In 2018, my husband and I visited Amsterdam for Operation 31 Euro (My 31st Anniversary aka Bday). While waiting on our hotel room, we met a guy from Tennessee, who ironically gave us a small lesson in the stock market. This conversation turned out to be a game changer. I can remember returning home, immediately downloading the Robinhood App, to purchase my first shares of cannabis stock. Honestly, at the time I had no idea of what I was doing. I only knew Tennessee bought cannabis stock and saw a huge profit, so I was going to buy cannabis stock to see a huge profit too. After realizing it wasn’t that easy my interest faded and I quickly forgot about my stock investment. Looking back on it now, it was my lack of knowledge that allowed my excitement to fade.
If you’re reading this, I’d imagine your household was somewhat like mine. Conversations about money only came when bills were due or someone was saying the famous line ” You think money grow on trees don’t you?” Although my mom is the “ultimate hustler”, there were no talk of investments, the stock market, shares, dividends, etc. As minorities (Outliers), were not taught the game of investing as a whole. Instead we’re trained to work, then spend. Even the idea of saving is lost, as most Americans don’t have an emergency savings to fall back on. In a 2014 study by Credit Suisse and Brandeis University’s Institute on Assets and Social Policy, it was found that low African American participation in the stock market contributes to the widening wealth gap between black and white households. That gap seems to only be growing. It’s reported the median wealth for an average white family is $171,000. While the median wealth for a black household is $17,500. Crazy right?!
Looking back on how I treated my own finances and money, I understand that number (yes sad). I had to educate myself because the goals are now different for my family and I. Ownership is what I desire and wealth is what I hope to achieve. You don’t measure wealth by how much you spend, but by how much you keep. So since we’re a family of 5, we need to keep a lot. We require a lot (no shame). I think our reason for not approaching things like the stock market is because it’s not anything tangible you hold in your hand. Then add the fact, at face value, it seems like a foreign language. I mean you wouldn’t pick up a book in Spanish, if you didn’t speak Spanish would you? However a lot of people invest in the stock market without realizing it, and that’s through their 401K through mutual funds. (We’ll touch on later)
As the pandemic came crashing down on us, literally stopping our way of life as we knew it (pause for dramatics), I realized that it was now or never that I get serious about my finances. I went back to look at that investment portfolio I had built off ignorance. I started truly paying attention to the world around me, (because that’s what Outliers do) and teach myself this foreign language that I saw the privileged succeed on. As I watched stores sell out of simple household products like tissue, regardless of the brand, I started to look at the companies making the money. I wanted to own the company and how else can you own a company without being an entrepreneur or the founder?
The Stock Market!!
It was time to learn from that experience in Amsterdam in order to LIVE a better life. Here are some lessons I picked up along the way to help you on your own investment journey:
The Mind Shift
Understand money is a tool, use it as such. Instead of always working for more money, have your money work for you. The idea is to create multiple streams of income that come in, regardless if you’re awake or not. This is considered passive income or “mailbox money” as I like to call it. Income that requires little to no effort to earn or keep. Investing in the stock market can be one of the best examples of passive income. Overtime they increase more than the real estate bond. If there’s anyone of success you follow I can guarantee you the bulk of their wealth probably comes from their investments in the stock market. Contrary to popular belief it wasn’t founding Apple that gave Steve Jobs the bulk of his wealth, it was his large ownership stake in Disney.
What is the Stock Market?
Imagine a small business, yours if you have one! It’s been going really well and now you want you want to expand. You tried getting a loan from the bank but was denied. Typical right!? So instead you decide to go public (IPO = initial public offering), allowing the public to invest in your company for a small piece (share) of ownership. As you start to grow your business you decide to share the profits with your investors through dividends (some companies don’t). Others then began to buy shares from your original investors at a higher price. This is the stock market; people buying and selling tiny pieces of companies based on how much they believe the company will be worth in the future. One of the benefits of owning shares of the company, is you’re able to participate in annual board meetings and vote.
The New York Stock exchange (NYSE) is located in New York City on Wall St. This is where the big traditional companies are traded, companies like Walmart (WMT), GE, Walt Disney CO (DIS). The Nasdaq Exchange however does not have a physical location, theses stocks are instead traded online. They consist of tech companies like Apple (AAPL), Facebook (FB), and Microsoft (MSFT),
If you want want to know how both exchanges are performing you look at the index (comprised of all the companies) There are 2:
- S&P 500 index *most commonly followed*: This index tracks 500 of the largest companies on both exchanges like
- Amazon (AMZN)
- Apple Inc. (AAPL)
- Microsoft (MSFT)
- DOW Index: This index only tracks the 30 most important companies in America on both exchanges like:
- Johnson & Johnson (JNG)
- Nike (NKE)
- Coca Cola (KO)
Open a Brokerage Account:
So now that we have a little background information on the stock market, we can start investing in actual stocks. To do this you will need a brokerage account. A brokerage account is an investment account you can use to buy stocks, bonds, mutual funds and other investments. There are many different brokerage firms to decide from, so be sure to do your homework. Many firms allow you to get started online with no initial deposit. However, you will still need to fund the account prior to purchasing investments. You own the money and investments in your brokerage account, and you can sell investments at any time. A popular one I’m sure you’ve heard of is Robinhood. A pioneer of commission-free investing, that gives you more ways to make your money work harder.
Individual Stocks vs Stock Mutual Funds
As mentioned earlier, purchasing stock allows you to buy or own a share/shares of a company. If there is a specific company you are interested in, you simply purchase shares at that price currently.
A mutual fund is like an umbrella and under it you’ll find a group of companies. This means when you invest in a mutual fund, you’re investing in many different stocks with one transaction. There are 2 types of mutual funds:
- Index funds – As mentioned earlier S&P 500 or DOW are indexes. When you invest in an index fund you are investing in all of those companies that it tracks.
- ETF (Exchange Traded Funds) – involves a collection of securities like stocks and tracks the index. Your 401K is usually comprised of these. For example Vanguard S&P 500 ETF (VOO) is made up of some of the larger companies like Microsoft (MSFT), Apple (AAPL), Amazon.com (AMZN), Facebook (FB) and that’s just to name a few.
What to look for in your company?
One of the benefits about investing, especially for entrepreneurs (Outliers), is the more you investigate the companies, the more you start to become a better business owner yourself. The criticism you have about other businesses will start to become fixes for your own. So do your due diligence it just might work in your favor. Think about some of the qualities you would love to have in your own business and apply that to the type of business you’d want to invest in. If you don’t want to own it as a business, don’t invest in it. Thanks to the 7 Secrets to Investing Like Warren Buffett, some good qualities to look for are:
- Profitable business
- Lots of loyal customers
- Always ahead of trends
- Market leader
- Good growth potential
Sectors & Industries
The possibilities are endless when trying to find a company to invest in. There are several different sectors and industries to choose from, it’s mind blowing honestly. It’s important to know which area you want to invest in. My suggestion is to research the many different areas and find a few you like. As you start to think about these things, you will find how they are parallel to your own life. The things we spend money on, make money from, and what we like to do, all equates to us patronizing a business. Some of the sectors and industries I have learned on my journey are:
- Department Stores
- Consumer Goods
- Cleaning Products
- Basic Materials
Thoughts to Myself Like…
Our daily habits define who we are. As I took the time to learn from some of the successful people I admire, I learned that truly wealthy people have habits that create wealth. One of those habits is investing. Before this journey, I thought of the stock market as something only the privileged invested in. Silly me. If I am going to break generational curses and create generational wealth It was time I learned the “other side of the game”. The side where you learn about compounded interest, the stock market, and dividends. I’m still a novice but, I’ve come a long way from my cannabis stock days. Being able to understand the reasons stock prices go up and down, has allowed me to really see the connections in the world. Things like new inventory, media coverage (good or bad), the public views, are all things that can affect the stock market. It’s legit the matrix lol
***DISCLAIMER*** I am NOT a financial advisor. All lessons learned are those through my own education. Please take the time to learn and understand your style of investing to benefit YOUR family.