so we we have that here if

[05:56:49] I put a trend line to connect these two

[05:56:52] you can see that is almost a horizontal

[05:56:55] line I mean slightly off but almost

[05:56:56] horizontal um and and that is again

[05:56:59] typically what you see to form the head

[05:57:02] you then have another attempt people are

[05:57:03] thinking well that's support surely

[05:57:05] we're going to have to Rally up again

[05:57:06] and then your right shoulder rallies up

[05:57:09] to about the same height as the left

[05:57:11] shoulder sometimes a little bit higher

[05:57:13] sometimes a little bit lower in a

[05:57:14] perfect world that would have been

[05:57:15] exactly here but it it wasn't and that

[05:57:18] is basically um then it sells off again

[05:57:23] and we again hit

[05:57:26] this this line here and that is really

[05:57:29] when we give up or yeah you know when we

[05:57:33] really see that the the momentum is is

[05:57:35] changing very

[05:57:37] fundamentally so it's it's a real

[05:57:40] momentum play it is really an indicator

[05:57:44] that well you know things have changed

[05:57:47] the Bull Run is completely over so

[05:57:51] basically the Bulls um give up the Bears

[05:57:54] defeat them on on on the third attempt

[05:57:57] so to speak um and that is exactly what

[05:58:00] this pattern is and it's fairly common

[05:58:01] you see this quite a lot especially with

[05:58:03] stocks have had a long ball run um now

[05:58:07] there is

[05:58:08] also this is of course this bullish to

[05:58:10] bearish sentiment there is also the

[05:58:14] opposite of this and that literally

[05:58:15] looks flipped upside down uh I don't

[05:58:19] know if I I don't think I can show you

[05:58:20] one of those exactly but let's have

[05:58:23] another look at um I think it was

[05:58:26] Palante here that has a similar

[05:58:28] situation here so some people have also

[05:58:30] with Palante here here been calling a

[05:58:32] Head and Shoulder it's a little bit

[05:58:33] harder to spot I would say but you can

[05:58:36] if you want to so this is your your bull

[05:58:38] run up here this is your B for Bull Run

[05:58:42] and then you

[05:58:43] form a shoulder here you form a head up

[05:58:48] here and then you form your right

[05:58:50] shoulder here so that should then

[05:58:52] indicate to you that this bull run is

[05:58:55] basically over it's not as clean cut

[05:58:58] because you can see a few other dips in

[05:58:59] here so it's a little bit harder to spot

[05:59:02] and it isn't just harder to spot I think

[05:59:04] the cleaner they are the more kind of

[05:59:06] powerful they are in in a way um but it

[05:59:10] is it is still arguably a Head and

[05:59:13] Shoulder um the other thing you will see

[05:59:16] is you will also see there's changes in

[05:59:18] volume happening um so you see down here

[05:59:22] the last so we have volume down here in

[05:59:26] the real bull market it goes up you then

[05:59:29] see it falling off you see it

[05:59:33] flattening out over here and you see

[05:59:37] this last Dash effort at really getting

[05:59:40] a rally going again uh that sort of

[05:59:42] Fizzles out um and then again uh when we

[05:59:46] see when you get the actual Trend

[05:59:48] reversal we get the the the head falling

[05:59:52] off we had a lot of volume here which is

[05:59:55] you know over here and then again volume

[05:59:58] flattening out down the road so it

[06:00:01] always do watch the volume as well so

[06:00:03] let me show you that again with by do

[06:00:06] where did by do go you can yeah you can

[06:00:10] see that uh yeah I can think you can see

[06:00:12] that somewhat you know the average

[06:00:15] volume in the bull run here was sort of

[06:00:17] there uh whereas after it hits the first

[06:00:20] shoulder you can see the volume does

[06:00:23] fall off quite a bit then there is this

[06:00:25] attempt here to form another rally it

[06:00:28] doesn't really quite last and then when

[06:00:30] we do fall off we get you know bam this

[06:00:33] massive Spike now that was a little bit

[06:00:34] of an event driven event 26th of March

[06:00:37] by due selling of that AOS collapsing

[06:00:40] but you know the the pattern still held

[06:00:43] so despite a huge massive event driven

[06:00:45] thing happening in the real world you

[06:00:47] still see this uh this shoulder pattern

[06:00:49] so again your homework guys for today

[06:00:52] find some Head and Shoulder patterns

[06:00:54] find some upside down ones as well they

[06:00:57] look exactly the same just upside down

[06:00:59] and you can just troll s through some

[06:01:01] stocks basically anything with a decent

[06:01:03] trading history and see if you can find

[06:01:06] something like that um it sometimes you

[06:01:09] have to look at them a little bit harder

[06:01:11] to find something here's Apple for

[06:01:13] example can we find something like that

[06:01:14] with apple um not on a day chart for

[06:01:18] some time for example so you do need to

[06:01:21] watch out for it now some people might

[06:01:24] think that this here is a head and

[06:01:27] shoulder

[06:01:28] pattern but it isn't because the head is

[06:01:31] too small the head needs to be bigger

[06:01:33] than the shoulders that is not a valid

[06:01:35] head and shoulder pattern so don't just

[06:01:37] sort of start seeing them everywhere

[06:01:39] really see it needs to be that kind of

[06:01:41] core pattern where the head is taller so

[06:01:44] I can't find what an apple as you can

[06:01:45] see here it needs to be basically this

[06:01:47] pattern here I've drawn more or less

[06:01:50] ideally with these highs and low lines

[06:01:53] I've put in here at those levels but as

[06:01:54] I say it can be a bit skewed you know

[06:01:56] the chap can be like this or like that

[06:01:58] that is completely fine as long as the

[06:02:00] shoulders are below the Peaks today is a

[06:02:02] bit of an advanced Head and Shoulder

[06:02:04] class we to look at actually how you

[06:02:07] trade the pattern how does it make sense

[06:02:09] and for that I found an inverse one on

[06:02:11] the spy and you might be looking at this

[06:02:14] thinking like I can't see it what I one

[06:02:17] thing I like to do I think it makes it

[06:02:18] easier is make a line chart sometimes

[06:02:21] and then I think you might start to see

[06:02:24] what I'm looking at here done some

[06:02:26] annotations already there can you see it

[06:02:28] it's an inverse Head and Shoulder rather

[06:02:31] crudely drawn in by myself uh and if we

[06:02:34] go back to the candles here I think you

[06:02:37] can still make it out so you have the

[06:02:39] neckline here which is basically

[06:02:41] connecting the two high points now and

[06:02:44] if you if you look at this actual

[06:02:47] pattern here you can see coming down

[06:02:50] from above we have a selloff uh pattern

[06:02:54] and that is now reversing into a into a

[06:02:59] more bullish sentiment here on the right

[06:03:01] and this Head and Shoulder inverse is

[06:03:04] what makes that happen so how does it

[06:03:06] make that happen well and how would we

[06:03:09] trade it so it's important to draw in

[06:03:11] the neckline here which is always in

[06:03:14] this case the high point of of that

[06:03:17] shoulder

[06:03:18] um U yeah I mean in this case the as you

[06:03:22] can see the it isn't a perfect line so

[06:03:26] you might be thinking well shouldn't it

[06:03:27] be like that because he's a bit crooked

[06:03:30] uh yes possibly you you could possibly

[06:03:33] do this if you wanted to be a bit more

[06:03:35] cautious you could say he just very

[06:03:36] crooked and that is actually the

[06:03:38] neckline but it's still a head and

[06:03:40] shoulder pattern there's nothing perfect

[06:03:42] about it you could even do it do it like

[06:03:44] that if you wanted to exaggerate it but

[06:03:46] either way the pattern is fundamentally

[06:03:49] there then you have two shoulder low

[06:03:51] points on the left here and on the right

[06:03:54] and how do you how do you trade it

[06:03:55] you're wondering well really what we do

[06:03:58] is the most important thing is always

[06:04:00] wait for this pattern to establish

[06:04:02] itself fully don't trade halfway through

[06:04:06] you can start to write down the prices

[06:04:08] you want to trade at and this how it

[06:04:10] would actually play out but don't do the

[06:04:12] trade until it's actually been

[06:04:14] established as that pattern because you

[06:04:16] don't always get what you expect with

[06:04:18] these patterns so um what we do is we

[06:04:20] use the um the price difference between

[06:04:23] the head low point and the low point of

[06:04:27] either shoulder and the way you can do

[06:04:29] that again here in trading view is click

[06:04:31] on this little measuring chart and then

[06:04:33] go to the top of that and then I would

[06:04:36] conservative as I am go for the higher

[06:04:39] shoulder or in this case lower shoulder

[06:04:41] and you can see here the difference is

[06:04:44] 3.51 whereas to the right shoulder the

[06:04:46] difference is 4.68 so it depends on how

[06:04:48] bullish you are I would normally go for

[06:04:51] the smaller one so basically let call

[06:04:52] that a 3.5 is our difference where do we

[06:04:56] trade it from we trade it from the

[06:04:58] neckline so we added on top of the

[06:05:00] neckline so again if you want to be more

[06:05:03] cautious

[06:05:05] you would uh add it on on top of the uh

[06:05:10] well if you added it here by the time

[06:05:13] you are up here so the the right

[06:05:15] neckline is 110 so you want to trade up

[06:05:17] to

[06:05:18] 113.5 then you wouldn't have much of a

[06:05:21] trade if you did that up here which is

[06:05:24] why in an Ideal World this would be a

[06:05:26] smoother Head and Shoulder but say we

[06:05:28] added to the left side say we take this

[06:05:30] point over here the 112 and then 112 +

[06:05:34] 3.5 takes to 1 158

[06:05:39] 1158 so that would be our exit so we

[06:05:44] would buy in at the neckline which in

[06:05:47] this

[06:05:48] case arguably I wouldn't pick that one

[06:05:51] because you wouldn't have had your uh

[06:05:53] pattern established fully so I would

[06:05:55] draw this horizontal line across from

[06:05:58] what is essentially the neckline and

[06:06:00] trade here so I'm going to write that in

[06:06:03] for you uh just to make that really so

[06:06:05] that neckline is sitting at

[06:06:08] 112

[06:06:10] So you take the neckline

[06:06:16] 112 and

[06:06:19] add

[06:06:21] and

[06:06:23] add

[06:06:25] difference between top of head and top

[06:06:30] of shoulder um

[06:06:36] or if

[06:06:38] inverse uh Head and

[06:06:42] Shoulder

[06:06:43] um basically bottom of

[06:06:48] head and bottom of shoulder difference

[06:06:54] just what we looking at here so I'm

[06:06:56] going to put that in here you can uh

[06:06:59] maybe take a screenshot of that or

[06:07:00] something that doesn't come out

[06:07:01] particularly well does it why does it do

[06:07:04] that okay so we're going to have to hit

[06:07:07] some some of these in here so it makes a

[06:07:10] little bit more sense so here is our

[06:07:14] explanation therefore what we have to do

[06:07:18] is take this line here at

[06:07:21] 112 and I'm going to put an arrow up

[06:07:23] here so that 112

[06:07:25] and let me get

[06:07:28] another another one of

[06:07:30] these and write

[06:07:33] down we're going to do 112

[06:07:36] plus

[06:07:39] 3.5 um so we're going to buy at

[06:07:46] 112 and

[06:07:50] sell

[06:07:51] at

[06:07:53] 112 plus 3.5 I.E

[06:07:57] 115.5 and that will be our profit on

[06:07:59] this deal and you might think well

[06:08:00] that's not the greatest profit in the

[06:08:01] world but it serves to illustrate this

[06:08:03] purpose here so we are selling at 112

[06:08:06] plus 3.5 and 3.5 is the difference here

[06:08:10] between this top and the higher or the

[06:08:14] lower shoulder in this case and when

[06:08:16] would we get to

[06:08:18] 115.5 well not anytime that soon but you

[06:08:22] will get there over here you get to it

[06:08:25] um sort of up

[06:08:27] here basically up here 115.5

[06:08:36] this here is our then

[06:08:42] exit let me put that up

[06:08:45] here so this is where we exit the

[06:08:47] trade at there so we have made a nice

[06:08:50] profit I mean not the greatest profit in

[06:08:51] the world I I grant you that 2% or so

[06:08:55] but but you know that is essentially the

[06:08:57] the conservative way of trading these

[06:09:00] now if you are of course particularly

[06:09:01] long and bullish on the stock rather

[06:09:03] than a speculative Trader you can so use

[06:09:05] it as an entry signal and simply hold on

[06:09:07] to it that is also of course a valid way

[06:09:09] of doing it now if you wanted to set a

[06:09:12] stop loss there are two options really

[06:09:14] if you are particularly cautious you'd

[06:09:16] set the stop loss at the shoulder low

[06:09:19] point so this one I'm pointing at here

[06:09:21] um that can sometimes get you out of the

[06:09:24] trade which it would have done here you

[06:09:25] wouldn't have made any money at all you

[06:09:27] can also set the stop loss at the top or

[06:09:30] rather the bottom of the head in this

[06:09:32] case here which is a little bit more of

[06:09:34] a risky but um here you have it if this

[06:09:37] was a more perfect Head and Shoulder uh

[06:09:40] then I think it would have been a more

[06:09:42] profitable trade so therefore is

[06:09:45] spotting patterns that are more perfect

[06:09:48] rather than more imperfect like this one

[06:09:51] do tend to make you more money but I

[06:09:54] hope this illustrates the point and

[06:09:56] exactly the same applies of course if

[06:09:58] you do this upside down so homework for

[06:10:01] you find one of these patterns I mean

[06:10:02] look at the previous one we looked at or

[06:10:04] any any other one and and write down

[06:10:07] where you would have bought and where

[06:10:08] you would have sold and perhaps also

[06:10:10] your stop losses and that way you start

[06:10:12] to fully understand how this trade works