Stage 1 (Initial Research):
The stock market is a market where shares of publicly traded companies are issued and traded. There are markets all over the world and based on what’s happening, it has a large impact on the global economy and everyday people. Crashes can lead to economic recession while booms in the stock market are a sign of a strong economy. Some examples of world markets are: NASDAQ, The NYSE, Tokyo Stock Exchange, London Stock Exchange, Australian Securities Exchange, etc.
In the stock market, the basics are stocks, shares, mutual funds, and bonds, but there are more. A stock and a share are very similar, they basically refer to the same thing, but stocks are more general than shares. For example, if someone says they own stocks, they are usually referring to the fact that they own shares in a number of companies; while if someone says they own shares, they will be asked which company they own shares in. Shares are when you purchase a portion of a publically traded company and you make or lose money based on the company's performance. You also have an option to sell your shares if you think that will make you the most money. On the other hand, a bond is where you lend money to a company for an amount of time (that you choose) and when that time is up the money is returned with interest. A bond is not traded on the stock market, it’s traded on bond markets but it is similar. An option that ties these two together is a mutual fund. A mutual fund is a portfolio of stocks, bonds, indexes, etc. that you can invest in, that is a safer bet than individual stocks and bonds.
In the stock market, there is something called “supply and demand” which directly affects the individual share price. Demand is the amount of shares people buy and what price they want to buy it as VS supply which is the amount of shares people want to sell and what price they want to sell it at. Companies want high demand even if the price of the share is high because this means that the price of the share will go up and the company will make more money. Meanwhile if there is more supply than demand the stock price goes down.
There are pros and cons to investing in the stock market. The biggest pro is that if you understand the market, are lucky, and are successful you can make a lot of money without having to face the same risks as starting your own company or having a high-paying career. Investing can be done from the comfort of your home and there are so many choices to invest in. Meanwhile, if the stock market becomes too time consuming or you are unsuccessful you can liquidate it in an instant. Some people prefer to invest in real estate or bonds or directly in private companies because it is a safer option. The stock market can rise and fall violently, so it is not for someone unwilling to take risks.
Stage 2 (Investing):
Stage 3 (Reflection):
So far, the stock market project has not been going very well for me. My rank plummeted early on after a few investments went bad, and it has stayed there, only coming up slightly recently. Except for Lockheed Martin, none of my companies have been very successful. Under Armour was doing okay for a while before absolutely tanking because of a slow down of production, along with United Parcel Service and Amazon. I’m going to hold on to UPS and Amazon for a little bit just to see what happens, but Under Armour has dropped so much I’ve sold it. Fitbit and Phillips 66 were both rash investments but Phillips 66 proved a good choice because of the rising price of oil. While I’ve been feeling the burn from Fitbit since they haven’t come out with new products recently, so I’ve have decided to sell it. Texas Instruments, Procter and Gamble, and Berkshire Hathaway Inc Class B lack any company activity so their stock price has remained the same.
Moving forward, I’m going to cut back on my buying and try to keep my company maximum at around 5. My portfolio spiraled out of control when I had a whopping 8 companies, I could never target which specific company was the issue. I have been lacking research before making investments and I haven’t been following the companies that I’ve invested in, so those are two big changes that I’d like to make. Lastly, the investments that I’ve been making while following others’ advice hasn’t really worked out. My investments have fared better when I follow my gut, so I will continue to make more decisions for myself.
Stage 4 (Final Reflection):
The stock market project has had its ups and downs for me. I started well, then dropped half way through, and have now finished somewhat strong. I’ve had times where all my companies have been doing excellent yet my ranking still will not budge.
The company that worked the best for me was Lockheed Martin. With the election and countries looking to revamp their defenses, the advanced technologies company (which relies on governments for 80% of its revenue) made me a lot of money. United Parcel Service and Phillips 66 were quite lucrative recently as we head into winter needing energy (Phillips 66) and packages delivered for the holidays (UPS exceeded expectations this month by 20%). It's worth noting that the price of oil has risen recently which is good for Phillips 66. Costco Wholesale Corporation and Texas Instruments stayed steady throughout as they are both companies that aren’t directly affected by current events. On the other hand, Procter and Gamble dropped dramatically after being a steady stock for quite a while. I’m not sure why considering it is a company that should do well around the holidays (consumer goods). Under Armour had been doing well until late October, when the company announced that, albeit a stellar year, the company's performance would now be slowing down for the next two years. This saw the stock price fall by as much as 20%.
If I were to redo the project, my main focus would’ve been to buy more shares in specific companies but stick to a maximum of five companies. At the beginning, I thought that it would be a good idea to buy shares in lots of companies, but as I saw my rank drop while people with 2-3 companies rose, I realized I was wrong. The more companies you invest in, the more risk there is, and the more room there is for you to make a mistake. Also, if I had a chance at a redo, I would do more research beforehand. As the project went along, I went from taking other people’s advice and failing to doing my own research and succeeding with my own decisions.
In this project, my main lesson was that investing is an art, it is not just following the crowd. Investing in big companies that you think are popular doesn’t always work, and more often than not, it is better to pick a company that is constantly producing fresh product rather than sticking with the same old. I also learned that each company is different, each company comes with its own set of circumstances and if you don’t know the company then you’re gonna have trouble when it comes to making decisions. For example, for some companies, it is better to sell as soon as they go out because it doesn’t happen often, while with others you may want to wait because you know it will continue to grow for a while. The stock market comes with risks but also with opportunities to make money and learn new things. Based on the way the project went and the things I learned, I will definitely be investing in the future.