You may have heard of “stocks” or the “stock market” in movies or books, but figured they were some uninteresting hobby for people over 50. In reality, investing in stocks allows you to support your favorite companies, back new technologies, and build financial stability at the same time.
Before we dive deeper, let's define what a “stock” is. Stocks, or equities, are small portions of a company that investors can purchase. These portions are divided into smaller pieces called shares. This is why you hear about “Tesla Stock” or “Apple Stock”. These shares are exchanged (bought and sold) in the stock market.
When you purchase shares in a company, you are giving the company money in exchange for a minuscule portion of their company. So, when you buy a share of, say, Sony, you own a small piece of the company, and therefore, indirectly profit from every PS5 they sell.
You might be wondering, “Ok...why should I give my money to some huge corporation?”. When you purchase shares of a company, you make money when the shares go up. In most cases, when the company performs well, the shares go up in price, meaning you make money. So, you can think of it as, “Every time the company makes money, so do I” (although at a much smaller scale). Additionally, thousands of companies have stocks available for purchase, not just corporations. You can also invest in companies that develop technologies you enjoy or support, like renewable energy, virtual reality, and e-sports.
Stability and safety is another reason to invest in stocks. If you invest in say, McDonald's stock, there's an exponentially small chance you will lose your money because McDonald's is such a large company. Even if 1 or 2 of their restaurants close, they still have thousands more that remain open. During unpredictable events like Covid, they adapt to continue selling their food by delivering it straight to your door. This overall stability in the company generally equates to stability in the stock price, meaning your investment will be safe as long as the company continues to profit and grow.
When choosing what stocks to purchase, you have to take a deeper look at the company you’re thinking of investing in. You’ll have to look at their financial statements (how much money they make), their stock data (volume, earnings-per-share), and their products and leadership.
You make money in the stock market by selling your shares. The aim is to sell them at a higher price than what you bought them for. This price increase can happen for a variety of reasons. A popular product was released, new technology was announced, a record-breaking number of sales were achieved, etc.
It's important to note that stocks don't always go up. No investment is ever risk-free, and there is always some chance that you could lose your money. Stock prices go down, for example, when a product doesn't perform as it was meant to, or fewer people are purchasing certain items. This is why it's important to conduct thorough research before investing in a company.
By investing in the stock market, you can own a small portion of a company, and profit as the company does well and the stock price increases. You can support upcoming technologies and back innovation, all while growing your money.
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