WTF is this Stock Market Thing? (Step 1)

Only 35 years to go...

Only 35 years to go…

By every account I’ve found so far, if I want any hope of not retiring to a cardboard box under an overpass, I will need to invest in stocks (or write the next Harry Potter book). To me, this is terrifying on many levels:

A. I do not want to live under an overpass. There are hobos there. I know. I’ve seen them.

B. Cardboard boxes get all mushy and melt when it rains.

C. I don’t understand the stock market at all. I might as well go to Vegas and play roulette.

D. I am not a strong writer.

…so my future’s not looking bright. On top of that, I work in entertainment. I barely get by. And I am actually quite frugal and financially responsible. I’ve had a savings account since I was 16. Savings accounts make sense. I understand them. However, I will apparently still live under the overpass relying on my savings account alone. Also, my savings account goes through many months when it doesn’t get any love (sorry savings account, I’ve got to eat, and pay off all that oh-so-useful schooling).

Years ago in college, I was given a $35 AMEX gift certificate and I got it into my head I was going to use that to start investing. So I opened an account at ShareBuilder and bought Alcatel-Lucent SA (ALU), using all of $34.14 (it bought me a little under 1 share). I’m not entirely sure how I picked that, surely there was lots of research and mathematics (or I liked the color of their website. God only knows. Roulette, I tell you). Today, it is worth a whopping $2.09 (and ShareBuilder tells me it’s up .11%). At it’s all time low, it was about $1.18. So if I hold onto it for another 200 years, I just might make my investment back. Needless to say, I was not enamored with the stock market. Who knows were my portfolio would be today if I hadn’t been an idiot with that first investment 10 years ago?

All of that being said, I’ve started to put a little research into how stocks work and how to invest in them. I found this handy article over at howstuffworks that at least gave me a clear and understandable breakdown of how the stock markets work (with a very useful pizza analogy – I think they know their target audience well).

Essentially, it seems like the stock market is like going to the mall. It is a collection of all the “stores” (companies) that you would probably want to “buy stuff from” (invest in). However, the stock market has like “Nordstroms” (expensive, but high quality, long lasting, sold growth stocks – think Coca-Cola, Apple), Forever 21 (you never quite know what you’re getting, could be your favorite sweater for the next 10 years or you might wash it in a few days and it’s utterly destroyed – think majority of the stock market) and K-Mart (they are just going to eat your money, fit poorly and make you wish you’d spent $10 more to go to Target – think Alcatel-Lucent SA).

The problem is, though, that by your mid-twenties, you can totally tell the difference between the quality of clothes in the mall a lot better than the quality of stocks. Not entirely our faults – I mean, I learned early on to CHECK THE TAG WELL. Just because that shirt is filed under the Large section of the rack, doesn’t mean some jerk didn’t just shove the X-Small they no longer wanted in there. Also, I don’t really want to wear a silk shirt to work as a stage hand any more than I want to wear my black cargo pants to a wedding. And initially, I totally had to CHECK THE TAG to see what the clothes were made of. I even had to call my mom to ask if I could just throw a silk shirt in the washing machine (evidently not, much to my mother’s amusement and dismay about my general level of intellect). What I’m trying to get at here is that stocks have the equivalent of tags too. And sometimes you have to call mom to find out what the company is made of (or at least Google it).

CHECK THE TAG

CHECK THE TAG

Don’t get me wrong, I totally understand that if you Google “what stock should I buy?” The responses are totally overwhelming. I’m pretty sure if it were that easy, stocks would not be the Vegas chance game they appear to many (me).

One thought on “WTF is this Stock Market Thing? (Step 1)

  1. Pingback: Calculating Net Worth – You & Your Personal Financial Statement | brokeGIRLrich

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