Stocks 101: what are stocks?

Hey there ladies (Madelyn) & lady lads (me) 🤠 Welcome back to Monarch 💫

What a beautiful day to spruce up our financial knowledge!

Crack open an ice cold BUD (or grab some SBUX, depending on your timezone) and get ready to peek into the World’s frat house the stock market.

To warm us up, here’s a ✨not-so-fun but also fun✨ fact:

Today’s Monarch’s Menu:

• What is a “stock"?

• Why companies issue stocks

• Why people invest in stocks

• Real world example: Amazon (Jeffrey’s Empire)

What’s the deal with stocks?

• Investopedia’s definition: “A stock, also known as equity, is a security that represents the ownership of a fraction of the issuing corporation.”

• In Layman’s Terms: Stocks are like your slice of the company pie 🥧

• Casual midwest banter: “I snagged two Amazon stocks today!”

• Typical Facebook feed: “I’m now proudly owning two shares of Amazon!”

• Gen Z fam bam: “Just became business partners with Bezos 🤝🚀”

Why do companies issue stock in the first place?

Companies sell shares to the public to raise capital (ie: the amount of money they have).

This money can be used for a variety of things like:

• Expansion (launching new products or features / general innovation),

• Paying off company debt, and/or

• Attracting / retaining talented employees (offering stock options to employees can be a powerful incentive)

Why do people invest in stocks?

1. $$$ Growth Potential: Stocks have historically provided a higher investment return compared to bonds or savings accounts 📈
   (*higher reward and higher risk 📉)
   

2. Diversification is King 👑: Diversifying your stock portfolio, aka spreading your investments across a variety of company types, lowers your overall stock market risk.
   

3. Ownership: It’s pretty sick to invest your money into companies you care about 😇 And when they do well, you benefit 🚀
   

4. Dividends: A portion of the company's profits paid out to shareholders (typically each quarter) just for owning stock in the company 🤯
   

   Dividends in Layman's terms: You get paid a few times a year (typically each quarter) just for owning that company’s stock!

Dividends example: Coca-Cola (KO)

Coca-Cola’s current dividends: 46 cents per share.

If you started the year with 50 shares of KO, you’d have an additional $46 from their Q1 & Q2 dividend payouts in your brokerage account ($0.46 per share, twice!), regardless of how the stock itself is performing 🥵

BFFR: Remember, while the potential for high returns exists, the stock market also comes with its risks. It’s always crucial to do your research and possibly consult with financial professionals.

Why do stocks always do lil dances in price?

There are a 💩crap ton💩 of factors that can influence which direction a stock price boogies ⬆️💃🏼🕺🏼⬇️ which will require another newsletter entirely.

Here are a few common influences to wet your whistle until then 😮‍💨:

1. Earnings Reports: Whether or not a company has made a profit or lost money over the past quarter

2. Economic News: Think interest rates, unemployment numbers, or inflation rates

3. World Events: Political instability, wars, or major elections can sway the overall stock market mood

4. Industry Trends: A surge in tech innovation or perhaps a slump in oil prices (currently in an AI booooom 💥)

5. Company News: Mergers, leadership changes, or significant product launches.

Real-World Example of the day: Bezos’ Baby 👶🏼📦🚀 

Amazon (AMZN) went public (ie: became available for purchase on the stock market) on May 15, 1997 at $0.075 per share*

Big Time Rush🎤 Returns 🤑: If you invested $1,000 into Amazon on May 15, 1997, it would be worth over $1.1 Million dollars today

*Share price adjusted to accurately reflect the four stocks splits it has gone through

• Today’s Price Tag: One slice of Amazon pie (or one share) costs $137.67 (as of EOD 08/15/23)

• Rewind to January 3rd, 2023: A slice was only $85.83

• And back on September 2nd, 2022? It was $133.27

So, if you treated yourself to an Amazon share on January 3rd and decided to sell it on August 15th, you'd be richer by $51.84.

But if you jumped in on one stock September 2nd, 2022, and sold it on January 3rd, 2023? Ouch. You'd be down by $47.44.

What if you bought on September 2nd, 2022, and still have your stock(s)? Trick question - you haven’t won or lost any money beyond the initial purchase of the stock until you sell that bad boiiii.

That’s (almost) all for today…

Please let us know your thoughts on this newsletter with the click of a button below

Ok, that’s all 💘

Stay connected, stay curious, and remember - the more we know, the more we grow! establish the skills needed for world domination.

TTYL,

Bailey (she/her/lady lad)