What I’ve Learned About the Stock Market, So Far

I’ve been investing in the stock market for about 5 weeks, and I’ve learned some things. One, the stock market is unpredictable. Two, shareholders for certain stocks are fickle. Three, retail traders have changed the landscape. Four, big money still rules the day.

Trying to predict what the market will do from day-to-day is usually a losing battle. Having said that, there are patterns that are noticeable. Stocks that have been gaining for a considerable amount of time will eventually fall, then rise again, and then fall again. That’s the case for a more traditional stock that doesn’t have a lot of hoopla around it.

The same rules don’t seem to apply to the more sexy and exciting stocks. Tesla comes to mind. This is a company that attracts a lot of attention, has enthusiastic supporters, and is led by a flamboyant but brilliant CEO. Tesla is a trailblazing company that is launching us into a new era. Self-driving cars, space exploration and space travel, solar-powered homes, and other exciting technologies will change our lives and even our view of Earth. My kids and grandchildren will likely one day be able to travel to space and look back on earth.

Below: The explosive growth of Tesla over the past 5 years

Apple is another company that changed our lives. The iPhone is one of the most revolutionary devices ever created. Not only is it revolutionary, but Apple created a brilliant business strategy around it. Now, Apple is developing an electric smart car that will change how we travel. Apple is the largest company in the world. It’s worth more than entire nations.

Companies like Tesla and Apple break all the rules of the stock market. I can’t see either one of them just tanking. Even when (yes, when) the stock market crashes, these stocks won’t be down for long. They might go through cycles like other stocks, but there’s so much wealth, attraction, and influence surrounding these companies that they can’t possibly do anything but continue to grow for the foreseeable future. Unless an asteroid hits earth or a super volcano wipes out North America, Tesla and Apple will continue to make money and affect our daily lives.

So, yes, I have Apple and Tesla in my portfolio. They’re kinda no-brainers along with Microsoft and Google.

The Retail Trader

There’s also a big change in how stocks are bought and sold. The retail trader, like you and me, can now purchase stocks on our own. Most of us aren’t too interested in buying boring stocks, though I have some in my portfolio. Through apps like Public, anyone can buy into the stock market.

You don’t have to buy an entire share, either. Fractional shares are offered, so even someone like me can invest in expensive stock like Google or Amazon by buying a slice of a share. Most brokerage companies require that you buy an entire share. There’s not many people out there that have $2607 for a single share of Google, or $3708 for a single share of Amazon. That left a lot of people out of the market, but now we’re in it. We’re changing the nature of the stock market, and making it possibly less predictable and more predictable in the same breath.

Below: Expedia hit hard by Covid-19 but recovering quickly

The retail stockholder can be more skittish. A broker isn’t going to panic and sell off all their shares in a company because the stock went down slightly on a single day. Someone who is watching their stock (their hard-earned money) go up and down throughout the day, every day through an app like Public, likely will. I’ve seen a lot of panic selloffs just in the short time I’ve been watching the market. It drives me nuts. And I’ve been guilty of doing it myself!

Big Money

Still, as much as us lowly average Americans are influencing the market, I’ve noticed that big money still rules the day. The big time investors can launch or tank a stock on a whim. If they want to make more money, which they do, they can make that happen by pulling their money out of a company, then watching the share prices drop, then buy back in.

The only way retail traders can do that is by sticking together. You’ve probably heard of meme stocks. These are stocks that get the attention of retail investors communicating online through social media, like Reddit. They all go in together to buy a stock and try to launch it to the moon. GameStop and AMC are two of the most recent meme stocks.

I avoid those stocks because I still believe in the fundamentals of investing. I only invest in very good companies that I intend to hold for a very long time. There is a small portion of my portfolio invested in penny stocks that might take off in the future, but for the most part I try to diversify and keep a level head about what stocks I do buy.

The war between the hedge funds (big time investors) and the meme stock trader will go on. It’s fun to watch, but I stay out of it.

My Results So Far

Okay, so how have I done in the short time I’ve been investing in the stock market. Well, so far I’ve made money. I could have made more if I hadn’t panicked here and there. So far I’m only ahead by $28, but hey, I haven’t lost any money, so there’s that. I’ve also changed up my portfolio quite a bit, trying to put together one that is less volatile.

Below: The more predictible stair-step increase of Google stock

I’ve also done a lot more research on companies and sectors, learned about dividend stocks, stocks to have for when the market crashes, and added stocks across various sectors. Technology is my favorite sector, but I’ve added consumer staple stocks as well.

I still want to add some banking and real estate stock, but I’m leery of both, considering they were a big part of the Great Recession that hit in 2008. Overpriced houses, home loans that are more than the home is worth, people overextending themselves, and all that jazz just makes me want to stay away. Plus, it’s hard for people in Decatur, Illinois to understand housing bubbles. Our starter homes aren’t $900,000. I honestly don’t know how anyone can afford to buy a home in California or Boston. Really, what do they do for a living? All of that feels foreign to me, so maybe I should just stay out of that sector.

And that brings up a good point. You should invest in companies that you know and understand. I enjoy keeping up with the news on Tesla or Apple. I couldn’t care less about Grandpa Savings and Loans.

Plus, not many retail stockholders are attracted to boring, crusty stocks or the yawnfest of ETFs. People are thinking about vacationing on the moon, not their bank, which they probably hate anyway.

What Have I Learned

So, with all that said, what have I learned. Most importantly, never invest more money than you can afford to lose. I’m investing with my ex-husband’s money, so I’m willing to risk it. 😉 But I am adding money of my own on a monthly basis, and trying to be as smart about as I can.

Basically, I just try to pick good companies that I believe will be relevant and profitable for years to come, and I don’t intend to sell them until I’m ready to pack up and leave the market before retirement. I have about 15-16 years before retirement age, so I only plan to invest for the next 10 years and then get out. If you’re close to retirement age, I wouldn’t recommend investing the stock market unless you have the money to burn.

If you’re in your 20s, you’re in the driver seat. Man, I wish someone had told me about investing and IRAs back then. I didn’t know how much they can grow over 30-40 years. I could kick myself. Ugh.

Anyway, I’ll chime in once in a while and let you know how things are going, or if I’ve learned anything important to share. And of course as a disclaimer I am not giving financial advice. Lord knows I’m not an expert. Do your homework if you want to invest in the stock market. You could lose your shirt.

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