The Stock Market: How to Make a Killing in the Stock Market
“Dad says you are “making a killing” at the stock market. What does that mean?” asked Mira, chopping into another cronut and dreaming of owning a cronut company.
Grandma laughed. She knew Mira’s dad was trying his hand at the stock market with limited success. “Well, “making a killing” just means making a lot of money. I made a little bit of money in the stock market and told your dad, and now the whole world knows!”
“How did you do it?” asked Teyus, very interested now.
Grandma explained to them her 4 steps to doing well in the stock market.
Read the news everyday. When you read the news, you pick up all kinds of information. For example, you can read how the Candy Manufacturer has just opened a new line of candies by popular demand. This will tell you that there is a lot of demand for this company. Or you could read how a car company had to do a massive recall. This would mean that there is less confidence now in this car company so not so much demand for it. The more information you have, the better you are at predicting the stock market.
Look at what people are buying and what businesses they are visiting. Do you see a lot of people shopping at a certain store in the mall? What kind of coffee shop do most of your friends’ parents like to go to? Are you beginning to see a lot of people wear a certain brand of clothes? Keep an eye out for these things and you will soon begin to pick up patterns in people’s preferences and be able to better see which stocks will be more “in demand”.
Understand your risk. This is the most important. The stock market is a risky thing to invest in because prices go up and down. You need to ask yourself, “how much am I willing to loose from my savings?” This is called your “Risk Tolerance”.
If you don’t like to chance your money and lose it, then your risk tolerance is low. If you don’t mind taking a chance to lose your savings in return for more profits, then your risk tolerance is high.
You need to really ask yourself the following questions:
- What am I saving for?
- What would happen if I lost all this money?
- How much risk can I take? That means, how much am I willing to loose for a chance to get some profit.
Learn about the companies before you invest in them. Before you put your money somewhere do your research.
- Do a web search for the company website and see what they are all about.
- Read news about that company.
- All companies listed in the stock market have something called a “TICKER SYMBOL” which is basically a 3 or 4 letter code that shows the current stock price of the company, if the price has gone up or down and where it is traded. You can follow this price on the web.
See if you can notice any patterns in this price. Is it lower at certain times of the week? Or is the price going steadily up? Notice the pattern and try to put all the pieces together before you put your money into it.