Good afternoon, everybody. Welcome back to Schwab Coaching for our next topic, getting started with stock investing today with a focus on the investing basics. I'm glad you're all joining me today. Of course, I'm your host, Kevin Horner. And, you know, this is a fairly entry-level class for you here today, everybody. Now, that doesn't mean you won't find some value in this class if you've been around the block a little bit already. I'm of the belief that it can be helpful to be reminded of what we are doing here and sometimes be reminded of what the market really is at brass tacks. We often, as traders, can forget about some of these things from time to time.
And like I say, if you've been doing it for a long, long time, there's probably quite a bit of detail and information about the market that you may have forgotten or have already moved past and is considered second nature. Well, for those of you, this is going to be a refresher by nature there. But if you are looking to really gain an understanding of what the market is, what we mean when we start talking about asset classes, cap-sized groups of stock versus sectors of the U.S. Markets and ways to think about investing, this is a wonderful series for you that will provide that level of education, that base layer, if you will, on getting familiar with stock investing. So this is a series.
And yeah, today might get us started a little bit remedially, but we will be progressing over the course of the next four to five weeks. And you can expect to see that same bat time, same bat channel here on Thursday afternoons at 3 p. m. Eastern. So glad you're all here. Thanks for being here. Of course, I see a few names I recognize in the chat already, one of which is my friend Michael Fairbourn. He's going to certainly look to answer questions that I'm unable to get to in the midst of all of this. But don't hesitate. Don't hesitate to post for me in there. I'll try to answer your questions directly over the course of the next about 40 to 45 minutes or so.
Now, before we get going, I want to remind you about some key important disclosure details. And first and foremost, as always, we remind you that our discussions here are exclusively informational and educational. What we mean there is, of course, we're not making a recommendation about a process or a strategy to approach the market. Certainly not recommending individuals. We're not recommending individuals. We're not recommending individuals. We're not recommending individuals or equities in the marketplace. If we bring those symbols up, please recognize they are simply for educational purposes and often for examples. And beyond that, you know, some of these more basic conversational topics like past performance is never a guarantee of future results. We know that one, right, everybody? You hear that all the time.
Just bear in mind the market, as I say frequently, I believe the market is about probabilities. The market rarely, if ever, has certainties for us. There's always measures of risk. What we want to remind ourselves about is that, as investors, we tend to lean into probabilities to aid us in investing and putting that money to work. So historical returns can have a bearing and a basis on your process and approach, but we can't guarantee those returns, of course, regardless of our process. So please keep all that in mind, everybody. All right. So let's take a look at the overview here. As I mentioned, this is a series where you can expect to be progressing through a base level of understanding of the overall markets.
And then we start to really get into the processes that some of you may choose to take on as investors and traders alike. So these are the things that we cover in the next month or so. Everything from understanding what growth versus value equities are. Maybe even defining an equity. We'll start there today, of course. But then there will be some semblance of technical analysis and how do we utilize technical analysis to start equity positions or positions in the marketplace, buying shares of stock with entry signals and utilizing risk management techniques to basically provide us the level of risk mitigation, capital preservation with which we're comfortable. A big part of what we cover. And a lot of our Trader Talk segments that I do host on the morning shows at 9:30 a.
m. Eastern with the start of the market open. So before we get into all of that, though, before I sling over to the next slide, I did want to bring up one other slide. And of course, that's the Schwab's YouTube coaching page here. We call it the Trader Talks page. And the reason I'm bringing it up is just as a reminder for those of you who, as I said, might be here and feeling as though things are a little remedial for you. Remember, you're not going to be here for a long time. So, you can dive in here with the use of the search function here, this little magnifying glass. And my favorite thing is: You can start typing in your preferred strategy, for example.
So if some of you are here thinking, yeah, I was looking for something a little bit more advanced. I wanted today to talk about options or maybe even a specific option strategy you could do as simple as simply as typing it in here. I'm going to put an Iron Condor and hit enter. And what it's going to do is take you to these various. Uh, segments we've previously hosted archived that have discussion on that strategy. So you can be very granular in your search topic, everybody. And I just wanted to remind you, if you're feeling like this is a little too slow for you, move on over to the Trader Talks page, do a little search, find yourself in the archive.
You're apt to find something that's going to get you what you're looking for here on the YouTube Coaching Channel. So, all right, let's keep progressing on through everybody. Our agenda today, we're going to identify and define these investing styles that might be incorporated by us as a, uh, depending on our timeframes and comfort and familiarity. We'll discuss some of these terminologies that you'll need to be aware of. Uh, and then of course, we're going to locate some online resources and those resources really lean into two main places for you. Of course, everybody Schwab. com and think or swim, the desktop application here, that the majority of us coaches we work with on a very consistent day-to-day basis. And you see us utilizing it in our shows very often.
And you see us using it very frequently here. So let's, uh, let's keep stepping on through. Like I said, you're going to see a little, some stuff that you're familiar with, but maybe some that that's a good reminder. If you've got questions, get those into the chat for us as we work on through. So let's start with the strategies or process, uh, maybe a thought that you might have about how to go about investing. So when we talk about investing, at least the way that I tend to think about it. Um, I think of investing. It's a window of time that is longer than something like five or more years, right? A timeframe longer than five years gets you down the road towards allowing the market's broader trends to play out.
Uh, in many cases, an investor is not just doing so for a five-year window, but maybe an extended period of time, 10 years, 20 years, 30 years or longer. And the truth has been proven that over time, that overall plan of investing. And putting your money to work with a defined plan that you adhere to, maybe that makes some minor alterations over the course of a long-term period due to life event changes, which we'll expand on. But the idea is having a consistency to your methodology and then just feeding that plan typically with new dollars, right? If you think about what you do on a day-to-day basis, you go to work, you receive your income portions of that income. I hope.
Are placed into a retirement portfolio in some way, whether that be by your firm, your company, or maybe that company even contributes to retirement for you. So you have these wonderful ways to just continue to invest as long as you do so with a defined plan that suits your goals and comfort. We're probably going to find over the long haul that that is working out in your favor. Remember saving and investing are kind of hand in hand, right? In a room. Of. Value investors or in an area of value. So think of growth as these companies, maybe that have as of yet been able to establish themselves in their own marketplace or established themselves amongst the various tradable companies in the US markets.
When I think of growth, it doesn't have to be small cap companies, mind you, but it can be often a growth company is one that, like I said, has not quite gotten their foothold in their industry. Maybe they are still battling with high debt ratios right there. Maybe they're not yet making money. So they're working capital. Capital is coming from debt, which does put them in a bit of a bind. Commonly, small-cap companies tend to have larger debt allowances. But also that means when things like interest rates work against them, that can become problematic. So, growth investing by nature is going to be a bit more volatile in the sense that you're going to get price action that could be really, really favorable sometimes. And then other times, pretty, pretty much the exact opposite, right?
So what is the value investing idea? Well, the biggest difference between these two is that value investing is tied more to does the company generate income? Does the company provide me with return? That's comfortable. So while growth might be out there for the long-term investor, who's really willing to take on risk, value might be for the investor who is far less willing to take on risk. Once more established investment companies, companies that might be considered low-risk, a high-value in the sense that it takes a small amount of money to get a $1 return from those companies. So, when we talk value investing, commonly, a ratio that traders and investors will look at is the price-to-earnings ratio, which ultimately says how many dollars do I have to put to work in that company in order to make a dollar back?
So, a company with a $20 PE ratio, that's pretty affordable. It seems right. You might be able to pay $20 and you'll get a $1 return on average. Now, the growth companies that you might have been familiar with out in the market. Right? I'm going to pick on, let me think of, oh, I don't know, a Tesla, for example, with a very high price-to-earnings ratio. Even an Amazon has a very high price-to-earnings ratio. But the value investor wants to know that they're putting their money to work in companies that are going to maybe be a little bit more confident for them. Right? With a better relationship of dollar invested to value. Dollar returned. And I think another word that kind of falls into the vein of value investing is stability.
Now, don't misunderstand stability with lack of risk. That is not what we're suggesting. But if you were to look at a defined approach between these, growth investors would tend to be a little bit more aggressive. Value investors would be more conservative. Then we have the income investor who is less concerned with capital risk necessarily. And more concerned with will that company pay me in the form of a dividend on an ongoing consistent basis. Many investors have less concern, and many income investors, I should say, have less concern about the capital appreciation of their underlying stock than they have about does that company pay me a dividend consistently. And you should know there are companies out there. Who pay. Every quarter. Every month. Or every year.
And there are even companies that have done so consistently enough to be part of a group known as either dividend kings, dividend aristocrats. We can also look at, for example, in the thinkorswim desktop application, one of the things that we have available to us is our watch lists for companies that have paid a dividend for 25 plus years. Or companies that have paid a dividend for 50 plus years. These are companies that dividend or income investors are looking for. Now, we haven't quite defined dividend just yet. We're going to get to that, to flesh that out a little more for you here in coming slides. But remember that an income investor ultimately is less concerned with did I buy the XYZ stock at 10? And am I able to sell it at 10?
Or am I able to sell it at 20? They really don't care about that. They're much more caring about I'm buying that stock. Are they still paying the dividend? Do they anticipate continuing to pay the dividend? Are they perhaps raising the dividend? And increasing that payout to the holder of their share? So let's go forward a little bit. Let's talk more about some of the basics associated with stock investing. Let's define what a stock really is. So a stock is simply that representation of ownership in the underlying company, right? So when we purchase one share of stock, we are purchasing a small fraction, and we do, of course, mean a small fraction of this company. And you, as a shareholder, will have respectively a claim to changes in market value.
Maybe those dividends we've spoken about, of course. Your viewpoint is commonly that if you are the owner of a share of stock, it's because you believe the stock's value is going to increase over time. Hopefully, over time, you can measure it with the window of time in which you'd like to be invested in that stock, right? So there's always a measure of hopefully some measure of time involved when you're thinking about it from the standpoint of owning this company, essentially. Wanting that ownership in the underlying stock. Now, for many, the challenge becomes, 'Am I owning it at the right time?' And ultimately, that's where we get down to a review of current prices relative to historical prices. Also incorporating things like what is the company's underlying earnings detail? Are they progressing?
Are they making money consistently? Are they making the same amount? Are they making a greater amount on a quarter-over-quarter or year-over-year basis? These are all things that an investor needs to be considering before buying a single share of stock. And obviously, many times the trader will incorporate that process that just says stock appreciation. I think the stock is appropriately valued at $20 a share, but I also think for reason X, reason Y, and reason Z, that over the coming 90 days, I could be able to sell at $25 a share. And so that's the trader mentality that says, well, maybe it's undervalued today, and in a window of time equal to my comfort zone, I'm hopeful to sell it five points higher. I'm going to look to take what we would call stock appreciation.
That's just simply the price per share of the security you invested in went up. That alternative method is the dividend payout. That's the periodic issuance of dollars to the shareholder of record. That dividend gets paid to you commonly as the owner of shares in the form of cash. Now, there are alternatives to that. There are extenuating circumstances. Sometimes a company will pay a dividend in the form of stock. And in many cases, an underlying individual stock can afford you the chance to not just accept a dividend from them, but to take that dividend and immediately reinvest it into that same company. We call that a dividend reinvestment plan. And for the majority of your United States equities, you are allowed to do that free of charge.
It's one way to build a portfolio that just grows and grows on itself. Remember, one of the great things about saving money in general is the compounding effect, right? And if you think about your dividends being compounding, well, every time you get a dividend, instead of utilizing that dividend, some investors, younger investors commonly, or those with more time on their side, would lean into reinvesting those dividends to increase the compounding of that underlying equity. As you get older, though, maybe that dividend payout is no longer necessary to be compounding. And now that dividend becomes your income for your longer term portfolio. And so, as you get towards those ages of retirement, we start making shifts in terms of what will that portfolio do for me, right? From age 30, 25 and above, right?
All the way out to 50, 55, 60, and hopefully no more than 65. We have that portfolio built in a manner to provide a measure of return with which we are comfortable, but also understanding that the volatility from that portfolio is also within our comfort zone. But as you get towards those years of retirement, the portfolio no longer needs to grow. It just needs to maintain or hold a steady balance, right? Earning a few percent every year, just to allow you to take out your required minimum distributions, if we're talking about a retirement account, of course. So there's always a process, that we should be thoughtful about. And the biggest shift, or the biggest reason, I believe that a trader would utilize, an investor that is, would utilize these concepts to shift your process, is all about your individual life events.
So remember when you're thinking about your overall portfolio, okay, I've been going for growth, I've been working for growth, and I'm getting a little closer to retirement. Should I start to maybe pull back on that growth process and work more towards value? Maybe some semblance of income? These conversations are out there for you. We want to have them with you on the phones. Never hesitate to reach out and speak with a representative at Schwab to have that conversation. It's a very important one, and we want to help you work through that. But the reasoning behind making decisions like that is most commonly tied to your own life events. We try to make those decisions based on that, as opposed to what the market's doing.
Especially, when you start thinking about things in a very long-term window, everybody; what happens on a month-to-month, year-to-year basis is probably not all that relevant to your long-term investing plan. So you don't want to say, 'Boy, we went through a really rough patch in the market.' I don't know if I could necessarily sustain that type of volatility in my long-term 20-plus year portfolio. Wouldn't suggest that makes sense to make adjustments along the way based on that. However, if you called up and said, 'Hey, Kevin, I'm thinking about making some adjustments to my long-term portfolio.' I'm about to be married, or I'm about to have my first child, or I'm about to send mine to college, which just happens to be where I'm at right now all of a sudden.
These are life events that matter to our bottom line. Those are the reasons we want to make decisions to alter our investment process from a long-term standpoint. So just be thoughtful about that. We try not to let the market dictate those changes and shifts to your long-term approach. So as it states here, how do we lose money in equity investment? Most commonly through the stock's price per share dropping. And at any moment, the income investor needs to recognize that no dividend is guaranteed to be paid. That's why a list of companies that are consistent payers and consistently not just paying, but in some cases raising that dividend, that's why an income investor, a dividend investor will look for that historical measure to validate their reasoning for being in these companies.
So if you're investing for dividends and the company you're investing for dividends with suddenly stops paying the dividend, they're probably not longer in your portfolio. Right? So, all right, moving on. I tend to agree with you, Hyena. I'm a big believer that if we're getting started with school, not everybody is ready to go for a four-year university immediately. Many want to get started by knocking out some credits at a junior college or, you know, a community college even. I'm a big believer in that. You know, the final piece of paper might matter more than some would suggest. And yet not everybody wants to go to four-four. They want to go to four full years at a university necessarily. So good point there. Absolutely. All right. So let's talk about earnings a little bit, everybody.
We're coming in to earnings season pretty quickly here. And, of course, these publicly traded companies, they are absolutely required to tell everybody how they're doing. They are also going to give this earnings statement. It's released on a quarter-to-quarter basis most commonly. And we look at things like earnings per share. How is this rate at this most recent quarter, how does that look relative to the last quarter? Or how does it look relative to this same quarter last year? Remember, businesses can often have cyclical returns from one quarter to another. Sometimes it's the first quarter of the year that a company shows a majority of their returns. So it might not be today, the current quarter, versus last quarter. Rather, this quarter this year versus this quarter last year.
So there's always a way to evaluate these things, of course. Once the company releases their statement, they commonly will hold a conference call. They discuss the report in detail. One of the things we hear these days, these companies discussing artificial intelligence. In fact, there are tracking details out there, tracking software documenting the companies that mention AI in their earnings report. And that can lead, as it turns out, can lead to price action. Now, what's really intriguing is that in some cases, you can know exactly what the earnings report is going to be. And you still might not be able to peg how price action in the stock is going to react after the fact. That's just the stock market, unfortunately. But earnings announcements can commonly bring volatility to the stock price.
And even though we might think that a good report means good price action after the report, it doesn't have to go that way. And sometimes earnings might be good, but the company has a few comments that might be taken unfavorably. Maybe those comments are tied to what the company's expectations are for future quarters, what we would reference as future guidance. And these corporate leaders of these companies, if they start talking about future guidance being scrutinized or we may struggle, these are things that can lead to bumpy rides in the price of the stock. But the main point, as it relates to earnings, isn't just what earnings numbers are, but everything under the umbrella of earnings. What were expectations for the current quarter being announced? What about the outlook for the next quarter going forward?
How about the price action of the stock before the earnings? Did the stock rally? Did the stock rally 20% for the last month before the earnings? And then they announced the earnings, which were wonderful, and the stock drops 10%. Is that simply profit taking? It's also a possibility, right? So outlook, yeah, you're right, Kevin, absolutely. Commonly, the conversation around what we expect next quarter or later in the year can have a lot to do with whether or not the stock reacts favorably after an earnings announcement. You're absolutely right. So there's a lot to consider, but I hope the takeaway is, boy, no matter how much analysis I put on it, whether it's price action, combination of price and earnings detail, the reality is we just don't know how the market's going to react.
And when we start thinking about why, Kevin, you might think about the outlook or the guidance in the future being as important as anything else, it has a lot to do with the market itself. It's process, what is commonly stated about the market. The market broadly is a forward-looking animal, right? Generally speaking, about six to nine months into the future. Some would say nine to 12 months into the future. Really not necessary to try and get too granular there. Just recognize that what we trade at today is not so much tied to how things are in the market at this moment, but rather expectations of the market in the next six to 12 months, many would suggest. Okay? All right. How about more on dividends?
So the dividend is essentially, it's a distribution of the company's profits, right? And they do that commonly, like I said, in the form of cash or potentially additional shares. They are always paid exclusively at the discretion of the company and can be paid. Monthly, can be paid. Quarterly, annually, even semi-annually, right? But it's not so much do they pay the dividend as it is if they pay the dividend, do they continue to pay the dividend, right? So a good friend of mine, formerly a Schwab regional investment strategist, Mark Item, one of my favorite individuals to work with, gentleman retired a couple of years ago, and he used to say, look, if I'm investing, for the purpose of a dividend, and that dividend gets paused, gets cut, reduced, or negated altogether, that company is out.
That is, they are dead to me. Moving on. Okay? Just remember, if you're investing for the purpose of a dividend and that dividend is no longer on the table, that generally means it's time to at least evaluate that investment. Is it any longer worth your time? More importantly, is it worth your dollar? Right? So dividends can be a big, big part of your overall investment plan. And remember back to what we said a couple of minutes ago about dividends being either great way of compounding your individual position in a security, but also as we get nearer that window, when we're going to start drawing on our balances, those dividends can then be shifted from a reinvestment process into more shares and just be paid out to the shareholder, right?
So that can look like income on a month-to-month, quarter-to-quarter annualized basis. All right. What else do we need to know when we're talking stocks? Well, we got to know about the potential for corporate actions and news. One of those corporate actions we just got done talking about, dividend payments. We need to also be aware about mergers, acquisitions, potential for a stock split, even a spinoff of a company from the parent company. So let's talk of just a couple of these things, first of all, that we need to be aware of. So corporate actions like stock splits, you're going to commonly be made aware of these in advance. Same with these dividend payments. And I'll show you here in thinkorswim where we can find those in our charts, fairly clean to see on your chart, upcoming dividends, upcoming splits, upcoming earnings windows as well.
The spinoff, a little less common, but it does happen. Surely a scenario right now, and this is certainly not suggesting that it's going to play out, but as an example of a spinoff that might occur in the future, if you were looking at Alphabet, the parent company for Google, which is the owner of YouTube, as an example, some have suggested that YouTube could be spun off from Google and become a publicly traded separate entity altogether. That's what a spinoff would be. And in that case, if it were defined as such, Alphabet shareholders would get shares in YouTube in that scenario. Again, just an example, not even a speculation of it happening, just an example of how a spinoff might work.
Now, for many of you who are watching the market day to day, you're already paying attention to the other side of this slide, the market news. We're paying attention every week to headlines, to data points, right? This week, we heard from, we got inflation data. We got PPI and CPI, the Price Producer Index and the Consumer Price Index, both of which can give us a little understanding of how prices are acting relative to last quarter, relative to same quarter last year. We can also do something similar with the retail sales that just came out here today. And then, unemployment, right? We have to consider all of these things. All of these are factors in what can drive market movement, both from a larger or broad market spectrum, but also from an individual equity basis as well.
It's important to remember that not every move in an underlying single equity, a single stock that you could just pick out of the universe, not every move it makes is based exclusively off its own merit. And what I mean is, say, take for example, you own that XYZ stock, probably the most popular symbol I've ever come across. You own XYZ and everything positive about XYZ says that the price should be going up. But for one reason or another, bad news on the day, maybe that unemployment report was unfavorable. The market reacted in an unfavorable manner. We saw the S &P down 1%, the NASDAQ down 1% or more. If you think about it, if your stock is going lower because the rest of the market's going lower, hey, that's okay.
That's relative performance, right? What we don't want to see, necessarily, is the rest of the market moving upward while our single stock takes it on the chin, right? So, you can evaluate and incorporate your overall market news and detail with your process, but it can be very difficult and very helpful to recognize that sometimes that movement you're seeing in your stock is more tied to being part of a basket of other stocks having a similar struggle any given day and not so much tied to its own underlying balance sheet, metrics, enthusiasm around the price, etc. All of that can be very important to keep in mind. Hard to keep in mind, but very important to keep in mind. Let's see here. We're going to move on to talking about asset classes, but I did see some postings coming through.
So, well, yeah. I mean, earnings expectations. Yeah, you're right. You're finding a range. A proper expectation, that could always be a little bit more tricky. One of the things you might look for is just a combination of factors. And I think the ones you mentioned, your third-party companies, for example, probably do provide a review, if you will, of expectations and give you kind of a sense of a series or a range of those expectations, right? Expectation that we have, like Schwab. com, for example, if you went in and looked, it'll say we have this many analysts covering it. This is the range on a price per share basis. And that could give you an expectation. But again, as I mentioned earlier, when you think about it, even though we could have every single piece of data and have it right and still get the price action after the announcement wrong.
So yeah, absolutely something to be aware of. A lot of traders do want to have an understanding of what is the expectation and that helps them to base decisions after the fact. But it looks like Mike also provided a little bit of an answer there. Thank you, Mike. Yeah. Okay. So Gazelle, your question here about production levels and sometimes companies announce their previous production numbers way ahead of an earnings announcement. Unfortunately, there's really no way to know if that's going to happen. One of the things about that is that those can be, those are often referred to as surprises, right? They get noted in advance, not on a schedule. Companies will commonly do this as a way to maybe build enthusiasm heading into a report.
But there's rarely, if ever, a defined window of time in which you could expect something like that. Companies, now a company in the habit of notifying you in advance of their earnings about something from their balance sheet that they want you to know about, companies that are in the habit of doing that, that's notable. A little different though, but not going to be able to give you a true schedule on that because we just don't know. They like to be kind of, keep that stuff close to the vest, don't they? And yeah, Eva, you're absolutely right about corporate actions affecting your holdings, affecting your positions. They can happen quite frequently. It's important to keep it in mind, especially in instances where you find yourself in a longer-term portfolio overweighted as a result of some corporate action that could be taken as well.
Remember, there's a big difference between how you handle an account that's traded account versus an investor account. But these are all things we have to keep in mind as we consider our investment plan, our investment process, and even your investment philosophy. Now, the asset classes that are commonly referred to will include our U. S. stocks, U. S. REITs, and Master Limited Partnerships. Now, really, MLP falls into a very, very small group. And in many cases, United States REITs also fall into a fairly small group. REITs definition, Real Estate Investment Trusts. These are simply a larger investment designed to provide provide you with access to the real estate market without necessarily being a real estate investor per se. So this is more of a little bit more common from a income generating portfolio, I would suggest.
The U. S. Real Estate Investment Trusts, again, the design being one to pay out in the form of dividends or interest to these shareholders. Most commonly, one you are all most familiar with likely, is this U.S. Stocks group, which we talk about as large cap and small cap and maybe mid cap or even micro cap when you're thinking about U. S. stocks collectively. For the majority of United States investors, U. S. stocks are going to make up a very, very healthy component, but not the entirety of a long-term portfolio. Remember that international components likely have a place in many long-term portfolios as well. Because the market now more than ever is an amalgam of not just the U. S., but the overall world.
The world economy is a real thing and it absolutely will have an impact on how the U. S. market performs as well. Now, next up, in terms of additional asset classes we need to be aware of, we have U. S. Treasury, we have bonds, and we have commodities. So commodities are essentially those real assets, right? So when we talk real assets, we're talking things like oil, things like gold and silver. They have a relatively low correlation to price action movement in underlying equities, but they can also be volatile. And so one of the things about commodities that will happen, periodically, is we see U. S. or broad market equities undergoing difficult window of time. Well, commonly we'll see commodities doing okay in those windows.
And this just reminds us about why a diversified portfolio is most often utilized by the investor in that very long haul process. It's because by having dollars invested in all of these groups, Treasuries, bonds, U. S. stock, REITs, maybe limited partnerships, all of that, they don't work together all the time. In fact, when some of them are going up, the others are going down. But conversely, when things that were going up are now going down, the ones that were going down might now be going up. And so we're getting a balance from the overall layout of a portfolio. Those bonds are generally thought of in two ways. Common bond investment can be as simple as the U. S. Treasury market, where you're buying investment, essentially buying debt from the United States government, getting paid a set rate of return.
You could also buy debt in an underlying equity, a company who is desiring to take your cash and put it to work for themselves in their business. But they're going to pay you a rate of return for that as well. Those would be known as corporate bonds. And then there's that U. S. Treasury, like we mentioned, where it's a bit more of a, well, it's considered more stable because it is implicitly backed by the U.S. Treasury, which is believed to always pay those rates to us. Now, that's not a guarantee. Nothing ever is. Now, what about those major indices? For those of you who see us on a consistent basis in Trader Talk, you know about the S&P 500, the 500 approximately, because I think we're sitting on 502 at the moment.
But these are the 502 largest companies in the United States. And it is a, whoops, sorry about that, as a broad measure of the health of the overall U. S. market. And so you'll hear us talking about the market per se. I'm commonly referencing the S&P 500 just because it is the most broad. It is the largest. And it's also the one that is most commonly referenced by the majority of pundits and analysts out there. Now, the Dow Industrial Average, many of you, when I first got started in 1997, we talked about whenever I heard the market, I just assumed they meant the Dow Industrial Average. But the Dow Industrial Average and the problem with the Dow is, as you can see, it's only 30 stocks.
Is that really a wonderful reflection of the health of the U. S. market? Probably not. Certainly not as broad as what we can get from the S&P 500, right? Now, we also have, of course, the NASDAQ, which is about 3,000 plus companies, heavily weighted towards technology, not exclusively, but heavily weighted that way. And you can be a member of the NASDAQ index and also be a member of the Russell 500. Now, you can't be a member, excuse me, I said 2,000, I meant to say the S&P 500, I apologize. You can be NASDAQ and S&P or both. But the Russell 2000 is going to look at the 2,000 smallest stocks within the Russell 3000 index.
So that's a half-weighted investment based on size of these individual companies and how they fall into that overall matrix. But we talk a lot about the difference in price movement and valuation relative to the S &P 500, the NASDAQ broadly, or even some cases, the NASDAQ 100, the top 100 NASDAQ stocks by size, and then the Russell 2000 as we reference them, the so-called small caps. And then, as we go forward here, we're going to talk about this quite a bit. We talk about the top-down methodology. It's a big part of how we go forward to understand where is money moving, where is the strength of the market, where is the weakness in the market.
I think that this is going to be a wonderful way to just end the conversation today because we're going to pick this up next week and work through this top-down methodology. Now, if you'd like to see it in a bit more in action conversationally, well, then visit me in our Trader Talk segments. Now, tomorrow, our Trader Talk segment in the morning is a non-archived version. It's our Friday session. It's the only one that is not archived. We archive Monday, Tuesday, and Wednesday at market open. But if you're available to join us, I'll be joined by my buddy James Boyd, and we will be talking about the individual markets tomorrow with this concept of the overall review of the S &P 500. A look at the NASDAQ 100 as well.
Look at the small cap investments and a discussion as always around understanding the top-down methodology. So, a very big part of what we do here on the YouTube coaching channel. So, big thanks to all of you for joining me today, for sticking with me through the segment. And I'm really hopeful I get to see you all back next Thursday. Big thanks to my man, Mike Fairborn. Looks like we had a survey opportunity. So if you don't mind, I'd love to hear from you. I am new to this particular class. So your feedback absolutely matters to me. It all comes to me and I'd be happy to hear from you. So please don't hesitate to share some thoughts and ideas with us there on the survey. Follow Mike and me on X. That's Mike at Mike Fairbourn CS and at Kevin Horner CS. And don't forget, if you liked today's discussion, hit that thumbs up button down at the bottom for me as well. I greatly appreciate that. Last note, don't forget you've also got access to that YouTube coaching channel. Make sure you're subscribed there as well, everybody. And I'll wrap it right there. Have a great rest of your Thursday and let's hook up tomorrow morning for Trader Talk. Thanks, everybody.