f you are a college student or young adult right now, chances are you have fond memories of going to GameStop and buying the latest gaming console or Call of Duty game. This may lead you to wonder how exactly GameStop’s stock is taking off. You may also recall Blockbuster Video stores, and how they went out of business. So, wouldn’t Blockbuster’s video game equivalent be going out of business soon as well?
Just because their stock is doing particularly well, it does not mean GameStop stores are doing well. Check out NBC News’ article about the GameStop stock for a simple breakdown as to what is going on.
With conversations revolving around the stock market, you may be wondering if you should be investing in stocks, and particularly GameStop. Well, it depends. But don’t worry, we’re going to walk you through the basics of the stock market and investing in stocks for you.
Get to know the stock market and the basics by understanding:
- Basic Stock Market Vocab
- What Exactly is the Stock Market?
- Where to Start your Investing Journey
Basic Stock Market Vocab
Before diving into how you can participate in the stock market, you should first get a grasp on some of the key vocabulary terms used.
There are a lot of new and complicated terms that are associated with the stock market, so here are the most important terms that you may be hearing during your journey of investing!
Investment: An investment is the process of putting your money somewhere (like in a company, or a stock), with the idea that you will make money from putting your money in. A very simple example would be giving a company $10, and coming away with $20 when the company succeeds.
Share: When you buy a stock, you are buying one share. This share is the portion of ownership of the company that you now own. But don’t get too excited, because one share is often less than one percent of ownership of a company. So, you aren’t going to be asked your opinion of the latest Apple products.
The prices that are going across the screen are the price of a single share. You can buy as many or as few shares as you would like in a single transaction. And yes, you can purchase a fraction of a share.
Stock: A stock is the collection of shares that a company puts out into the stock market for purchase. When a company opens a stock, it is going public, in that anyone can buy a share of their company. When a company goes public, it often is putting up less than 50% of their company - and it’s usually much less than that for larger companies like Disney and Apple.
Stock Symbol: A stock is represented by a one to four letter sequence to identify it, and this is known as a stock symbol. You will see these when looking at specific charts of the stock market. For example, Disney’s stock symbol is DIS, Facebook’s stock symbol is FB, and Apple’s stock symbol is AAPP.
Portfolio: Your financial portfolio is similar to what you think of an art portfolio. It is a collection of all of the stocks, bonds, and other investments that you have all in one place.
Sector: The stock market is divided into various sectors. These sectors are separated by category of the types of business that the companies are affiliated with. Healthcare, Industrial, and Information Technology are just a few examples of different sectors in the stock market.
If you work with a professional, they’re going to tell you that you want to diversify your portfolio. What they mean by this is have an equal amount of investments in every sector of the stock market. This way, if one sector skyrockets or one sector plummets, your portfolio will not be completely affected by it.
Broker: A broker is the person or firm that completes the transaction set forth by the investor. In the situation where you are purchasing a stock, you are the investor. There is usually a brokerage fee associated with a broker when you utilize them to make a transaction.
Financial Advisor: A financial advisor is a professional that helps investors understand the money that they have. Financial advisors do much more than that, as they can help with your taxes, real estate, and the like.
Keep in mind that if you want to utilize a financial advisor and their services, they are on the expensive end. If you want to look into a financial advisor, talk to your parents to see if they have any connections with existing accounts you may have.
What Exactly is the Stock Market?
No, like really. What is the stock market?
With an understanding as to some of the language utilized in the stock market and investing world, hopefully you’re more prepared to understand what exactly the stock market is.
In the most simple terms, the stock market is where the buying and selling of stocks takes place. This is where investors go to conduct all of their stock-related business.
However, the stock market is not one specific physical location. With the rise of the internet and the pandemic, almost all of the buying and selling takes place virtually. There are also various websites that you can utilize to participate in the buying and selling of stocks.
See, it’s not too complicated.
Where to Start your Investing Journey
As long as you are informed, it doesn’t matter where you start, as long as you start.
There isn’t necessarily a “How to Guide” on how to begin your investing journey with the stock market. So, beginning your journey is mostly about understanding what you want to get out of investing, and if you think it’s the right fit for you.
Part of starting your investment journey, particularly with the stock market, is understanding the risk associated with it. Now you understand that the stock market is rapidly changing, and there are no guarantees that you will make money from your stocks. If you don’t think you’re ready for the stress of the stock market, there are plenty of low-risk investment opportunities you can still take advantage of!
The first recommended step for someone looking to get into investing in the stock market is to find stocks that are deemed as low-risk for you to invest in. Low-risk stocks are likely to grow slowly over time, with few dips in their share price. So, begin by specifying a few companies that you are interested in purchasing stock in. It would be a good idea to keep an eye on these stocks for a day or two to see how they are performing.
With these specific companies in mind, you want to remember to buy low and sell high. The lower the price of the stock, the better time it is to purchase. Then, when you’ve earned what you wanted from your investment, you should wait to sell if it’s going to continue going up. Now, this isn’t to say that you should buy every stock that is low, because sometimes when a stock is low, it’s just going to keep going down, and you will end up losing money from that investment.
There are websites like TD AmeriTrade that allow you to buy and sell stocks on your own within the website itself. With these types of websites, you are opening a brokerage account that you are able to control yourself. You get to choose what stocks to buy and what stocks to sell when you want to.
One key thing to always remember when you are buying stocks in particular, is that your money will not be growing overnight. Sometimes it can, and that’s great to see, but the stock market has ebbs and flows. You don’t necessarily have to understand why it does, as long as you are comfortable in your investments.
If you are feeling a bit overwhelmed by all of this information, do not fret. This is what financial advisors are for. They always have your best interest in mind and want to help you grow your money. Remember, you may not know much about the stock market and how it works, but the more you engage with it, the more you’ll learn the ins and outs of it.
To review: the stock market allows investors to buy and sell stocks, and they do this in hopes of the company growing over time so that they can profit off of the growth. There are also low-risk ways to invest for those that don’t want to take a gamble on the stock market.
Image courtesy of The New York Times.