Online Stock Market Trading
And Why Black People MUST Consider Investing
This articles addresses what is online stock market trading and why black people must consider investing.
What is the stock market and what are shares?
So we can easily understand what the stock market is let’s have a look at the analogy of a street market. Business owners / market traders bring their fruits and vegetables into a certain location to attract potential customers. The market traders products are known as stock. We know this because when they sell some of their fruits and vegetables they have to re-stock (get some more stock).
Each time they make a sale each piece of fruit or veg brings in it’s original purchase price, plus some profit. Now let’s imagine one of the market traders co-owns the market stall. He or she has a business partner, who although not physically present in the market, contributes financially to start the business, keeps the business going or helps the business grow with additional advice, specialist knowledge, financial or other input / investment.
As an investor this business partner has the right to own a share or percentage of the business. Additionally he or she also has the right to enjoy profits from the business or a growth on any investment they have made towards the business.
This is the same with stock market investments. You can buy some shares, which is the same as investing in a company. You are giving them more money to grow their business, and as the company grows, you will watch the value of your shares grow and often receive what are called dividends.
Dividends are often profits that a company will issue to it’s shareholders at regular intervals.
Why is the stock market a good investment?
The stock market is a good investment because typically the value of companies usually rise.
Sometimes a company’s value will decrease or a company can cease trading in which case you can lose your entire investment, however most companies increase in value.
Here are a few examples:
It’s usually the companies that we use everyday that make the best investments, simply because you, me and everyone else is spending money with these companies EVERYDAY, so their profits are increasing EVERYDAY!!
Make a list of the companies you spend money with, then use this link to check how well they are performing in their respective markets. Looking at a chart will quickly tell you how much a company has grown over the past 1, 5 or even 10 years. This one shows the performance of Samsung. You can see more charts below.
Who invests in the stock market
Traditionally it was only wealthy people that knew how the stock market worked or even how to get involved in it. This was due to the fact that they were often business partners or worked in certain industries where they shared financial knowledge among themselves because it usually meant they would get new investors in their companies or companies they wanted to do well. This could be quite simply because they were already invested in them.
Today there are people from all walks of life that are invested in the various stock markets around the world. From Financial PhD professors such as our very own black finance professor Dr Boyce Watkins, to children who have been shown the value of not just buying Nike trainers but owning a piece of the company and receiving money from the company instead of just giving the company theirs or their parents money!
Why have black people not invested in the stock markets?
That is a great question. Here is an easy to understand answer.
We didn’t know how it worked or how to get involved. Then when we did find out about it, we shunned the idea of parting with money that we could keep in our pockets. The problem with that is we would eventually spend the money and often have little or nothing to show for what we had bought. Also we tend to buy LIABILITIES instead of ASSETS.
What is the difference between an asset and a liability?
An asset is something that once owned, brings you more of something.
Example: You own a car and use it as a taxi. As long as you are operating that taxi and it is making more money for you than you are spending on it, it’s an asset.
A liability is something that you own that continually decreases your wealth.
Example: You’ve wanted a brand new BMW for years, eventually you save up enough money to buy one. You feel good, everyone compliments you on your new purchase, your social life improves, BUT, you now have a £200 a month payment to make to the car dealership.
The BMW might look and drive great, however, it is making you no money, IT IS ONLY COSTING YOU!! You just bought a major liability.
As time passes black people are becoming wealthier, more educated and much more business minded. We are currently enjoying an economic boom in the black community. How do we know?
Look at how much each black family or person is spending. In order to spend, you have to have the money in the first place. We are much better off financially that ever before. BUT our spending habits have become awful. Do you know how much we spend on some of the most ridiculous unnecessary purchases? Fake hair, fake nails, expensive cars, alcohol and drugs including weed?!! £50 / $75 trainers sneakers for our children that they grow out of in 3 or 4 months.
Clothes that we wear once or never. I’m not saying don’t buy expensive things, often expensive things are worth their value, especially when buying 1 costly item that will last for years and can become a family heirloom, can be given away when no longer needed or can actually increase in value as time passes, as many antiques have proven to do.
As previously stated, many of us are now enjoying an economic boom and our spending power has increased.
What should we do with the money?
The basic 4 things to do are:
Give to charity. This is a great thing to do as helping others less fortunate than ourselves is simply about making the world a better place for everyone and according to the law of abundance when you give it keeps the flow of positive energy flowing in your direction too.
Spend. This is also known as dead money. Obviously there are things that need to be bought such as food and bills have to be paid. But spending on things we don’t need is simply a waste of money.
Save. Yes, saving money is a great idea because there are sometimes emergencies that require immediately available funds or maybe things we will need to buy in the future that might cost more than we have available right now. Putting that money aside for another day until we have saved enough to make that purchase is smart. BUT and it’s a GREAT BIG BUT many of us don’t realise the simple economics of saving and inflation.
If you save £1000 or $1000 or whatever your chosen currency, the bank will use your money and then make a handsome profit from it’s investment. They will make as much as possible from it and then give you back as little as 1.5% to 5% over the course of 1 year.
That means you have made £15 to £50 or $15 to $50 profit over 1 year.
Remember – you saved your money with, which actually is the same as YOU loaned / lent £1000 / $1000 to a multi billion or multi million $ / £ company, and they only gave you back £15 to £50 or $15 to $50 profit for a YEAR !
That is not very much profit at all.
PLEASE remind yourself how much they charge YOU for loans or even going overdrawn without their permission !!
Now let’s briefly discuss inflation / the cost of living.
Most everyday purchases go up in price. In a normal year your shopping costs will increase anything from 7% to 22% or more depending where you live in the world.
So what does that have to do with your savings?
If your savings are only increasing in value 1.5% to 5% per year and the cost of living is rising even as little as 7% per year, your saved money is actually DECREASING IN VALUE.
What your money could buy for £100 / $100 last year will now cost you at least £107 / $107 this year. And the same thing happens every year. After 10 years your £100/$100 could be worth as little as or will buy you the same as £30 / $30 would buy you this year.
That’s why saving is NOT always a good idea.
Invest. This is the best option. Investing means you put your money into something and expect to see a return on your money. Unlike saving with a bank, you expect higher returns. People often think of investing as risky and they are right. However, most people think that when you are saving with a bank, you are actually investing with a ‘guaranteed’ return. The reality is that no-one can predict that their bank will be in business at the end of any year. Likewise when you invest in a company’s stock you are not guaranteed that your investment will increase or that the company will still be trading in a years time.
If we look at the companies that we spend money with everyday or every week, we will begin to see a pattern. These companies have often been around for many years, and their share prices have steadily increased and they have sometimes become household names.
It’s quite easy to pick good stocks / shares to invest in. Again just look at the companies you spend money with every day. Another good idea is to buy the stock / shares of your bank instead of just settling for a low return on your savings. Think about this, they are experts at investing, their organisations make MILLILIONS / BILLIONS every year and they give you a tiny fraction of their profits. They don’t have to satisfy you because you don’t know how the game works.
You lend them your money for almost 0% interest ! But their shareholders and stockholders have to be taken seriously by the banks. These people often make their decision based on the banks performance. The banks HAVE TO PERFORM WELL FINANCIALLY to satisfy their investors or the investors will take their money / investment and put into a competing bank and then that bank will be able to perform better.
Other ways to choose good companies to invest in are:
- Ask your family, friends and colleagues which companies they regularly buy from.
- Research the companies whose clothes and footwear are worn by you, your family and the people who you know.
- Investigate the financial performance of the manufacturer of your car, your friends cars or your favourite cars.
- Research some of your favourite food chains’ financial performance.
- Additionally you can even consider creating an investment agreement with a black owned business that you like.
- Why not go even further with the above idea and research some black owned companies in black led countries such as Jamaica, Ghana, Barbados, Liberia or Nigeria?
Remember, we can only become a strong economic force if we are circulating our money amongst ourselves. If we are not doing this we are helping other races become wealthy through our efforts.
Armed with that knowledge, how can we complain if we feel oppressed financially, when it’s our own doing because we keep giving other races the tools to financially oppress us, i.e. our effort, energy, time and money!!
Here are some charts of the performance of the share prices of some popular companies and banks:
You will notice that most of these companies featured are not black owned or operated, at their leadership level, but we do have a choice on their relationship with OUR MONEY. Spend our money with them and get products that give LITTLE OR NO FINANCIAL RETURN, or we can invest in them and use the money we earn from our investments to buy from them.
When we have earned enough income from our investments we can put our own companies on the existing stock markets or………
Why don’t we create our own?