The Zulu Basics: The Investment Story of Pastor Joe (Part I)
Updated: Apr 28, 2019
- Dedicated to the idiot, but lovely girls at my home church.
Disclaimer: Not based on true story. Please do your own research before initiating an investment.
Part I: Pastor Joe Learns About Investing
Once upon a time, there was a Pastor named Joe. He served at his church faithfully for many years. He always wanted his church to have enough money to pay for the monthly rent. Land in his village was very expensive. He worried day and night, and one day, he took another look at the church's piggy bank.
When he looked into the piggy bank, his worse fears began to surface - the church only had money to pay rent for another year; maybe another two years, if they budgeted extra carefully. The church was a very important place for the village - people from all over village, came to this church and the church served many people that were out on the streets, hungry, and lost. He knew that the church could not afford to shut down.
''What can I do about this? I need to do something quick!" He pondered for a moment.
"The only way to is to grow this money somehow. Gambling is too risky. And the money won't grow if it's sitting there in the piggy bank."
Just then an epiphany struck.
At that moment, Pastor Joe realized the best way to grow the money well and responsibly was to invest. However, Pastor Joe then quickly, had some concerns and doubt.
"Man, I've only studied about the Bible my whole life. I don't know how to invest. What if I lose the churches' money? Then it's going to be our turn to be homeless! Oh no! That cannot happen!"
Because Pastor Joe always wanted to make sure the church was healthy and strong, he worried a lot. He thought that he would have failed as a pastor if he couldn't keep the community healthy and thriving.
"Well, it looks like I got no choice. Sitting here and doing nothing is just going to make everything worse."
Within the church, there was another member there named Brian. He knew that if anyone knew anything about investing in the church, it would have been him.
"I think Brian said something last Sunday, after sermon about investing."
He thought for a moment. Pastor Joe had great memory and often was able to remember even the tiniest details and things people said and explained.
"I remember now!" Pastor Joe exclaimed, feeling proud that he remembered what Brian had said:
Investing is about buying something today, and hoping that the value of what we buy today (present), will be worth more tomorrow (future).
"But what can we buy? Not everything can be bought and will appreciate and be worth more in the future. It doesn't sound like a good idea to buy candy and I hope it will go up! In fact -
Sometimes, things can go down in value. Investment always carries risk: the chance of a partial or complete loss of capital/principle.
He then recalled something Brian said about what people usually buy to grow their money:
The most common ways people grow their money are through stocks and bonds.
Pastor Joe got excited all of a sudden. "Chicken stock? I make that at home everyday! Bonds..? Like human relationships?"
After a few moments, he began to think more clearly.
"That can't be right..there's got be another meaning for stocks and bonds investing...Brian explained what it was on Sunday, and I think he said this:
Stocks are investments, that represent an ownership in a company or business. Each unit of ownership in the company are called shares. How much of the business you own depends on how many shares of stocks you buy from the business. 'Shares' refer to how much of the company's stock, you own.
"This sounds very complicated", thought Pastor Joe. "Did he even give an example? I think the one Brian gave was:
Let's say you own company A. Company A has 10 shares of stocks. That means the company is selling itself in 1o units. If I own 2 shares of Company A, and if there are 10 shares in company A, that means I own 20% of the company. When you own 20% of a company, you get 20% of all the company's earnings, benefit and dividends.
Pastor Joe, a worrywart, then thought about the scary possibility of a company catching on fire, not doing well, and going bankrupt. He then remembered what Brian said in their conversation about stock owners of bankrupt companies: "Well you see, Pastor Joe, - if you put in a $100 into Company A and it goes bankrupt, that means those shares you own will be in a business that will have more debt than cash or profits. This will mean that the company will be worth in the negative. The shares will go to zero. You will lose $100, in most cases. BUT! The good thing about owning shares of stocks in a public company is that you can only lose what you put in. "
Debtors can't go after people who own the stocks of a bankrupt company to pay the debt. This is the Limited Liability Rule that the law says stocks have.
"This means you won't lose an infinite amount, but you will lose whatever you put in."
"So Brian, does this mean that it's not enough to be a proud owner of Company A?"
Yes, this means that it is very important to buy good companies at good prices.
"And where do we go to buy these shares of a company?" Do special banks let you buy these stocks?"
In order to buy stocks and bonds, you have to go to a special firm called a investment brokerage. A brokerage is an institution that allows people to buy and sell investments like stocks and bonds in the market.
Brian added one more thing: "You have to open an investment account; it's like a bank account, except, you get to buy and sell things like stocks and bonds." "So, do these brokerages keep all these stocks and bonds in their firms and hold it for you until someone buys it? Like a retail store?"
"Not quite Pastor Joe. For the most part, these brokerages don't "store" their stuff like inventory. They help you buy and sell from someone else through the stock market. They are just people who serve as middlemen in the markets and they just help match buy and sell orders."
"Oh, a market! Brian, I am an expert at the grocery markets. Chicken, pork- you nam- "No, I don't mean a grocery market, although it is a special type of a market."
A stock market is a place where people, usually through a investment brokerage, trade, buy, and sell stocks.
"So is it fair to say that this stock market is one giant market place of buy and selling things?" asked Pastor Joe.
"You can put it that way. But, within the stock market, there are different sections. Like grocery departments with different categories for food, each stock are listed in only one department, or stock exchanges.
A stock exchange is a specific type of listing within the stock market. There a few major types of stocks exchanges within the US stock market. The three major exchanges in the stock market are: 1) New York Stock Exchange (NYSE), 2) NASDAQ, 3) American Stock Exchange (AMEX).
"Don't be too worried about the exchanges though. The brokerages will figure out what exchanges to go to for you whenever you want to buy or sell something. Pretty neat huh?"
The more Pastor Joe remembered from what Brian said in their conversation, the more confident he became. "This is good. I like where this is heading. I am getting the hang of this. I just need to talk to Brian on what I should buy and how to figure out what are the best things to buy. Our church is going to be so blessed! Praise God for this newly found plan!"
Pastor Joe went home that night, tucked himself into his Simpson bed, all giddy and happy, feeling a renewed sense of hope.