Ever wondered what the boring figures on our TV screens represents and the information it carries?
Little wonder the news is boring even worse the business news.
It’s one of those things that can overwhelm us before we even begin; The Stock Market!
Unless we have a finance degree or studied one of the F. A. M. E courses or you just have a keen interest to really dive in and figure it all out. The stock market can remain an elusive web of numbers and acronyms that we’ll get around to understand “someday” when we are older. And wealthier. And generally have the rest of our life in place.
But do we really need to wait? And more importantly, should we be waiting if it’s actually far easier and more attainable to invest in the stock market right now, right where we are?
SO WHAT EXACTLY IS THE STOCK MARKET?
Well, we all know what a market is. Think farmers market or grocery market. It’s just a place where people get together just to buy and sell items, right? The stock market is simply a market where people from all over the world buy and sell stock.
Let’s breakdown the word that really confuses the most people. Stock. Stock is synonymous with the word “shares” and also “equity.” (This is the part where most people get bored out of their minds, but it’s really quite fascinating.) A stock is just an instrument or tool used by a company to keep track of ownership.
Here’s a quick example: Say I wanted to start a company, “John Wears,” where I sell hand-made sweaters. (This doesn’t sound very lucrative idea, but stick with me.) If myself and my two sisters ran this company and we were going into debt buying tons of cotton, how could we get more money to keep the business afloat?
We could get a loan from a bank. Or we could sell stock in the company. [Now, obviously there are numerous other ways to get more money. This is for brevity.]
If we sell stock in the company to our friends, then our friends would in turn give us money to “share” ownership of the company. This would be verifiable by the “stock” they owned. Why would our friends do this? The main benefit, of course, is a monetary one. If John Wears becomes a raving, massive success and gets bought out by Citrus Inc. for 10 million naira, then anyone who owned stock would legally own or be included to receive a percentage of that 10 million, subject to how many stock (or shares) they owned.
WHAT DO THOSE ACRONYMS MEAN?
This part is really easy to understand actually. Just like if you watch supersport, they show the scores of the sports team with their logo next to it. Each stock is assigned it’s logo next to it. Each stock is assigned it’s own symbol (called a ticker). For example, Dangote Sugar is Dangsugar, Access Bank is Access and Capital Oil is Capoil. It’s just simply a way to keep track of companies.
HOW DOES STOCK EARN SOMEONE MONEY? DO YOU NEED ALOT OF MONEY OR A PROFESSIONAL BROKER TO GET STARTED?
If I would be so bold to continue with the John Wears theory, as outlandish as it might sound. Say I sold 100 sweaters in my first year of business. Then the second year in business I sold 20,000 sweaters. Then in my third year, I sold 1,000,000. This would be seen as growth. Growth, in any business, is vital. Growth in a company is how people make money if they’ve bought stock while it grows!
Pretend in 2015 you had #3,000 and wanted to buy stock of GT Bank. And remember, buying stock means you actually buy some ownership of GT Bank(ticker GBT). How much ownership of GTB did you buy? Something like .00000015%. Nonetheless, you are an owner!
So November, 2015 GBT was trading at #57 per share. Meaning, if you wanted to buy one singular piece of stock in GT Bank, you would be spending #57. If you had taken that #3,000 you could have bought 52 shares. 3,000 / 57 = 52.6315
Since you can no longer buy fractional shares, this means you would literally own 52 pieces of stock or shares of GTB. Total value 52 x #57(the hypothetical buying price in Nov 2015) = #2,964.
As of this writing, those 52 pieces of stock are worth #78.15 per share. Therefore #78.15 x 52 (the amount shares you bought) = #4,063.80
WHOA. That’s #4,063 [how much those 52 shares are worth now] – #2,964 [how much you bought them for] = #1,099.80 profit! Meaning you made over 1 grand, or 30% ROI without having to actually do anything. Your money did all the work for you.
Therefore: No, you do not need a bunch of money to get started; there are countless brokers out there, most of which anyone can access simply through the banks. Sure, you’ve got to start with some money, but that’s like anything in life. You can’t take one class in medical school and become a doctor. Yes, you do need a broker to trade in the stock market, but I hope Nigeria evolves quickly enough to enable customers access brokers through apps or something.
Growth, in any business, is vital. Growth in a company is how people make money if they’ve bought stock while it grows.
THE CONCEPT OF BEING AN “OWNER, NOT A BUYER”.
Owning things that go up in value is the key to wealth. It’s just that simple. The two greatest fields of investing are real estate and the stock market. Over 90% of the worlds millionaires got their wealth from either stocks or real estate (often a combination of both). 90%! That’s HUGE! Literally, if you truly want to become wealthy, it’s an industry you must learn.
In the above example, GBT stock “paid you” over #1,000. That’s how much value you received back, just from buying into the company.To really understand the concept of being an owner rather than a buyer, pretend you spent just #50 and bought some Dangotesugar (Dangsugar)stock 10 years ago. It’s honestly a challenge to figure out exactly how much money you would have. But it’s about #800000 Yeah. That’s a huge amount of money right there. ALL because you decided to become an owner rather than a buyer.
If you can answer the three questions below, then you probably know of a company where you would rather be an owner than a buyer. In turn, becoming an owner could ensure the financial security of yourself and your family, if done properly!
3 QUESTIONS TO DETERMINE IF YOU SHOULD OWN STOCK IN A COMPANY:
1. Do I interact with this company on a daily basis? Companies like Facebook, Dangotesugar,
GTB, Fidelity Bank, International breweries limited etc…
2. Do I know how the company makes money? (This one just takes 5-10 minutes to actually think about. Maybe you have to ask someone or do some quick online research, but it’s easy to determine. I’m happy to help, also!)
3. Do I LOVE this company, their products and do I spend my money there? IF you spend money at a place constantly and you know hundreds of others who constantly shop there and spend money, then the chances are you know of a company where you could invest in and become an owner!
WHAT IS THE DIFFERENCE BETWEEN PUBLIC AND PRIVATE EQUITY?!
Great question. So, private equity just means it’s not on the public stock market. The most popular examples of private companies are Sally’s Bakery , Mimi Drink etc. Neither are on the stock market (therefore, they are private, not public). There are a lot of pros and cons, but that conversation will cause me to go down a deep and dark rabbit hole and I’ll lose most of you. To keep it simple, when a stock is public, anyone in the world can buy or sell at anytime. Literally, whenever they want.
If you own stock in a private company, the buying and selling process can slow down drastically. However, the rewards can be even greater in private companies!
I hope it enlightened you and please ask me question if you don’t understand anything. Cheers!
#Thestockmarket #Economics #Theonomics #Fineducation #fininclusion