%20(YouTube%20Icon)%20(19).png)
Bridgeport Unmasked
Bridgeport Public Librarian Adam Cleri hosts talks & interviews on all things about Bridgeport, CT, the Park City!
Bridgeport Unmasked
Morningstar: the Library's Finance Database
Librarian Andre Massa joins Librarian Adam in the Beardsley Branch podcast room to talk about finances & the library's financial database Morningstar. Listen to this podcast to learn about Morningstar's financial tutorials, articles, search engine, & charts of investments' performances, & to learn as Librarian Andre explains way to finance, how to research, & the importance of maintaining emotional self-control when investing.
Please remember that neither Librarians Andre nor Adam are financial advisors, though we encourage you to seek financial advisors before & during investing; & please remember all investing comes with some risk.
Use Morningstar today—You just need a Bridgeport library card!
Go to https://bportlibrary.org/research-databases-by-subject/ & scroll down to Morningstar Investing Center (our databases are listed alphabetically—& are free! Be sure to browse our other databases!)
Hello everyone and welcome to another episode of Bridgeport on Mask. Today I will be joined by my fellow librarian, I'm Brainmaster, and we're gonna talk today about a database and the public library here at Bridgeport called Morningstar Investing, a database that can help give you information about the investing world. So please stick around to learn more about finances and investing. Mostly my my friend Andre will be talking about a bunch of financial things today, uh, financial literacy, how to make investments, uh, and what investments are out there, that type of jazz. Uh, we just want to uh remind everybody that this is strictly educational. Uh, neither of us are financial advisors, and uh, we recommend that before you invest and while investing, you seek the help of financial advisors. Please remember that all investments carry a degree of risk with them. And uh with that, uh, so I have here uh my friend and fellow librarian, Andre. So, Andre, you have been with us now on two um podcast episodes on Bridgeport Unmasked.
SPEAKER_01:I'm the first person that gets that honor.
SPEAKER_00:Uh, you are the second person that gets that honor, but uh first is the worst, second is the best. I don't know. I pulled that from my six-year-old, my six-year-old memory right there. I I've heard various th second lines or third lines to that. I'm not sure uh which one is the accurate one. Anyways, uh, so yeah, so the first time you were on here, uh you uh talked with me, really debated with me about the nature of the hauntings at the haunted house on Lindley Street. And today we're talking about investing. So, in other words, uh, one of your talks is all about a very scary thing that seems to come from another world, and the other one is was just about ghosts. Uh a lot of people get scared away from investing, and um, we hope that with a little bit of knowledge, uh especially since one of the points of the library is to increase financial literacy, it's even included in our mission statement. Uh, we hope to uh alleviate uh both the fear and the ignorance at least a little bit today. So uh, Andre, what's going on with you? What's up here at Beardsley Branch Library and uh all that jazz?
SPEAKER_01:Well, there's a lot of cool things that we just had we had here at Beardsley. So, you know, about a week and a half ago, we um you know, we had a uh Caribbean steel drum vibe band over here. And, you know, honestly, 10 out of 10 would recommend it. It was a fantastic show. People had fun. It was probably easily one of the best holiday consoles I've actually seen since I've been working here for now. Close to three years right now. Uh last week we had, last Saturday, we actually had Frosty the Snowman, who actually came here and a lot of children had fun decorating cookies and nice uh getting uh you know getting uh you know getting pictures of Frosty and hearing about the traditional old Frosty the story, you know, Frosty the Snowman story. Um we have computer classes happening here every Tuesdays. Uh we although I will be taking a break for two weeks starting next Tuesday. Um we typically have our chess club still happening every Monday. Um and of course, we have some of the, you know, you know, not just here at Beardsley, but in the Bridgeport Public Library System in general, we of course have some of the best staff that can help you find things that you're interested in reading, help you with all of your technology needs, printing needs, and so forth. So there's a lot to look forward, there's a lot to look forward to with the library. Just visit our website, www.beportlibrary.org, and you can find out more.
SPEAKER_00:Well, thank you very much for that amazing segue, because uh that is also the website to go on to to access the database that we're gonna talk about today, the resource that the library paid for, so that you get it for free, uh, Morningstar Investing. To access Morningstar Investing and the other databases that we have on the library, please go to B, that's the letter B, portlibrary.org, click on digital library, scroll down to Morningstar, and then all you'll need to do is type in your library card number. If you don't have a Bridgeport public library card and you are a resident, you work for the city, or you are a student at Bridgeport, then you can come to any of the Bridgeport libraries. There's five Bridgeport libraries open currently, and you can come down to any of those and they'll tell you what you need to bring and show to get yourself a library card. Library cards again open to any students in Bridgeport, residents in Bridgeport, and workers of the city of Bridgeport. Once you type in your library card number, and uh after clicking on Morningstar, it'll come to the homepage. And there is a lot going on on the homepage. My hope today is that after researching and looking at all the other pages on Morningstar, each of which focus on a different aspect of your research for investing, uh, that after that point you will be able to uh just uh look at the home page and know exactly where you're going and which page you need to get to. And so we're gonna we're gonna kind of jump to the bottom of the pile here, uh, because it's actually a uh great place to start, um, especially if you're interested in investing. And uh Andre, I'm gonna turn it over just to a moment for you. I clicked on the uh the graduation cap. Uh that's a that's a mortar board? Is that the term for it? The graduation cap? I think so. I'm fairly certain. Anyways, the graduation cap uh opens a page with a bunch of tutorials and lessons and uh and articles and stuff to read about the uh basic types of investing that Morningstar gives you information about. Uh so Andre, um I do I do want you to go to town uh in just a moment on uh you know what are these things we're looking at on this page. There's a section on bonds, ETFs, stocks. Uh first though, uh I want to say something, and I'm not sure you agree with it entirely, but I would like to hear your point of view very much. Uh my opinion, you should hold off on investing until you are able to pay your bills uh every month, pay your credit card debt off entirely, and have some money at least in an emergency fund. Your thoughts, did I miss anything, etc.?
SPEAKER_01:That's true for the most part, because uh definitely with credit card debt, because credit card debt has a such a high interest rate that you really want to get those things paid off because, or else it just snowballs into something that you can't pay off. I mean, for things like, you know, debt that has a smaller interest rate on it, I mean you don't necessarily have to have those completely paid off before you can start putting money into a Roth IRA or a traditional IRA or start putting some money away for retirement. Um, because usually the interest rates on those are sustainable as long as you can keep making the monthly payments or actually contribute a little more to the principal so that you get it down. But yeah, for the most part, right, like you got to make sure that your bills are paid. You got to make sure that there's no credit card debt. And an emergency fund is always a nice thing to have if you can build one, because if there is, you know, God forbid, like an emergency with your car, you have something to pull from. Um, because the thing with investing, with investments is that every time that you sell a security, whether it's a stock, a bond, an ETF, or some kind of cryptocurrency commodity, whatever it may be, there is a taxable consequence to that, um, regardless of which account that you're pulling from. Um, so that's why it's always good to have the emergency fund first so that you can pull away from that stuff tax-free.
SPEAKER_00:Okay. So so if I hear you correctly, kind of the notion of if you are gonna invest, then try to not touch that money that you are investing until, of course, you know, you're selling it for your retirement or for your college fund.
SPEAKER_01:Yeah, for whatever, for whatever the goal is, right? Because say if you buy a share of, say if you buy 10 shares of Microsoft at$400 and then the shares appreciate to$500, right? You've made a$500 profit on that, depending on the time frame of which you sell when of which you sell that investment within, right? There's going to be a taxable capital gain that you have to pay money on. Um, so that's not, you know, if my car engine breaks down, I would much rather use an emergency fund that is just fully maybe in cash and a high yield savings account to pay that off rather than having to sell a security such as maybe those Microsoft shares that I've appreciated and having to then worry about paying a capital gains tax on the next year.
SPEAKER_00:Okay. So so so so maybe uh, you know, tell me if this is a good way of thinking about what you're saying because it's very interesting, right? Um if I take a thousand dollars and I just put it in a bank or a credit union uh for my emergency fund, and then um I do need a new uh I need a new washer, uh washing machine, you know, actually happened to me a couple months ago or so. Um and I I I could just take my thousand bucks uh and what very, very, very little uh, you know, uh prince, you know, interest grew on that, essentially take my thousand bucks and buy it. Whereas like if I invested a thousand dollars in a stock and it lost money, I'd only have like 900 bucks or something.
SPEAKER_01:Yeah, that's also one thing that could happen, right? Like stocks inherently, like as we mentioned earlier in the podcast, all investing involves risk, including even the potential loss of principal, depending on which security you're investing in, right? Um now there are, of course, you know, there are of course financial ways that you can manage risk and so forth. Maybe we might talk about that later on the podcast. But yeah, a high yield savings account, the interest rates are usually determined by, they usually follow the interest rate sets by the Federal Overmarking Committee or the Federal Reserve. Um and the and that money, I mean, you're obviously paying taxes on the interest that grows in there, but the money can be withdrawn at any point. There's no consequence to withdrawing it, as opposed to something like a certificate of deposit, which there's it's a penalty that you have to pay to withdraw that money from. Or in the case of a stock, right, you could have that$1,000, but because the markets are so volatile on a day-to-day basis, you don't know if that$1,000 could be, say,$900 or it could be uh$2,000, it could be$5,000, depending on what you invested in, right? But you just don't know. So for something like an emergency fund, right? Something that you know that you want to be there, usually high yield savings accounts are the best way to do it because you have a way to let that money grow at a decent rate. Right now, I think a lot of high yield savings accounts might be doing like, you know, between three to three point five percent. And you have a flexibility to withdraw that money whenever you need to.
SPEAKER_00:Okay, and um, okay, so so we've uh already, already we've been throwing around some some uh basic but sometimes quite confusing. And, you know, I've been learning about them for years and still learning things about it, uh, terms that are related to um related to investing. Um, I think, and certainly, you know, I I did and probably still do when I hear investing, the uh the three the three words that pop into my neurons uh pretty pretty quickly are stocks and bonds. And in fact, on Morningstar, uh there are two entire courses, one on stocks, one on bonds. Um, Andre, could you please give us the crash course on what those are and your thoughts there on?
SPEAKER_01:So a stock is essentially your is essentially an ownership of a piece of a company, right? So companies usually companies can be usually publicly or privately traded. Um we obviously are dealing with companies that are publicly traded on the New York Stock Exchange or the Nasdaq Stock Exchange, right? So basically what happens is the stock market, think of it as like a giant auction. You have buyers and you have sellers. Now, a stock's price is determined obviously by the supply and demand for that company's shares. When you are looking to buy a share, you are essentially putting in a bid for that share based on the market price. And somebody then sells you their shares. Um, what happens is when you buy that share, then you are buying a piece of that company. Now, a stock gives you a right to participate in that company's earnings or losses. It gives you the right to uh be paid any dividends that company may declare, any spin-offs that company may do. It gives you all of the economic rights of that company. Um now a bond is a different type of financial security. What a bond is, it's not necessarily an ownership of the company itself, but it is ownership of that company's debt. Or in the case of governments too. It is a promise of the bondholder to pay you back the principal that you've invested in it in addition to some kind of coupon or interest rate payment, depending on the duration of the bond. Um what you are not entitled, of course, is a part of that company's earnings. You are simply entitled a part of that company's being repaid that company's debt in addition to some interest on it. So the way that bond markets work too is it's also based on supply and demand. You have buyers and sellers that are determining um the price of the bond, and then the interest rates of the bond is determined by the price of it. It's very complicated, but usually what a bond does is that uh it promises to pay you something called the par value of it. So for example, uh you have U.S. treasuries, right? There are some US treasuries that you might pay about$90 for 100 shares of that treasury. And what that'll do is based on the maturity date of that bond, right? Say if the maturity date is like six, twelve months, maybe two years out, three months out, they'll promise to pay you a hundred dollars on that bond you paid$95 for. In addition, though, some of those bonds may also pay you a coupon or the interest or the interest on it, too. So you're getting both paid principal on it and interest on it. So it's very complicated. Um, you know, but they all make a decent part of like the you know, decent part of like a stock portfolio. So typically, like what a lot of financial advisors will do is they'll put your money 60% into stocks, 40% into bonds. Usually those bonds will be a mixture of treasuries and corporate bonds because that provides you some stability when markets are going down. Because typically what happens is when stocks go down, bonds go up as investors seek this relative safety of U.S. treasuries. And you know, when stocks go up, bonds typically go down because investors are selling those bonds because they are taking on more risk by buying stocks, right? So each of these securities have different risk profiles on them. When you're buying a stock, you are essentially buying something that is more volatile, it is more risky, but it promises higher returns. For the most part, when you're buying a bond, you're buying something that is safer, that will at least you'll be guaranteed at least some kind of interest, of course, as long as the bond issuer doesn't default on its debt. And um, you know, you have some stability that could be part of your portfolio, depending on, you know, which type of bond you're going in, right? You have to consider differences between high-yield corporate bonds, uh, you know, investment grade corporate bonds, and U.S. treasuries and so forth.
SPEAKER_00:Um and then to everyone out here, this is exactly why we encouraged you to get a financial advisor when you start, and then after you have started um investing, uh Andre is not speaking, you know, too too uh too big or or with too much over-the-top eloquence. This is very much the nature of the beast. It is complicated. I I I ran when I started in learning about investing, I ran into a quote that I think sums it up nicely. Forgive me for forgetting in at the moment who said it. Uh basically to paraphrase it, it went. The problem is that people think that investing is either easy or impossible. And it definitely falls somewhere in the range in the middle of that. Uh, okay, so that being said, if I followed you correctly, um, just just just to sum that up, even though when I hear the word investing, I really think stocks and bonds immediately, they're actually quite different things. A stock is part ownership in a corporation. Exactly. Uh, and I do use the word corporation because if I'm not mistaken, corporation by definition is a business that sells pieces of its business uh in the form of stock. You know, if corporation uh if corporation widget, you know, is worth a million dollars and it sells a million stocks, each one of those incredibly over oversimplified, but each one of those stocks is worth one dollar. So if you buy one dollar into corporation widget, you actually own one one millionth of corporation widget.
SPEAKER_01:Yeah, depending, of course, on like what the market cap and a share price of that company is worth at that point, right? Yes.
SPEAKER_00:Certainly. Whereas a bond, if I'm if I understand it, this is how I've come to understand it, is more like a loan, but a loan you make to either a business or the government. Like you you've probably heard of war bonds before during the world wars. Those were loans that individual people made to the US government, and the US government would then turn around and pay that loan back sometime in the future, uh at a at a pre at a predetermined time in the future, plus interest. And so essentially you were acting as the bank in that notion. Is that is that too inaccurate?
SPEAKER_01:Or it's pretty accurate, right? It's essentially a promise by the bondholder to pay you a certain amount of principal back plus interest by the maturity date on that bond. Um bonds get a little bit more complicated, though, because like there is an inverse relationship between the price of the bond and then the uh the you know the the average the APR, the interest rate on a bond, right? The way to remember it is bond prices go up or as there's more demand for bonds, interest rates fall because it's a fixed it's because they pay you a fixed price on the maturity of the bond, right? So obviously, if I pay$95 for a pair of for some US treasuries that are maturing in a year, there's gonna be a certain interest rate that comes with that, right? The interest rate would be calculated by um, you know, the difference between the$95 I pay for the bond right now versus the$100 that the US government will pay when it matures. That difference is then calculated as the interest rate. But say obviously what happens is what if I pay$97 instead of$95? What's gonna happen, right? The interest rate on that bond is going to fall because now I'm paying$97, but I'm still gonna only get$100 when it matures, right? So there's Oh, I didn't I didn't know that.
SPEAKER_00:That's very interesting.
SPEAKER_01:Yeah, so that's why bond, that's why bonds are often called things like fixed income. Because as, like I say, as the prices of the bond rise or as there's more demand for bonds, the interest rates themselves fall. Because to keep in mind, right, bonds are always going to pay you the same amount on maturity and the coupon and the interest payments, they pay you semi-annually, the coupon payments are gonna be the same regardless. So usually if you're paying more for a bond, generally the interest that you're gonna get, assuming you hold that bond all the way to maturity, is going to fall because the price, you know, because the money that you get both on the maturity of the bond and of the interest payments isn't gonna change at all.
SPEAKER_00:Okay, uh, so let me see if I because that's new information to me. Um, you know, if I pay 90 bucks for a bond and when it matures, in other words, when it's time for the business or government that I loaned the money to essentially through my bond to pay back, and I said and and when I bought it, they said, Okay, we'll pay you a hundred. And then like a year later, it only costs like forty bucks to have that bond. Then oh well. I mean, that's an exaggerated example, but yeah.
SPEAKER_01:Yeah, and actually that's an interesting point you bring up too, because then because of the way because bond prices are also constantly fluctuating like stock prices too, there is the potential for you to lose money if you sell a bond past, you know, before its maturity, right? Like in your example, right? If you paid$90 before the bond, and then the price, you know, plum god forbid that would, you know, because that would cause a collapse of the global economic system if we saw bond prices tumble that much. Um, but say, yeah, if the bond price falls to 40 and you sell it before it matures, yeah, you'd technically lose money on that investment. That's why we mentioned earlier is that all investment carries risks. Because even with something that could quote unquote be as relatively stable as like US Treasuries, which are backed by the you know, the ability of the government to tax its citizens, if you sell that thing early, you could potentially lose money. Um because as bond prices go down, interest rates would go up.
SPEAKER_00:Um absolutely. Um I mean that being said, uh there is also uh setbacks. I won't call it risk. I don't think I should use that word in two completely different ways, but setbacks in just shoving your money under a mattress, uh, as they say, because of inflation, you know, any, you know, if you had just cash uh uh under your mattress per se, the value of that cash would go down uh over decades because a dollar. I think I don't think I have to tell anyone listening to this that a dollar doesn't go as far as it did some decades ago. Yes, uh on the tutorial page here on Morningstar, uh a whole course on stocks, whole course on bonds, a whole course on portfolios, which forgive me if this is an oversimplification, is basically everything you have invested. Just the list of all you've invested.
SPEAKER_01:It's uh it's a collection of everything you've had invested, and then it's usually like the weighting of you know what a certain investment you have is in your portfolio, right? So if, for example, I have a portfolio that has like it's 10,000, it's worth$10,000,$5,000 of it is in Apple, and like maybe$2,000 is in Microsoft, and then I got$3,000 in bonds. The portfolio weighting of that would be that 50% is in Apple,$2,000 of what of you know, 20% would be in Microsoft, and then the 30% would be in Treasuries.
SPEAKER_00:Absolutely. And uh there are a few other lessons on this page, uh, but we're going to have you in slight suspense for a moment or two because uh I want to come back to those in just a moment. So if you click out of the tutorial page and click on the one that looks like a bar chart, right, a bunch of lines going upwards, uh, and in fact is named chart, uh, you can use this page to determine what the value of a stock bond and other investment tools that you can buy, including those we'll talk about in just a moment, by searching here, right? So if widget was a real corporation, I'd be able to type in widget here to the uh into the chart, and I could see how each of those stocks, remember those one million stocks, how much they're worth and how much they're worth changes over the course of a day, several days, a month, several months, a year, and several years, because uh each of those one millionth part of their company, uh it doesn't keep the same value. And in fact, that's to very much oversimplify how investing works, right? You hope to invest at a lower level and then sell at a higher level. Uh and um uh Andre, your thoughts on the fact, and I found this fascinating, but it made so much sense. Uh, everybody has heard buy low, sell high, but so many people do it backwards, not because they're stupid or they don't know that saying, but because like when when a stock or a bond is doing really well, especially a stock, right? They're a little more flexible. Uh when a stock is doing really well, people are like, oh, we should buy this because it's doing well. And then when it stops doing well and its price decreases, they're like, oh, we better sell this before we lose more. So people often buy high and sell low.
SPEAKER_01:Yeah. So like that is such a like microcosm of the way that investor psychology works, right? Because everybody knows that you should obviously buy security when its price is low or when it's undervalued and then sell when it's overvalued or the you know, the price is high. But oftentimes what happens is there's a lot of emotions that come into play. And this is why, frankly, people get financial advisors, because financial advisors are able to manage the emotional turmoil that could happen with the day-to-day moves of the market. Because the reason why people end up buying highs because it's a phenomenon known as fear of missing out, right? When you see the price of a company or a stock go up, people tend to talk about it. They tend to talk about maybe how revolutionary the product that the company is making is going to change things. People start to tout that earnings growth is going to, you know, is going to grow exponentially and people start piling into that security. Now, as I mentioned before, right? What fundamentally determines the price of a stock? It is the supply of the shares being on sale and it is the demand for that stock. So as more people go to buy it, the price goes up because then, in order for those buyers to acquire the shares, they have to bring in, they have to, they have to up their bids so that more sellers can come into the market. Um, and conversely, the reason why people end up selling low when the price drops is because everybody starts to the sentiment on the stock or the company ends up going negative to the point where everybody wants to get out because they see that the future is bleak for it. Maybe there's a competitor that came in that offers a superior product and and the outlook for earnings or earnings isn't going to be great, or maybe the company might even be going bankrupt. And everybody then tries to pile on and sell those shares. And what happens when there are more sellers that enter in the market? As there is more supply for those shares, sellers end up end up having to lower their prices or lower the prices for their shares in order to attract buyers at lower levels. And so the way that you have to manage that emotion, right, is a lot of people end up becoming afraid of investing because they're afraid of losing money. And that is a legitimate concern. We all work hard for our money. We don't want to lose money, right? But markets, even indexes like the SP 500 or the Dow and the NASDAQ are so volatile on a day-to-day basis. But if you zoom out on those charts to like five or 10-year or even 20-year horizons, what you then see is a straight line up. And so the key to managing investing, right, is to manage your emotions and to have a long-term horizon. And to be honest, it's also to pick things that are simple. It is to pick things that you fundamentally understand. And that's why most financial advisors end up having people go into like index funds like the S ⁇ P 500.
SPEAKER_00:Okay. A couple of a couple of things there that really resonate with me and uh my uh financial uh my financial story, uh, which interestingly began with a book that I uh encountered unintentionally here at the library, by the way. Uh one, uh financial literacy is very important, but and I think I even under, I should have like come right out at the beginning of this. Uh perhaps even more important or as important to financial literacy um is financial emotional control, especially if you're gonna do the stock thing. It's scary, it plummets, it rises. Uh, theoretically speaking, um, though if you work with a financial advisor, hopefully you'll lower the risk of this. Uh theoretically speaking, you could lose everything that you have invested in a given stock, not trying to scare you away from that avenue of investment. Uh, but you do needed an emotional control.
SPEAKER_01:Right. And that takes honestly years of mastery, right? Well, like when I I I do my own investments, and when I started, like there was a lot of emotion that was in it, and I had to learn a lot of lessons just from like the money that was being lost, right? But then eventually I learned how to control emotions, how to digest the day-to-day movements of the markets. And, you know, I've done all right for myself. Uh, you know, I'm not gonna like brag or anything, but you know, that for me, though, right? I have the emotional capacity to understand how markets move. And so that's why I might be somebody that might be more accustomed to doing their own investments. But for a lot of people, right, and I'm going to say this in all honesty, it is a lot, and I mean a lot, lot, a lot of work to manage your own investments because there's a lot of research that has to go into it to the point where like it's almost like another full-time job. And if you're somebody that already has a lot going on in your life, right? Like you're trying to raise a family while juggling maybe one or two different jobs, it is perfectly okay and might even be preferable to find a financial advisor and to entrust them with your future, with your funds, because they have been schooled in the, you know, in the emotional control that's required to be able to make investments grow in the markets over a long period of time. They're not going to be inclined to panic sell when markets or stocks are going down. They're not going to be inclined to buy when prices are rising rapidly to the point where maybe those stocks are overvalued, right? They are going to know what to do at the right moment for the most part.
SPEAKER_00:So the other big notion that you threw out there that I think is very important is um having a long-term uh financial plan, uh, trying to get rich overnight. It does not work. Just does not work. Uh, remember, we're still having trouble determining if it's gonna rain in three days. I mean, if you have the hoot spud to think you know, you know, how the entire market and specific stocks are gonna go over a shorter period of time than that, that's a tough one. So, my question to you, Andre, is um how would we use on Morningstar on this charts page uh the information of uh the chart that shows how the value of a corporation, therefore stocks have changed? Should we just completely stick to like the five-year, 10-year options that show how it's grown in five or ten years? Or is there a time in place to look at how it grows in one day or a week or something?
SPEAKER_01:Um, it depends on the kind of investing strategy that you're going for now for shorter periods of times, those are usually strategies employed by like day traders or swing traders. So, what those traders are specifically focused on is they'll just analyze the charts and they'll use something called like technical analysis to determine like you know things like support and resistance ranges, you know, to try to predict where the price is going, where the price is going to go. Um, if people are willing if you're a day trader out there, you know, good for you. It's not really my thing. I I typically like to do what's called fundamental analysis, which is what you're talking about, right, is like the five, 10-year, 15-year horizon. What that does is it means that I research the company, what their product might be. I might read some of their earnings reports or some research materials they might have published. And then what I do is that all of that information about the company, I then make a determination about, you know, what kind of sector is it in, you know, is the product or service they're offering revolutionary in that sector? What is the prospect for, you know, earnings growth, for revenue growth and all those kinds of things? What is the price to earnings ratio of that stock? You know, the stock price in relation to its, uh, you know, to its projected earnings growth. No, these are all things that as I research, I consider, and then I make a determination that if I hold the security for something like five, 10, or 15 years, is it going to grow or appreciate in value? And uh, once I do all that research and I'm answer that, you know, and I make a simple yes or no question, I might buy that security. And, you know, typically then my strategy is to um it's never to sell it out of panic. It is to just simply hold it. Um, if the price drops of that security below what I bought it for, and uh, you know, I still believe in the fundamentals of that company, I might even buy some more shares of that company, you know, depending on if my thesis that I've developed about the company is still true or not.
SPEAKER_00:Oh, absolutely. Um, mistake I made was research a little bit at first and then don't follow up with research there. Um, as far as research goes on Morningstar, um, you can get uh articles, um, which are just one part of the of the many things you research. These articles are on the I'm sorry, I have no idea how to describe this shape that you would click on on Morningstar. Uh, it's the icon below the home button. Uh, I I don't know, what would you call that, Andre? Uh it kind of looks like a roundabout with with like a road that looks like a turn.
SPEAKER_01:It looks like a dot plot to be.
SPEAKER_00:A dot plot? Okay. Since I've never heard of a dot plot in my life, that was probably why I wasn't identifying that. Uh yeah, so we have articles here, articles that talk about the US market, uh, mar other countries' markets, and also um specific things going on in governments uh that uh might be a consideration if you're investing. Um other ways, you just you just brought up your your research, your very extensive research, other specific things um that that you would you would have people research.
SPEAKER_01:But what Morningstar does is that for most securities, especially like most core holdings, like an Apple or a Microsoft, they'll have extensive, fully extensive research reports. Um, and what they'll do is they'll evaluate like what is the prospect for earnings growth, uh, what is the moat that a company might have. So a moat is something that like, you know, it is a competitive advantage that a company has in their specific sector industry, right? So something that might be a wide moat will be something where it is almost impossible for a customer to be able to switch to another product. Um they usually will also determine, like, you know, the leadership of a company based on like what they know about the company CEO and how they typically have allocated capital in the past. And there's also like a risk part of those earnings reports too. So they'll often assign things like low, medium, high, or extreme, um, you know, depending on like what the, you know, what the risk is for a company that they'll be able to uh, you know, achieve what they want to achieve or not. And then they what they finally do is like, and this is where like there is a disclaimer that Morningstar puts, but what they do is they assign like what is a quote unquote fair value for the stock. Now, like be careful, right? Because like while the fair value that the Morningstar will assign for a stock is based off a lot of expertly reesearch based on the company's earnings reports and models of growth that they use and so forth, they're not guarantees, right? Because as we mentioned earlier before, all investment involves risk. And just because somebody might say that a stock is worth X amount doesn't mean that that always happens. So these Morningstar reports are a great place to start, but I would still encourage you to also do your own research as well so that you have a more uh robust thesis before you make any investment decisions, especially when it comes to individual stocks.
SPEAKER_00:Yes, you could certainly say that again. Now, uh everyone out there, uh, I want to thank you. I know we uh we've been throwing lots of terms and ideas uh out there, and I want to throw two more, or rather have the right honorable gentleman sitting next to me do so. Um if you click on Morningstar uh and you click on the icon that looks like a bunch of lines and then a magnifying glass, the screen uh screen, if you will, um the screen that shows up is a is a is a search of different um you know securities is the term for stocks, bonds, and things of that nature. Securities you can buy. Um, and if you go to investment type, you have two that um are called ETFs and mutual funds. I think they are important enough to include in this uh particular podcast episode. Uh so Andre, if you could go um if you could go into what like how they because they're quite similar things, like what they are similarly, and then like after that, like after all these years, I'm not sure I could tell you the difference between the two. So I I I'm I'm all ears on this one.
SPEAKER_01:So exchange trader funds and mutual funds, what the what they have what they both have in common is that basically a bunch of people they take money and they give it to somebody who then uses that money to create a sort of like fund that might have a typical theme or might follow an index fund. What they do is they use that money then to buy the individual securities that would make the weighting that they go for. Like uh, so like for example, right? There's like there's an S if there's an index fund that follows the S P 500, for example, one of them might be Vu, which is the Vanguard SP 500 fund. What they do, what pi people typically do is they'll, or there might be a mutual fund that follows the SP 500. Basically, what those fund managers do is they take the money that you give them, and then they'll buy the stocks that make up the SP 500 according to what is quote unquote its weighting in the SP 500. So I mentioned weighting earlier as part of a portfolio, but you know, every stock in the SP 500 doesn't occupy an equal slice of the pizza. Some pizza slices are bigger than others. So for example, uh Apple makes up about 6% of the S P 500, so there's Nvidia. Whereas a company, for example, like um uh Clorox, for example, might only occupy like 0.05% of the S P 500. What that means is that Apple and Microsoft are getting bigger parts of that pizza. And when you give these people that are you know investing money into the SP 500, essentially$100, right? If you take$100 into the SP$500,$6 of that will go to Apple,$6 of that will go to Microsoft, and then like a nickel will go to like Clorox. Um the difference between an ETF and a mutual fund, though, is that exchange trader funds are freely traded on the New York Stock Exchange or the NASDAQ or the Nasdaq composite as you know, things you can freely buy and sell on the market just like an individual stock. Whereas like a mutual fund you would typically buy through a financial advisor. There's something that are a little more closed off, and what those financial advisors do is they'll send you, like usually, you know, depending on you know how often you want, but usually it's quarterly. They'll send you quarterly statements of how the uh investments are doing. It also is like a little bit, you also have to do like a little more research to find out exactly what kind of securities are making up part of that mutual fund, whereas like an ETF, you know, when you buy an ETF, your brokerage account will usually send you a prospect of them and they'll tell you exactly what securities are in there. I personally like, personally for me, like for my retirement accounts, like my Roth and traditional IRA, I exclusively go with exchange traded funds because they allow me a very low cost and efficient way to diversify my portfolio and to basically buy into certain themes without having to buy the individual stocks themselves. So if I, you know, and the the the these are usually the ways that a lot of people end up starting their own investing journey if they choose to do the if they choose to do it without a financial advisor, so they'll go with the exchange traded fund route.
SPEAKER_00:So yeah, so that seems to me like um you uh you uh instead of taking uh all of my money and putting into company widget uh and watching its stock grow or fall or what have you, I would go to a financial institution, you know, uh financial institution of Jones, Jones and Jones, and say, Hey, I know you guys are like investing in hundreds of companies, and I would like to have my money invested in the hundreds of companies that Jones, Jones, and Jones invests in type of a deal. Okay. Okay. Well, that is pretty awesome. Uh Andre, I mean, we could probably Continue until you have to go home because the library closes. Uh, but is there anything else while you were here that you won't think people really ought to know about finances, investing, and all of that?
SPEAKER_01:I mentioned it earlier. It's always important to have a long-term horizon when you're investing, but like before you do start your investing journey, it's always extremely important to make sure that you are prepared for it. Because what a lot of people do is that they'll jump right into investing, not knowing what to do, not knowing like what the risk profile of individual stocks versus something as simple as like an exchange traded fund is, and they will lose money because they were not prepared when they jumped in for the journey. Um, and that's why we offer Morningstar, right? Because Morningstar allows you to, you know, especially with like the investing classrooms, right? It allows you to have the resources to start that preparation to start that research so that when you are ready to invest your first dollar, you'll be all the wiser with where that dollar should go, right? Because it's very easy to open up something like a brokerage account and be like, oh, everybody's buying like this really cool meme stock, and then to put money into it, but without really understanding what exactly it is you're putting money into it, and that's how people end up getting burned or they lose money. Um that's something that I wish that I knew when I started investing, right? And believe me, I had to learn a lot of uh hard lessons that the market has taught me. But uh if I had a resource like Morningstar, I would have been like much more prepared. And um, you know, it it's definitely something that I'm proud of that we offer here at the library because it gives you all the opportunity to really prepare for your own journey, you know, depending on where that journey may be. But have a plan. You know, when you're investing in like have a have a time horizon, like what are you gonna use that money for? You can use it to buy a house, you can use it to you can use it to grow your retirement count. Once you have that plan, research, use morning start to become prepared. And then when you're ready, you would choose the right account, whether it's an individual brokerage count, a uh, you know, a 401k or 457, depending on your employer or uh, you know, a Roth or traditional IRA. Um, but you know, to talk about those different accounts too would have to be a time for a different podcast because there's honestly so much I could talk about. But that that would be my three things. Be prepared, um, have a time horizon, and uh make sure that you are emotionally in control.
SPEAKER_00:Certainly. And feel free to go on to our website, B, that's the letter B, portlibrary.org, click on digital library, click Morningstar, and then type in the number underneath the barcode on the back of your library card. And with that, thank you so much for joining us for another episode of Bridgeport Unmasked, the Bridgeport Public Library podcast series about all things. Bridgeport. Today it's been me, Librarian Adam, and my co-worker, Librarian Andre. And we have been talking about Morningstar, the library's database, where you can get information about investing in finance. Thank you so much for joining us today. Consider watching our rather listening to another episode of Upgrades for the Mass.