Understanding The Stock market: The Teen Investor’s Guide

Written by Danielle Pollack

The cost of a share of Apple in 2010 cost buyers around $30 per share; today, that share would be worth ten times that price. That's the power of the stock market, a place where money used to purchase shares in various companies can grow and shrink constantly depending on the current state of the economy and company. 

What Is the Stock Market?

The stock market is a place where buyers, also known as investors, get the chance to hold ownership stakes in a publicly traded companies by buying and selling stocks. The NASDAQ and New York Stock Exchange (NYSE) are the two main stock exchanges in the U.S.

How It Works:

Why do companies become publicly traded? Most of the time, companies need more capital to scale, and one way to raise that capital is by undergoing an Initial Public Offering (IPO). Through an IPO, investors can purchase shares in the company. Those shares can be bought 

and sold constantly between investors from all backgrounds, with prices of the stock changing based on many factors. 

Why Prices Change:

Stock prices change because of multiple factors. Some consistent reasons include company performance (profits or losses), economic news (changes in interest rates, inflation, and job numbers), global current events (wars, political changes, and natural disasters), and even investor psychology (opinions shared between investors about a company).

Types of Stocks

There are many types of stocks to consider when investing, some include: common stock, preferred stock, growth stocks, value stocks, and blue-chip stocks.

How People Invest

Investors chose to invest in stocks in many different ways including indiviually, index funds & ETFs, dividend paying stocks, and active trading.

Risks and Rewards

Risks and rewards come along with being an investor in the stock market, over decades the stock market has consistenly proven to deliver strong returns to investors and build wealth. Even though sucess can be an outcome, there are many risks that go along with it. Prices can fall quickly and investments are never guaranteed. Investors typically aim to diversify their portfoilos and consider long term outcomes for this very reason.

Why It Matters for Teens

The sooner investments start, the longer amount of time the money has to grow and produce compound returns. The stock market is a great tool for anyone eager to grow their money and invest in ideas they believe in.

“If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.” - Warren Buffett