Student Take
The stock market has been crowding the headlines recently, and if you’re anything like me, you can find all the news overwhelming. So, here are some simple explanations to common questions about the stock market from a student’s view.
March 3, 2021
What is the Stock market?
Buyers and sellers trade shares, they have on companies (stocks) in hopes to benefit themselves.
But some might ask, what are stocks?
Stocks are an ownership share of a company. This doesn’t mean that you get a parking spot, or have a job at this company, this means you get a percentage of the companies profits or losses. For the common person, stocks are a way to gain money through common trades. They get a share of a company in hopes to earn a return on their investment, whether that’s through trades or dividends (payments from the company to shareholders). For a business, stocks are a way to raise money and grow their business.
How does the stock market work?
Buyers and sellers are constantly looking and observing the market to produce the most money for themselves. This is why money is constantly moving around in the stock market. Investors typically sell their stocks when the markets money is on a rise, or when they need to get out of a failing share.
Why is the stock market in the news right now?
The companies, GameStop and Reddit have been circulating when talking about the stock market, but why?
Recently GameStop’s stocks skyrocketed because of investors short selling (professionals borrow shares to sell but then buy back later so they can return them and still profit even if the market goes down). This is how GameStop was named a “short squeeze”. The most controversial point of this frenzy is the limits interactive brokers have put on buying and trading GameStop stocks. This has caused a lot of people to become disappointed and frustrated, some even have sued companies like Robinhood because of their loss of access to their stocks.
In regard to Reddit, one community called “r/wallstreetbets”, people were actively discussing the GameStop stocks squeeze. As well as reddit, many people used twitter as an outlet to discuss the changes with fellow investors.
How could a Student benefit from this situation?
As a student, we are not allowed to make a trading account till we are 18, but a lot of classmates I know have invested in the market with their parents. Knowing how the stock market works and the ins and outs of situations like the current market can set us up for potential success if we choose to participate in the market in the future.
