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Trading 101: How Does a Stock Make You Money? - YouTube
Channel: ClayTrader
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I've done a video on how the stock
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market works but how exactly does a
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stock itself work what makes it go up
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what makes it go down that's exactly
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what we're going to tackle in today's
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video now these are some of my favorite
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videos because I can take no credit for
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actually coming up with this idea
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because this is a perfect example of
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something where you know I've been
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trading for a while I've been in the
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market for a while so what seems obvious
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to me is not obvious to somebody that's
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brand-new and as I've said in past
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videos hey if you have suggestions if
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you have a question let me know and I
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would lino gladly do a video on it so
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that's what I'm going to do here got a
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question on YouTube and I thought you
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know what that's actually a great
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comment and something where now that I
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stop and think about it now that I put
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myself in a newer trader shoes or just
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somebody new to the market yeah that
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doesn't quite make sense right out of
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the get-go so I want to explain exactly
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that so let's first go over this youtube
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comment so Yakko my taco great name by
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the way says this may be a stupid
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question
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but why would anybody invest in a share
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unless they make some sort of dividend
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on the money they invested you say to
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sell their share for a higher profit but
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why would anyone want another shares in
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the first place if there's no dividend
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that no one would invest essentially you
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just be giving your money away in the
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world of the stock market and in the
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world of stocks as you'll say there's
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really two ways to make money and the
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two ways are through dividends which
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this person is referring to and then the
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second is growth and I'll explain more
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on that now as far as dividends I'll put
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a link in the description box below but
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I've already done a video on you know
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what a dividend is so you can go and
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watch that video if you're not familiar
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with what a dividend is but that is the
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one way that you can make money with
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stocks now this person has already said
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well what happens if there is no
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dividend then how the heck why does it
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make sense to buy a stock how does a
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stock actually make you money and that's
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that's a very good question and the
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answer if you know in trading lingo an
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investing lingo would be well you would
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have a growth stock and growth means
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exactly that you want something to grow
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or in stock market lingo you want it to
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increase
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value so if you have a stock here and
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again you buy for let's just say five
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dollars you want this too as time goes
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by increase in value or you want it to
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grow in value okay so what is going to
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actually make that grow in value well
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let's just take a look at a very famous
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company out there that I think many
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people are familiar with and Apple so
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Apple is known as a APL in the world of
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stocks that would be known as its ticker
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symbol it's like an abbreviation but
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Apple let's look at Apple and Apple now
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does pay a dividend but let's just
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pretend that they didn't pay a dividend
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at all so why in the world like this
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person is saying would anybody ever want
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to buy this stock I'm it doesn't pay any
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sort of dividend so what's the point
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well the point here is going back to the
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whole growth argument that people
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believe that over time Apple stock price
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is going to grow in value it's going to
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increase in value so how exactly does
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the stock operate in that function what
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is going to get this to go from five
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dollars up to you know whatever price
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you want you can fill in the blank but
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what's going to cause this to grow well
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let's just kind of go through a quick
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history of Apple and this is not like
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this is a broad summary so don't be like
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hey well I'm an apple historian and you
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actually miss this I'm just cut me some
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slack okay I'm just trying to prove a
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point
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so Apple used to just have you know
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computers so there's the little keyboard
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there and they would sell computers and
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what would this do well selling
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computers would bring money into the
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company so hey good that brought money
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into the company
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now one money's coming into the company
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they're going to be making you know
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revenue they're going to be making
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profits and the more profits a company
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makes that's good that means that
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they're more valuable and the more
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valuable something becomes because
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they're making a lot of sales there's
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many people saying you know what I think
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that stock is going to go up so they're
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going to buy stock and when they're
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buying stock it is it's going to start
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to grow in value so maybe it started at
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five so
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because they're selling computers you
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know it's going to help push the price
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up to you know right around here so
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maybe at that point you know let's just
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say it's seven dollars at that point so
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there we go they didn't ever pay a
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dividend but because they came out with
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some really cool computers because I had
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a product that people wanted people
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bought that product because people were
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buying that product that was putting
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money into Apple's bank account and
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people are saying WOW Apple's getting a
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lot of money because they have a great
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product I want to buy some of their
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stock and when people are buying a stock
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that means the prices are going to be
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heading up but growth how is it going to
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keep growing because at a point
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everybody's going to have these great
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you know computers it's going to be
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fantastic and then would a tap will do
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over the history of time well they had
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these little things and they had little
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buttons down here the iPod who remembers
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the iPod they came out with those so now
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what do they have well they're not only
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growing as a company because instead of
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one product they have two products and
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depending on how old you are the iPod
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thing was a huge boom so once again that
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led to more money into the Apple as a
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company now Apple has a stock because
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Apple has more money their stock Wow
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these iPods are awesome yeah the
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computers are cool and they still are
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cool put the iPod awesome everybody's
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buying well jeez I think apples I want
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to get some of that Apple stock so
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people continue to buy that Apple stock
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it was it seven so because of the iPod
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let's just say it's going up to here
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maybe that's not worth ten dollars okay
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well computers are out there iPhones or
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iPods out there I just let the cat out
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of the bag so what was the next kind of
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big thing that Apple did well you know
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these phones you know I think we could
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get into the phone business well the
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iPhone I don't even know how to draw
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there we go we got the screen and we got
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the numbers down there I realized that
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looks like an iPod but this is the
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iPhone okay point beam they came out the
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iPhone now would have a half they have
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three products out there and unless you
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live under a rock I would assume that
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you know the iPhone was pretty popular
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so once again people are buying buying
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buying Apple as a company is getting
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more and more money into their checking
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account they're just raking in all kinds
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of money people notice this OOP saying
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wow look at all this money that Apple is
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making
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and they keep making great products you
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know I think at some point they're going
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to come out with even more great
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products what they are have people can
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speculate but the point being there's
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people there's lots of things going on
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that I want to get Apple stock so what's
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going to happen well we're just
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repeating history once again people are
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going to buy Apple stock and at this
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point it pushes it up to let's just say
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that's $15 up there and this process
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goes on and on and on a growth company
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would be one that is just they're making
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money for their investors by growing by
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innovating by coming out with new ideas
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now eventually Apple will reach a point
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and most companies reach a point where
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they have so much money they're like I
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don't know what to do all this money
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let's just pay a dividend and so at this
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point in time at least as it stands at
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the recording of this video Apple does
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still pay a dividend and some people
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would argue that Apple is not really a
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growth stock anymore but we're not going
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to get into that the point being and to
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answer this person's question how does
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the stock make people money how does
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this if there is no dividend well stock
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can increase in value what increases in
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value well companies just got to be a
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good company companies that don't
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innovate that don't have good products
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nobody's going to buy their stuff their
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company's going to start losing money
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and their stocks and go down in price
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because well they're they're not nobody
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wants to buy their products buy their
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services whatever you know it may be but
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that is how you're going to grow and now
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why would anybody want to sell well
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remember at some point in time somebody
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is going to say you know what Apple is
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great but I think I think it's done and
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I think it's done let's just say it $10
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and the big thing that you need to
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realize in the stock market is for every
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transaction somebody is right and
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somebody is wrong the person selling
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here so in our example the person
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selling they were wrong because they
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sold because I don't think it's going to
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go above 10 I mean if I thought that
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they want to be selling right so in this
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person the seller was wrong but in this
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person or in this situation the person
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that buy or that bought was actually
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right and that's just one little
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transaction in the market but that's how
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the stock market works that's how stocks
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work is what the stock keeps going up
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and up why would you sell you know well
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people may think that it's not
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go up anymore and that you know therein
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lies the great mystery of the stock
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market when do you sell a stock when do
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you buy is it safe to buy should you
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sell or should you hold these are all
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the questions that make the stock market
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so challenging because nobody knows when
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exactly it's going to stop going up or
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when it's going to stop going down and
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you know that's why I me personally that
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that's a great challenge that's what
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makes things so fun because it's it's
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all it's all a big puzzle and you have
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to do your best to dice the decipher the
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pieces of the puzzle so hopefully that
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answers your question about how a stock
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works how a stock can make you money
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especially if it's not paying you
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dividend because I've already covered
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that is well that's where it's not a
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dividend or and I should note that that
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we call it an income stock then you'd
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want to depend on a growth stock one
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that is growing and by growing as a
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company you know it's going to cause
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people to want to buy and the price will
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just keep on rising and rising as long
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as the company as a whole can keep on
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innovating and growing those revenues so
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again any sort of questions or other
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things up like this person presented
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would be great and I'll do my best to
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try to make videos on them
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I might just answer you in the youtubes
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you know comment section regardless but
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hope you found this video helpful
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definitely you know click it or click it
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like it and maybe share it if you think
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other people could benefit from it and
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check out the rest of the channel too
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and hopefully you autumn lead aside to
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