Wall Street in a nutshell

Don’t work for money, make it work for you by Sean Jones

The stock market is one of those things you hear all the time. “The DOW is up! The NASDAQ is down! The stock market is on fire!” These are all things said during the news, podcasts, and even day to day conversations. But for a good chunk of people, the stock market is an enigma to them. It’s not like it’s taught through general education classes or math. It exists and you can go your whole life never understanding how it actually works. But that can always be changed…

“Just hearing the term stock market sends shivers up my spine.”-Gabriel Cerrillo, Business Teacher

What is a stock?

That’s a great place to start. Think of a company like a whole pie of pizza. The pie is separated by slices, but each slice is still a part of the whole pie. That’s what stocks are, a slice of the pie. When you own a stock, you own a piece of a company and become a partial owner of the company. This is explained in an article published by the National Association of Securities Dealers Automated Quotations, NASDAQ for short, “for example, if you own a share of Starbucks stock, congratulations, you are a part-owner of Starbucks.” Now there are different types of stocks that do different things, but for the most part, they are a share of a company. So if we can buy stocks, then a stock market is where you can exchange them. You can of course buy and sell stocks at your pleasure, but you have to do it at a stock market. There are physical stock markets, like the New York Stock Exchange, and there are virtual markets, like Robinhood and e*trade. Robinhood and e*trade are virtual trading platforms that allow people to trade over the internet. This ease of access allows people to buy and sell stocks from their home, at work, or on the go whenever they please. It also allows people who don’t usually have the time to trade on a trading floor and trade when they have the time to do so.

“The use of apps such as Robinhood, Webull, and Sofie have allowed normal people to have access to materials needed to compete with the stock brokers that trade for a living.” -William Hayes, senior

The stock market can also refer to things called indexes. Indexes are an average of a sample of stocks that are used to judge how good the overall stock market is doing. When you hear phrases like, “The NASDAQ and DOW are up again today.” These are referring to certain large indexes (the DOW and NASDAQ in this example).

How does the stock market work?

So now that you know what stock and the stock market is, you can learn how the stock market works. The stock market is composed of buyers and sellers, buyers are the people who buy stock through brokers, and sellers are the people/companies that sell stock. Brokers are the middlemen that work to help people buy stock, think of your Robinhood and e*trade companies. The stock market works on a supply and demand type market, the more people that want to buy a certain stock, the higher that stock goes up, the more people that sell a certain stock, the lower the price of that stock goes. This action of people buying and selling stocks is what causes the changes in the price that you usually see. How do you get started?

Well, according to the same article from the NASDAQ, “You need two things to participate in the stock market, money and a broker.” This is usually done through a company as a retirement plan. You and a company would go to a broker and invest in a retirement plan that you can use after you retire. But if you want to have more control over what you put into your account, you would open an account by yourself through a broker. This account allows you to choose what stocks you want to buy and when you want to sell them. This is called a brokerage account. You can now even handle your stocks through apps.

Many variables can determine what happens to the price of a stock. After big announcements on major developments, the price goes up because people think that that company’s price will go up over time and want to be a part of it. So they buy stocks. After a major scandal, the price will usually go down because people fear that other people will sell their stock and make the price go down, so they sell. Other things can also affect a stock, but it’s good to keep an eye on when to buy or sell. A good rule of thumb is to sell stocks at high prices, and buy stocks on low prices.

“START NOW! Contribute to your employer’s 401-K plan. If your employer matches, then take advantage of the free money. Try your best not to take out loans from your plan. You’ll be thankful when you reach retirement age!” -Tanya Smoot, Business Teacher