How does the stock market work? The stock market is a platform where people can buy or sell shares, as well as other financial instruments such as bonds.
Shares are like a proof of ownership of a fraction of a company. Investors who own shares will, if the company makes profits, receive dividends as long as they own the shares. They can also make a profit by reselling the shares if the stock price has increased compared to the initial acquisition price.
The stock market provides a market price for shares that are traded on it. The price is determined by supply and demand: if there are more buyers than sellers the price will go up, and if there are more sellers than buyers, the price will go down.
Stage 1: My initial investments: Netflix: I chose Netflix because I think it has a lot of potential. It is not yet making a lot of profit and the stock is already expensive (the P/E is very high) but it will become very profitable.
Tesla Motors Inc.: I chose Tesla because I know they have launched a new car which is more affordable and already very successful so I think the company will make profits soon.
Mc Donald’s: It is a very well known product and brand which keeps doing business even in times of crisis.
Reflection half way through: During the project, I made (and am still making) a lot of changes to my portfolio. I started with shares from five companies and now there are eight different companies in my portfolio. The only shares that were in my initial portfolio and that I still have are from Tesla. Tesla was in the negatives not long ago but, before that, it had always been good; it is one of the best companies I have. I think it was good when I first bought it because they had just released a new car which was very successful. Another really company I bought after is First Solar Inc. It is the only company I have that hasn’t been in the negatives since I bought it. One company that really surprised me in the way that I wasn’t sure it was going to be good but it actually was is Apple. I bought it a while after the Iphone 7 was released but it was still a good investment.
Recently, my dad told me to buy some shares from Deutsche Bank. I did and it was a good advice. Since Deutsche Bank had never been so low, it could only go up, so, right now, it is positive 7% and is one of the best companies I have.
Overall, I think the reason why I lost so much money and why I am 44th in the ranking is that I made too many changes to my portfolio and now I have too many companies. However, I don’t think I am going to sell shares because I want to see how my portfolio goes when I do not make changes for a while.
Final reflection: There are two companies which have been really god recently: UPS and Deutsche Bank. I know that Deutsche Bank was really beneficial because, when I bought it, it was lower than it had ever been, so it could only go up. However, UPS wasn't always good. I sold it a while ago because it wasn't doing well at all, but now it is one of my only companies in the positives. Right now, the worst companies are Ab Inbev and First Solar Inc. This is strange because First Solar Inc used to be one of the best companies in my portfolio. After I bought it, it stayed in the positives nearly all the time. I did some research and found that the company wanted to focus on newer solar modules and restructure operations, so they laid off more than one-quarter of their staff and they expect at least $500 million in charges. This restructuring was announced on the 16th of November in response to steep price declines and lower demand in China. I did not find the reasons of Ab Inbev's low performance.
If I were to do the project again, the first thing I could do better would be to keep companies a bit longer, instead of selling my shares when they've only been in the negatives for less than a week. For example, I sold Netflix and it is currently pretty good. This project taught me a lot of things about the stock market, I didn't know it could be so unpredictable. I also learned to be a bit more patient and to think and do research before doing something (in this case, buying or selling a stock).