Hey, wanna trade Stonks? (Intro to Stocks)

The educational portion focuses on stocks

Welcome to Weekend 2 of Investing Reimagined. The lineup is basically the same as the week before, but it just has a different vibe. We can’t explain it.

As a reminder, this newsletter is designed to transform you into the person your friends go to for investment advice. You’ll be that good. If you ever have questions you’d like us to address, feel free to reply to this email or DM us on IG or Twitter

Economy: We have good news

Markets: idc 

  • Executive Order vs. Economic Stimulus No one can agree on how to handle unemployment, the most damaging economic symptom of the pandemic. Stakes are even higher with the $600 Enhanced Unemployment Benefits running dry since the end of July. To combat this, President Trump issued an Executive Order that extends Enhanced Unemployment Benefits with a small amendment: States are now on the hook for covering $100 of the $400 weekly benefits. While good on the surface, critics argue that many states are already strapped for cash due to the very thing that resulted in mass unemployment. Read more.
  • Unemployment is lower this week than last (and the week before that, too). This is good news right? It’s not that simple. There’s two sides of the coin. Unemployment is still devastatingly high and the good news that investors were looking for was a new economic stimulus package to bail out consumers – you know, the exact people the economy needs to spend money. Read more.
  • The world’s first COVID-19 vaccine has been approved. Russia’s Sputnik-V (we see what you did there) COVID-19 vaccine has been cleared for use after testing 76 people over the course of 2 months. It is claimed to protect you from the virus for 2 years. It’s also possible that among those who have been tested is the daughter of Vladimir Putin himself. However, many countries – including the U.S. – is wary of the efficacy of this vaccine.  Read more.

Someone hand me the popcorn 

Apple just spat on now-adversary Epic Games by initiating the ultimate Battle for the Gamerz. The tech giant was first challenged by the Fortnite creator after the gaming company implemented its own in-app payment system that works around having to pay Apple’s mandatory 30% fee for purchases. In other words, it basically cut Apple out from the profits and Apple was having none of it. This ultimately led to Apple banning Fortnite from its App store, which was quickly met with an antitrust lawsuit against Apple and a very public #FreeFortnite campaign. Read more.

This comes at a very interesting time since Apple’s CEO Tim Cook had just joined the CEO’s of Facebook, Google and Amazon a few weeks ago to testify before the House Judiciary antitrust subcommittee regarding whether their respective companies are monopolies (they insisted that it wasn’t the case).

S&P WYA? 

Investors collectively held their breath as the S&P 500 reached for its all-time high pretty much every single day this entire week. At this point, it wouldn’t come as a surprise if there’s an over/under in Vegas. Haters will say it didn’t break a record (some headlines have already jumped to the conclusion that it did) so you can color us haters, because the S&P 500 did not close at an all-time high this week. Read more.

Investors collectively held their breath as the S&P 500 reached for its all-time high pretty much every single day this entire week. At this point, it wouldn’t come as a surprise if there’s an over/under in Vegas. Haters will say it didn’t break a record (some headlines have already jumped to the conclusion that it did) so you can color us haters, because the S&P 500 did not close at an all-time high this week. Read more.

The S&P 500 to investors all week: 

Why is this important?

This is a huge deal because the S&P had set its all-time high last February, just weeks before the pandemic rocked the nation into the worst recession this country has ever seen. 

The “S&P 500” is a term you’ll see floating around a lot in the investment world because it is one of three major indexes (or indices, if you want to sound fancy) that investors track. They track this because it serves as a litmus test of sorts to determine how markets as a whole are performing.

The “S&P 500” is a term you’ll see floating around a lot in the investment world because it is one of three major indexes (or indices, if you want to sound fancy) that investors track. They track this because it serves as a litmus test of sorts to determine how markets as a whole are performing.

An Example, IRL

We’ll cover indices in another newsletter, but all you need to know is that if you’re a stock and you’re kicking butt, you’re the Lebron James of the stock market and every team wants to sign you to their roster. That’s why Tesla is currently being courted by the Dow Jones Industrial Average (another major index).

How to explain what a stock is to a 5 year old

TL;DR


Stocks offer partial ownership of a company in return for a financial investment. Typically, stocks are traded on exchanges, though some companies may allow private transactions as well. Stocks reap benefits such as profit (when selling shares), dividends, and voting rights. However, not all stocks are created equal, so it’s important to do your homework before purchasing a particular equity.

The stock market has provided solid returns (for the most part) for over two hundred years. Today, stocks (also known as “stonks“) are integral to almost any portfolio, regardless of age, financial goals, and risk tolerance.

While the amount an individual should invest in stocks depends upon your age bracket and financial situation, the fact is that you should invest. However, before you get started, it might be helpful to know just what a stock is and how it works.

“To put it simply, a stock is a security – a fancy word for financial holding issued by an entity – that gives you partial ownership of said entity. Stocks are “measured” in units called shares. The more shares you own, the more ownership you have in a company.”

Companies issue new stocks as needed, such as to fund a new project or float the company through lean times. Selling more shares also dilutes ownership, which can impact shareholders who purchase equities that confer voting rights. Occasionally, a corporation may also issue a buyback for their outstanding shares (shares purchased by shareholders).

Stocks are usually traded (bought and sold) on exchanges, such as the Nasdaq and New York Stock Exchange (NYSE). However, some companies may sell stocks in private transactions. A few also offer employee stock in their compensation packages.

Regardless of how a stock trades hands, there are laws that all transactions must follow. These laws prevent fraud, tax evasion, and other illegal practices that used to run rampant in the financial sector. The laws also exist to protect the rights of the stockholders and ensure that corporations follow best practices that benefit the shareholders as well as the company.

The Benefits of Owning Stock

There are three main reasons an investor may purchase a stock:

  1. To sell it (either ASAP or years down the line)
  2. For the dividends
  3. To take advantage of voting rights

Selling a stock

Selling a stock can provide either short-term or long-term returns, depending on your investment strategy. Some investors like to hold onto stocks for decades and enjoy slow but high returns, while others prefer to make a killing with a little luck and a short-term strategy.

In other words, some investors follow this philosophy: 

While others align themselves to this:

Dividend profits

Dividends are money paid to shareholders (i.e. people who own stocks) by the company that comes out of its profits. While most payouts are small, owning enough stock in one company – or a little stock in a lot of companies – means eventually an investor may earn enough in quarterly dividends to significantly supplement income or investing capital.

Voting rights

While not an integral factor for some, voting rights are another benefit some classes of stock confer to shareholders. In a voting stock, owning the majority shares (51%) allows you to make decisions about a company’s future – in a roundabout way.

One of the most important votes a company can hold is on board of director nominations. If a single shareholder owns 51% of a company’s stock, that investor then has 51% of the voting power – which means one person’s vote is all that’s required in order to instill a new board of directors. In turn, the board of directors would then vote on a new upper management team – such as the CEO – which would effectively steer the company in a new direction.

The Bottom Line?


If you own a stock, you own part of a company. If that company value goes up, you make money. If the stock crashes, you lose money. Investing in a stock is effectively investing in a company’s success.

There’s been a ton of talk about breaking up Big Tech. With the banning of Fortnite from Apple’s App Store this week, it sure brings this debate up again, and why many believe it needs legislation. NYU professor Scott Galloway is arguably the first first to voice this idea and has stood by this argument for years. 

He is quoted saying: “my only investment advice to all your listeners is always invest in unregulated monopolies. That’s the only investment advice you ever need.”

If you need an intro to this issue, Scott’s your guy.