The stock market is an interactive symbol of the financial world. Every day, investors and traders buy and sell stocks — ownership shares in a company — with the intent of making money.
“Firms need to raise capital to finance their activities, and a common method is to sell shares to the public,” Dr. Stephen Margolis , professor of economics, said. “These shares go into a market – [for example,] the stock market – where they can then be bought and sold, or traded. What makes a stock valuable is that the owner of the stock can get proceeds of some value – typically through dividends, or in selling the stock to someone else.”
On campus, student investors come from all types of backgrounds. Ian Hill, junior in polymer and color chemistry, attributed his interest in investing to his grandmother.
“She was raised during the Great Depression and I fondly remember her teaching me about budgeting and investing money,” Hill said. “I opened a mutual fund account with Edward Jones my junior year in high school with her guidance. I later opened an online trading account with Scottrade as well. I wanted to learn more about finance and have potentially higher yielding investments.”
Hill mostly trades and invests in large corporations, local companies and companies with a high product recognition. Currently, he is invested in several mutual funds, as well as Bank of America ( BAC ), Thermo Fisher ( TMO ), Google ( GOOG ), Hatteras Financial ( HTS ), Krispy Kreme Doughnuts ( KKD ), Celgene ( CELG ) and Ford (F).
He is still developing his strategy, but strives to fill his portfolio with 25 percent long-term investments (equities held for at least 5 years), 25 percent high dividend stocks (greater than 4 percent), 40 percent companies with products that he uses often and 10 percent speculative equities.
Hill acknowledged this past summer has not been a good time period for making money off world and national markets. However, he has learned to prioritize his portfolio and reinforce stocks with long-term potential due to the recent declines in markets.
“Hard financial times for companies can be just as beneficial to consumers as good financial times,” Hill said. “In times of high economic growth, companies spend more money on research and development… Conversely, in times of low economic growth, companies concentrate on products that … improve efficiency in their business practices.”
The effect a volatile stock market has on the economy applies to the University as well.
“N.C . State has an endowment, but it only pays for a small share,” Margolis said. “The instability in the market can negatively affect donors, which in turn affects donations that may have been made otherwise. When something catastrophic happens to the financial markets, the impact trickles down.”
To students who may be interested in investing, Margolis recommends only doing so with expendable money.
“It’s a good idea early on to find out what it’s like to work with a brokerage,” Margolis said. ”Also, if you only save in a savings account at a bank, than your interest rates will likely max out at 5 percent. Over the long haul, stocks pay around 10 percent. That doesn’t mean you should have everything in stocks, as they are a risky endeavor, but to have part of your wealth in equities is a reasonably good thing to do.”
