Demystifying Stocks: What Are They and How Do They Work?

Stocks don’t have to be all fancy-pants and complicated, folks! Today, we’re diving into the basics of what stocks really are and how they work, all in plain English. Trust me, if you’ve ever felt like stocks are just for Wall Street big shots, you’re not alone, and I’m here to clear up that confusion. We’ll break it down like this: buying a stock is like snagging a slice of pizza – you own a piece of the action! So, whether you’re totally lost or just curious, stick around as we sprinkle some wisdom and help you build long-term confidence in your investing game. Let's get to it!

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Check the full podcast episode here

Takeaways:

• Stocks are just slices of ownership in a company, kinda like pizza slices, right?
• Don't let stocks scare you; they're simpler than they seem, trust me on this!
• Thinking of stocks as a long-term game is key; patience pays off big time.
• Owning stocks can lead to dividends, which is like getting paid just for owning a slice!
• Companies sell stocks to raise money for growth, so you’re in it together, buddy!
• Investing in stocks can create wealth over time, just gotta hang tight through the ups and downs.

Links referenced in this episode:

• financiallyconfidentchristian.com
• financiallyconfidentchristian.com/becoming

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Episode Transcript

(00:00):
I got a great question intothe show the other day. Listener
asked this said, Ralph, stockssounds so complicated. Are they really
just for Wall street experts?I feel lost when people talk about
them. You might be listeningright now. You're like, Ralph, I
am tuned out as well. As soonas I hear the word stocks, I just
lose it. But here's the goodnews in all this. Stocks are actually

(00:22):
pretty simple. And today onthe show, I want to break it down
in really simple terms. I wantto talk about what a stock is, how
stocks work in just plainEnglish simple terms, and how they
can actually help you buildlong term confidence. So if you've
ever been confused withstocks, this is the show for you.
This is Financially ConfidentChristian, your daily dose of gospel,

(00:43):
grounded insight and faithdriven tips to help you break the
cycle of financial shame withconfidence. Hi there. Welcome to
Financially ConfidentChristian. I'm Ralph and I'm super
excited that you've chosen tojoin me today. Now, if you missed
yesterday's show, we talkedabout investment horizons versus
long term versus short termand we talked about how to select

(01:05):
the best option for yoursituation. If you missed any of our
shows, I want to encourageyou. You can go right to financiallyconfidentchristian.com
and you can see our entireepisode of prior shows. Now listen,
for decades I've sat withfamilies, I've sat with small business
owners, and I've sat withindividuals who really felt intimidated

(01:26):
by the word stock. Soon theyheard the word stock. They're like,
Ralph, I'm lost. I have noidea what you're talking about. I've
seen their eyes glaze over.I've seen them get lost in all the
jargon. But at the same time,and this is the really reassuring
part, I've seen theirconfidences rise. It was awesome
when they finally understoodstocks in very simple terms. Because

(01:47):
here's the truth truth bomb.Right now you don't need a finance
degree. You just need someclarity. And I remember one particular
story. This young dad came into meet with me and he said, Ralph,
I really want to get startedin investing in stocks. And I said
to him, okay, here's thesimplest analysis I can give you.
Imagine you're at yourfavorite pizza shop. He's like, man,

(02:08):
I love some pizza. I say, metoo. I can eat some pizza. And I
said, but imagine yourfavorite pizza shop decides to sell
slices of ownership. Justpicture that pizza in your head.
And that pizza shop says,slice is a stock ownership in that
company. Well then when youbuy one slice, you own a piece of
the shop. You own a piece ofthat whole pie. It's funny, he smiled

(02:28):
back at me and said, that'sit. That's all that stocks are. I
said, yes, that's exactly whatit is. It's really that simple. So
let's break it down a littlefurther. The first thing I want to
tell you, real simple terms, astock is simply ownership. When you
buy a stock, you literally owna piece of the company. Think about
that pizza. You own a piece ofthat pie. So if the company grows,

(02:50):
if the company becomes moreprofitable, your piece becomes more
valuable. But here's the otherside of that. If the company struggles,
guess what, your piece mightshrink. Yes, you might lose your
money. So that's where we haveto start. Second thing you might
be saying, Ralph, okay, that'sgreat, but why would a company want
to sell stock in theircompany? Well, here's the reason

(03:10):
for a very simple terms.Companies sell stock to raise money
generally. Maybe they wantmoney to expand, maybe they want
to develop new products, ormaybe they just want to hire more
employees. Maybe the guyrunning the pizza oven says, look,
I'm tired of working 80 hoursa week, Ralph, I've got to bring
somebody on. Well, one of theways you can do that is actually
sell ownership in yourcompany. So when you buy that stock,

(03:32):
when you buy that piece ofpizza, you're partnering with that
company. You're partneringwith them in their idea or their
anticipation of growth. Sothen you're saying, okay, I get it,
Ralph, I own a piece of thepie. They're selling it because they
want to grow. But how do Ibenefit from that? Well, here's the
real simple way you benefitfrom it. If the stock price goes
up, which it can, if thebusiness expands, you make more money.

(03:54):
In addition to that, a lot ofcompanies pay what's called a dividend.
That's actually a cash rewardthat they pay you, maybe quarterly,
sometimes annually, for beinga stockholder in that company. It's
really that simple. You own apiece of the pie. They're doing it
because they want to raisemoney and then they pay you or the
stock appreciates or grows invalue. And here's why it's really

(04:16):
so important to understandstocks. They have a huge long term
advantage. And this way. Everlisten to market gurus or those financial
analysts on the tv? Historyhas shown decade after decade that
stocks create wealth forordinary people just like you. Yes,
they do bounce up and down.You have to understand that. You
got to have a stomach for it.I talked about a little Bit about

(04:37):
that yesterday in your risktolerances. But over the long run,
you can look at graphs and seethis. They consistently have grown.
Now, you know I talk aboutBible and I talk about faith on this
show. So let's tie this intothe scriptures. Let's look at the
book of Ecclesiastes, chapter11, verse 2. It says this, invest

(04:57):
in seven ventures. Yes. Ineight, you do not know what disaster
may come upon the land. And Ithought that was perfect for today's
explanation. Really simple,plain English. I have people say
to me all the time, Ralph, Ilove listening to your show because
you put it in terms that I canunderstand and see. Even the Bible
in the book of Ecclesiastes.When it talks about investing in

(05:18):
seven ventures. Yes. In eight,it's teaching us diversification.
Well, stocks do exactly that.You don't buy all the same stock
in the same company. If thatpizza shop decides to go belly up,
you might own something else.You don't put all your hope in one
place. You spread it outwisely. So that's my quick 1, 2,
3 on stock ownership. Howabout we pray together? Father God,

(05:39):
we just thank You forreminding us that wisdom often comes
in really simple terms. SoLord, help us to see stocks not as
something scary, but Lord,help us to see them as an opportunity
to steward wisely. We ask thatYou would give us patience to think
long term. Give us faith totrust in Your provision, Lord, and
most of all, give usdiscernment to invest with peace.

(06:00):
And in Jesus' name we praythis. Amen. Listen, if stocks have
ever felt mysterious to you, Iwant to help remove that fear. I
just finished writing my thirdbook. It's called How to Become a
Financially ConfidentChristian. And I would love to share
that book with you absolutelyfree, no strings attached. Just go
to this website, go tofinanciallyconfidentchristian.com/becoming you

(06:20):
put your name, your emailaddress in there and bang. You can
get a copy of my bookabsolutely free. You download it
right from there. It's filledwith really simple truths to help
you grow both your faith andyour finances. That's what I'm all
about here, building yourfaith and your finances. Now, thank
you for joining me today. Nowdon't forget to join me tomorrow.
On tomorrow's show, we'regoing to talk about bonds. Yes, not

(06:42):
Barry Bonds, but investing inbonds, the safe bet for your portfolio.
Because the truth is stocksbring growth, but bonds bring stability.
So you don't want to misstomorrow's show. And together we
can work to balance thatportfolio out together. Make sure
you don't miss tomorrow'sshow. Now, today, I want to encourage
you, go out there and be thatfinancially confident Christian.

(07:02):
I believe in you. But moreimportantly than any of those things,
God believes in you. Stayfinancially savvy, God bless you,
and you have a great day today.