I usually post on Sunday evenings, either every week or biweekly, but this one is a special blog. CCIV hit an all-time high today on stocks!
I have received several questions regarding the stock market, and I’d like to get around to answering all them. These are the questions I will be covering:
1) What are stocks?
2) How does the stock market work?
3) Can anyone invest in stocks?
4) How do I get started?
5) What determines a good stock to invest in?
I will also be giving some tips I learned throughout my time investing.
I would like to say, though, that I am not a professional! This is all from personal experience and many, many hours of research.
What are stocks?
A stock is an investment that represents ownership of parts of a company. If you have heard the term share and you’re confused on the difference, let me explain it a bit further. The word stocks is a more general term, referring to ownership of parts of several companies. You are a stockholder when you invest in several companies. A share, on the other hand, is ownership of a particular company. For example, I could own 10 shares in Apple or 10 stocks of Apple and Microsoft.
How does the stock market work?
To explain how the stock market works, let’s begin with learning how a company’s stock price is determined. When you’re looking for a company to invest in, you will notice that each has different prices for their stocks. For example, right now (and I mean right now as I write, prices are always changing, even by the minute!), an Apple stock is $133.58, and a Microsoft stock is $244.03. The price of each stock is determined by the company’s worth.
A company’s market worth is known as its market capitalization, or market cap. The market cap is determined by stock price and the number of stocks outstanding. For example, a company with 20 million shares with a stock price of $100 has a market cap of 2 billion.
The change in price of each stock is then determined by supply and demand. This is key to our returns. If you buy a stock at a certain price with hopes to sell it at a higher price, know that this change in price is driven by a buyer and seller exchange. This means that the price for which a stock is sold to you becomes the new market price upon purchase. When a second share is sold, that price will become the newest market price.
If you kept up with the GameStop scandal, then you probably know why the prices skyrocketed for a while. Demand increased! As more people bought, the price went up. But of course, there is much more to this then all of that. I will not get into detail about what happened at Wall Street, but let’s just say that many rich people were not happy about this. There are so many details to cover with this event, and perhaps I will explain it in another blog if you’d like to learn about that. Let me know!
Can anyone invest in stocks?
To invest in stocks, some requirements are needed
18 years of age or older
If you’re under 18 and you want to invest, you would need to open up a custodial account. This means that an adult must open an account for you.
There is no citizenship requirement to invest in stocks, but brokers might make it a long process for you to qualify. Take a look at the sites below if you are not a citizen but really want to invest in stocks.
To get started, you’ll also need to wire your bank account to your investing account, whether it is Robinhood or any other. You will most likely have to wait 48 or so hours for approval, so keep in mind you won’t be able to trade right away after opening an account.
How do I get started?
If you meet all of the requirements above, then you’re set to begin your investing journey! Open up an account with the preferred app.
The app I use for investing is Robinhood. It is beginner friendly, easy to understand and easy to navigate! There are also other good apps to consider though, such as:
There are several more, and you can do your research to determine which is the best fit for you! I personally recommend Robinhood though, not only because it is the most popular and used, but because it is such a good app to get started with stocks! All you have to do is download the app on your cell phone, input your information and wait to be approved. Once you’ve been approved, you’re given a free stock and can also begin investing.
What determines a good stock to invest in?
Now here comes the million-dollar question: How do I know what to invest in?
I personally love sharing advice on what stocks to look into and possibly buy into, but I have also learned that one should not depend on another for investing. To determine what company is good to invest in, look at their financial reports, join a discord and do some research!
My personal favorite discord is WiseGuy. There is a cost to join their discord though, so keep that in mind! Here is the link if you’re interested:
As you do some research, you will most likely come across the term penny stocks, which is simply a stock valued at less than a dollar and are highly speculative. There are many penny stocks with so much potential, so do some research on those as well!
Some stock fields to consider are weed stocks, as rumors go that weed stocks are looking really good in the upcoming months.
Tips for Investing
When I began investing in stocks, I panic sold a lot. I lost over $600 my first few weeks… I was even told to just stop investing because it clearly wasn’t for me. Of course, I refused to believe that. I simply needed to learn more. From my experience, this is what I learned:
Do NOT panic sell. Just as easily as a stock can dip and plummet, it can come back up. I bought a few Tesla stocks last semester at the price of around $400. As I watched it dip, I began to panic. I sold at $336 and lost several hundred dollars. Now Tesla is at over $800. If I had kept holding on to these stocks, I would have made much more than I invested. SIMPLY DON’T PANIC SELL!
Look at their trends. If a company has hit a high and you think it will continue to do good, make sure to take a look at their trends. They may have done good for this week, but what about this month? This quarter? This year? If their overall trend is negative, you might want to reconsider investing in this company
Do NOT place all your eggs in one basket. Investing all of your money in one company is a HUGE risk. Diversifying puts you at a lower risk of losing money. If one of your stocks isn’t doing good, one of your best ones could balance it out.
My last piece of advice is to NOT blindly invest in a stock simply because someone told you to or everyone told you to. Yes, the GameStop stock did so well during that scandal! But the value of GameStop is actually very low. If someone invested a large sum of money at a high and did not sell at peak, then they most likely lost so much more money than they could afford. GameStop hit over $400 per stock last month, but it is now back to $49.30. There was a large return for many successful traders, but the risk was clearly very high. Those who didn’t sell… lost hundreds and thousands.
P.S. If at first you don’t succeed, don’t be afraid to keep trying!