How To Read Stock Charts Like A PRO Investor (Beginner Guide)

[00:00:00] Speaker 1: Hey guys, welcome to my new series, Investing for Complete Beginners, the Joy Yang Way. This is not like your average beginner guide video that either gives you too much textbook basics or makes you feel overwhelmed and wanting to give up before you even start. My goal in this beginner investing series is to make all of you take action right after watching my tutorial. So our first tutorial is on how to read stocks. To be clear, I want to make sure that you leave this video with two actual investing skills. One, when you look up a stock chart, you know how to read it and how to make sense of it. Two, you know how to read the essential financial data about a company and its stock. And with these two skills, you will be able to have a very basic understanding of whether a stock is a good investment to buy or you should avoid it. If you are ready to learn, make sure to bookmark or save this video, take screenshots whenever you need to, and best if you can have your computer by your side to get your hands on actual practice. Oh, I forgot to mention the most important step. My editor just asked me to remind you guys, don't forget to like this video. It's a free way to support the channel and it means a lot for the hard work that we put in into this video. For this tutorial, we'll use Yahoo Finance because it's free, beginner friendly, and it shows you everything you need to know in one place. If you have your computer with you, go ahead and type finance.yahoo.com into your browser. You should see a search bar right at the top of the homepage. To look up any stock, simply type the company name or its ticker symbol. A ticker symbol is basically a short abbreviation for the company's name. For an example, AAPL is Apple and Coca-Cola is KO. And if you're searching for Canadian companies like TD Bank, you'd have to put .to at the end or Enbridge .to. Once you search, click on the correct result and it'll take you straight to the company's stock profile page. At first glance, you'll see three main areas on this page. At the very top, you'll have the current stock price and the price movement today. Right below that, you'll see a chart that visually shows the stock price's performance. And if you scroll down just a little further, you'll see some essential financial numbers about the company. Don't worry if this page looks complicated right now. By the end of this tutorial, every number and graph here will make sense. So let's quickly recap how easy that was. So step one, go to Yahoo Finance. Step two, type the stock's ticker symbol or company name into the search bar. And step three, click on the correct result to land on the company's stock profile page. Now that you know how to use Yahoo Finance, let's get into the real tutorial, how to read the stock chart. Part two, reading the one-year and five-year stock charts. Let's continue with Apple's stock page as our example. Right below the current stock price, you'll see the stock chart. By default, it usually shows the one-day price movement, but we're investing for the long term. So I want you to click on the 1Y, which means one year, and then 5Y means five years. Let's first look at the one year. This chart shows you how the stock has performed over the past 12 months. You'll notice the line moves up and down. This represents the stock price over time. Hovering your mouse over the line gives you specific dates and the exact price at that point in time. Here's what I want you to ask yourself when you're looking at the one-year chart. One, is the price generally moving upwards, downwards, or sideways? This tells you if the stock has been growing, or falling, or just staying stagnant. Number two, are there any major drops or spikes? Big sudden changes could mean that there was news or an event that affected the stock. We'll talk about this in future videos, but it's good to develop a habit of noticing these big moves now. The five-year chart gives you an even clearer picture of how stable or volatile a stock has been. When investing, we want to pick companies with a generally upward trend over the long term. Apple, for example, clearly shows steady long-term growth, despite some dips along the way. Ask yourself these questions for the five-year chart. One, does the stock show steady long-term growth? If yes, that's usually a good sign of a healthy company. Number two, did the stock bounce back after any significant dips? This shows resilience, indicating that investors regained confidence after temporary setbacks. In general, good stocks for beginners show consistent growth over time and can recover quickly from downturns. That's exactly what we want to see on a long-term stock chart. I'm trying to keep my explanations in the simplest form so that if you're completely new to the world of finance, you can still follow along my tutorial and take action right now as you're watching. Of course, there's always more to learn about investing, but the best way to start is by taking action. You won't gain experience by waiting. You need to at least start practicing now. That's why I'm giving you my favorite chart to focus on first, the one-year and the five-year charts. Remember, the one-year and five-year charts are going to be your best friends for long-term investing. Also, comment one and five below to let me know that you're actually paying attention to this pro tip. Now that you know that these charts are actually not difficult to read, let's move on to reading the essential financial numbers so you can confidently decide if the stock is worth your money. Part three, reading essential financial numbers on Yahoo Finance. Now, let's scroll down slightly below the chart. You'll see an area called summary or key statistics. These are the most essential numbers that you should know when considering a stock. Today, we'll only focus on the basics you need to confidently start investing. So please don't be afraid of numbers. I'll keep this super simple and straightforward for you. There are only four financial terms that I want you to learn in this video. The first thing to pay attention to is something called the market cap or market capitalization. This just means the total value of the company or simply put, how big the company is. A higher market cap usually means the company is stable and well-established. For beginners, it's usually safer to pick larger companies with market caps above 10 billion or we call those blue chip stocks. So there you have another pro tip. Remember, focus on stocks with market caps above 10 billion. Next, look at the P.E. ratio, which stands for price to earnings ratio. This number tells you how much investors are willing to pay for every dollar the company earns. A lower P.E. typically means the stock could be undervalued or cheap, while a higher P.E. means investors have high expectations for future growth. As a rule of thumb that I personally use is a P.E. below 15 is considered cheap or undervalued. A P.E. between 15 to 25 is above average. A P.E. above 25 means investors expect the company to grow significantly in the future. I'm putting them here all together for you to take a screenshot, so don't stress if you need time to remember these numbers. Another important number is the dividend yield. This tells you how much cash the company pays you every year. Apple, for example, pays a small dividend. Companies like TD Bank or Enbridge usually pay higher dividends. Dividends are great because they create passive income and you can reinvest that money to grow your portfolio faster. Dividend yield is my favorite financial number to look at because I'm a huge fan of dividend investing. Dividends is literally you getting paid by the company just because you're holding their shares. Not all companies reward their shareholders. So if you are interested in companies that I'm investing in, make sure you're following me on Blossom. If you haven't used Blossom, you can download this free app in the description below. Lastly, let's look at the 52-week range. This shows the highest and lowest price that the stock has been in the past year. It's useful to see where the current price is within its range. If the price is closer to the lowest point, it might be undervalued or on discount. If it's closer to the highest point, it might be expensive. To recap, when looking at these key numbers, ask yourself, does the company have a large market cap? Is the PE ratio reasonable or does it look too expensive? Does the company pay dividends? And if so, how much? What is the current price compared to its 52-week range? Again, you can take a screenshot of this recap that I put together on the screen here. If you're still with me, post your screenshots on your Instagram stories and tag me to let me know that you're learning. By now, you've learned how to quickly read the essential financial stats of a company. With practice, you'll be able to evaluate stocks in minutes and make smarter investing decisions. Next, let's wrap this up with a simple checklist so you know exactly what to look at before deciding whether a stock is a buy or a pass. Part 4, a simple checklist to decide if a stock is a buy or a pass. Now, to make your life easier, I'm going to give you a simple four-step checklist. Every time you look at a new stock, quickly go through these steps to decide if it's worth investing in. Step 1, check the long-term charts. Ask yourself, over the past five years, has the stock generally gone up? A good stock usually shows consistent growth over time. Remember, the five-year chart is your best friend here. Step 2, check the market cap. Is the market cap above $10 billion? Bigger companies are usually more stable and safer, especially if you're new to investing. Step 3, evaluate the P.E. ratio. Is the P.E. ratio reasonable? Aim for stocks with a P.E. ratio between 15 and 25. Below 50 might be undervalued and above 25 could indicate high growth expectations. Step 4, dividend yield. This is optional, but I recommend this step for anyone interested in getting more money from your investments. Does the company pay dividends? This isn't mandatory, but dividend-paying stocks reward you for holding them. And if you can use that cash to reinvest your portfolio, it'll grow faster. If a stock checks off at least three out of four of these criteria, it's probably a good investment to start with as a beginner. Here's your checklist summarized on the screen. Take a screenshot and keep it handy when you're evaluating stocks. And that's it. You've just learned exactly how to read a stock chart and evaluate the basic financial data. Investing really doesn't have to be complicated. You can bookmark this video or save it in your YouTube playlist so that you can always use this for a quick revision. Comment down below to let me know what's the next topic that you would like me to cover in the Joy Yang's beginner tutorial style. If you can't think of any, I have two options here. Let me know which one you prefer to see next. One, how to create an investing watch list or two, how to find stocks to invest in. Before you go, consider subscribing to this channel if you haven't and let me know your feedback on this tutorial format. Should I keep doing this for you guys? Let me know. And click this video over here to watch the breakdown of my entire investment portfolio. See you in the next video.