Dose of Prose
For as long as I can remember, I never liked the news. I didn’t want to listen to it because, when I was little, quite frankly…it scared me. As I’ve gotten older, I dislike the news for other reasons. I find the news is heavily negative, sad, exaggerated and full of propaganda. However, I do enjoy learning and discussing current events. As someone who studies Finance at the Masters level, it’s sort of a requirement. My professors have always emphasized the importance of not only keeping up with what’s going on in the [business] world, but also, having the skills to analyze it and ask insightful questions about it. Although I’m not a fan of news media, I do make sure that I’m getting information by engaging in other mediums. Part of my morning routine includes reading the Wall Street Journal and listening to the Motley Fool Money podcast. I like both of these because I feel that they give a holistic approach to not only finance, but other global news as well. If you want to slowly start incorporating more news, politics, current events and financial literacy into your life, I recommend checking them out.
Gamers vs. Wolves of Wall Street
Speaking of news…at this point, I feel like I’m living through a historic event ever 5 seconds. Don’t you? These days, if it’s not one thing, it’s another. This week (depending on when you’re reading this post), you might have heard about the GameStop stock surge and its impact on the stock market and Wall Street, which is the inspiration behind today’s post. If you don’t know what I’m talking about, then I’ll give a brief explanation:
There’s a website called Reddit, which is like a chat forum/discussion website. Someone on Reddit noticed that a hedge fund (a type of investment fund – think of one giant pool of money managed by accredited investors and often restricted to high net-worth individuals) had taken a massive amount of short trades (a short is when you borrow stock and sell it at its current price, hoping the stock’s price falls so that you can buy it back at a lower price and return what you borrowed, but keeping the difference) against GameStop (a company that was on the brink of going out of business).
This person, convinced everyone in a discussion thread to come together to buy as much GameStop stock as possible. This caused the price of GameStop stock to shoot up (remember how I said in short selling you want the stock price to fall?) and this caused the hedge fund to lose billions of dollars. As a result, the hedge fund bought the GameStop stock back at astronomical prices, which sent the price up even more. This is called a short squeeze. The same thread on Reddit started causing short squeezes to other hedge funds as well, sending many into bankruptcy. Meanwhile, gamers and other regular folk (like you and me), started making big bucks, like thousands even millions of dollars in a matter of days.
Wall Street and the White House were not happy about this to say the least – calling what the Redditors were doing ‘illegal.’ Investing/trading app Robinhood even restricted trades on GameStop and other stocks that were impacted (i.e. Blackberry, AMC, etc.) to prevent the short squeezing and regulate the economy…but with the great wealth gap that exists in this country, it’s hard to not see these forms of ‘regulation’ as an attempt to keep the rich richer and the poor poorer.
Contrary to popular belief, they don’t teach you personal finance in school. Whether you major in finance or get a Masters in it, what you’re learning is essentially high-level finance. Meaning…how corporations plan and manage their short-term and long-term investments, as well as the mathematical formulas, strategies and analyzes that are used to do so. There’s a large variety of areas within finance that you can go into career-wise, just like there is with law or medicine. I’m saying all this to say that this post is not going to tell you how to get rich quick or manage your personal bank account. This post serves as an easy, simplified version of how to get started with investing in stocks. Investing is not only for wealthy, white people. It’s for everybody. Don’t let the language intimidate you. If you need a push, consider this your sign. Start. Nike said it best – just do it.
How to Invest in 4 Easy Steps
I know that was a long winded intro, but I felt it was important for me to preface this blog post with an overview of the GameStop stock surge, since I’m going to be discussing stock investing. I have always wanted to invest in stocks but never did because of good ol’ imposture syndrome. A couple years ago I connected with a professor/mentor who I felt comfortable asking the ‘dumb’ questions to, and one day I went into his office and bluntly asked, how do you invest in stocks? He laid it out for me and from there, I took the leap. Best decision I ever made. I broke down how to get started in 4 simple steps. Feel free to save and share the infographic I made and share it with others who may benefit from this information.
- I’m sure you’ve heard the saying, you have to spend money to make money, and when it comes to investing, this statement absolutely reigns true. I recommend saving/setting aside at least $1000 to play around with. Now I realize that not everyone has access to this amount of money, but if you play your cards right, you can and will make that $1000 back (plus way more) in a short period of time. That being said, if $1000 is way out of reach for you, check out my blog posts on budgeting as well as investing in startups for small amounts of money. Even if you don’t have $1000 on hand or if you just don’t want to spend that much, just take out an amount that feels comfortable for you. Start investing with that small amount and watch your money grow. As you get more comfortable, put more money in. It’s worth it, I promise.
- Once you have a set amount of money that you are dedicating to investing, it’s time to open up an account to hold all of your investments. Think of this like choosing a bank or a primary care doctor. Do your research and find a brokerage or fintech investing/trading app that you like. I personally use Public, because it provides a ton of resources that help make investing easy to understand. Public also allows you to invest in slices of stock, meaning you can take a piece of the pie without having to eat the whole pie. Referring back to my statement in step 1, if you don’t have a lot to money to start with, or if you’re hesitant about diving deep in investing, try finding an investing platform that allows you to invest in slices of stock. By doing this, you can spend $30 on Apple stock, instead of $130. Again, find what works best for you, but I recommend Public, Charles Schwab, TD Ameritrade, Chase or E-Trade.
- Deposit the money you set aside into your brokerage account. You’ll need your banking information to do this and it’s super easy and quick. Just like you make a deposit in your bank account, making a deposit in your investment account works the same way.
- Start investing! Easier said than done I know…but if you have absolutely no idea where to start, I recommend putting your money into a pool of stocks called Exchange Traded Funds (ETFs). Examples of good ones are VEO and VOO. Why? Think of it this way: if you put all of your eggs into one basket (i.e. only applying to one school, putting only one offer on a house, going on a road trip without a spare tire, etc.) without any backup plan, then you’re more likely to put yourself at risk. Putting your money into a variety of investments is safer than putting all your money into just one investment. This is called diversification. ETFs are considered safer/less risky, because they consist of a group of different stocks. I also have a blog post on how to pick the #1 stocks every time, without incurring any losses, which has some insightful tips as well.
Save & Share the Investing Infographic Below!
(click to enlarge the photo)
Look, Listen and Learn
Ultimately, his post is not meant to tell you how you should use your own money. The point of this post is to show you the basic steps to take if you decide to start playing the investing game. How you go about getting in the game, really depends on your level of risk aversion, the types of companies and industries you’re passionate about and overall, your willingness and curiosity about financial literacy. If you are into tech, look into investing in tech companies that you like and follow. If you enjoy learning about the environment and climate change, maybe look into stocks that involve clean energy. The list goes on and on.
Yes, there are certain strategies that money managers and accredited investors use to invest, but you don’t have to know about that to get started. This is why it’s important to listen to those podcasts and keep up with the financial world as I mentioned in the beginning of this post. See what others are doing, pay attention to recommendations that finance professionals have and use those resources to come up with your own strategy that works for you.
I hope this blog post was helpful for those who have always been curious about the stock market and investing but didn’t know where to start. Trust me, I’ve been there. I am still learning new things every day and it’s okay to not know. There are so many resources out there, you just have to read, research, ask questions and think strategically. Leave a comment and let me know if you invest and/or what you plan to do if you haven’t yet.
