Investing
Categories: Investing
Who invests in stocks? The answer? Everyone.
Well, almost everyone. Fancy-pants corporate CEOs. Yoga teachers. School teachers. Teenagers who mowed the lawn for a summer and are already dreaming of owning a home some day.
The fancy-pants corporate CEOs can likely put more money into stocks, but for most normal people, even 100 shares in whatever.com that starts at 12 bucks and compounds at 10% for 20 years ends up being worth a meaningful sum.
So...you can buy stocks. It’s not hard. It won’t hurt. Much.
The logistics are simple. Save a grand or three. Go down to your local Schwab store or log in to fidelity.com or a host of others. Set up an account and then just click to buy, uh, whatever stocks you think you want to own. You’d then just check your progress, or lack thereof, by going to Google Finance, Yahoo Finance, Etrade.com, and whoever else provides legit stock price info for the masses.
That’s how most of America does it. And believe it or not, most of America actually owns stocks. From the whitest, white-shirted CEO to the bluest of blue collar workers.
For many union workers, stocks represent almost all of their net savings, whether they realize it or not, and their stock ownership has produced some really perverse outcomes.
Take ProfitCo. Vastly overstaffed. It had an awesome union negotiator who got the corporation’s weak CEO to hire twice as many workers as it needed.
That "overemployment" scenario was great for the fat and happy employees who would otherwise be out of work, but it was bad for the company that now has to find the financial resources to cut double the number of paychecks. As a result, the company earned 60 cents a share instead of the dollar they would have earned if they had "right-sized" the labor force. But the typical union worker in the factory had essentially all of her wealth tied up in this company. As part of her pension plan, she had been “forced” to buy the company’s stock…about 5 thousand dollars’ worth of stock...every year, for decades. While the company did well, she found herself with 100,000 shares in a company whose stock was trading at $5 a share, or 10 times earnings.
That’s half a million dollars of savings fully invested in one stock. Lots of risk. But in a stock that pretty much everyone thinks is undervalued and under-appreciated by Wall Street. So it trades at a very low multiple of earnings.
Why? Because the CEO was a pushover. The lunatics ran the asylum, and now they’re suffering under a very low stock price, since many need it for retirement, home-buying, and, uh...high stakes antiquing.
So along comes a new CEO, Toughy McTough, who wants to fire ⅔ of the workers and “right size” the company, deploying robots at the same time.
If Toughy has his way, the company will earn a dollar a share this year, and likely 2 dollars a share in 2 years, since he fixed the bad, low profit margin structure of the company. Wall Street, he knows, will love this...and they’ll bid up the stock.
So strangely, but logically, Peggy in accounting cheers when she’s fired by Toughy.
Why? All her wealth, the 100,000 shares, have now been bid up.
They go from trading at 10 times earnings of 50 cents to trading at 20 times earnings of 2 bucks, or 40 dollars a share.
Huge wealth swing. She went from looking at retiring Prius-style on half a million bucks...to shopping for a hot new 23-year-old pool boy named Bjorn, with her 4 million dollars in stock wealth.
And it can be the same story for Martha the tennis instructor. Or Barry the pastry chef. Or Samantha the bedpan-maker.
Their stories might not follow the same trajectory, but as long as you own shares of a stock, you have the potential to reap major rewards. So that you have a chance to retire at an early age from...bedpan-making.
Related or Semi-related Video
Finance: Who Invests in Stocks?141 Views
Finance a la shmoop. who invest in stocks? and that's not like horton
hearing who . the answer everyone. almost everyone. fancy-pants
corporate CEOs, yoga teachers, schoolteachers ,teenagers who mowed the [kid sits in a big chair and smiles]
lawn for a summer and are already dreaming of owning a home someday.
yep well the fancy-pants corporate CEOs can likely put more money into stocks, but
for most normal people even a hundred shares of whatever.com that starts at
12 bucks and compounds at 10 percent for 20 years ends up being worth a
meaningful sum. yeah like that. eight grand and change. it's kind of cool. so you
can buy stocks. it's not hard it won't hurt. much. yeah. stick good ones in water.
well logistics are simple save a grand or three go down to your local Schwab
store or log into fidelity .com or a host of others, each raise a good one. set
up an account and then just click to buy whatever stocks do you think you want to
own. only you'd then just check your progress or lack thereof by going to
Google Finance Yahoo Finance e-trade and whoever else provides legit stock price
info for the masses. that's how most of America does it, and believe it or not [stock prices example shown]
most of America actually owns stocks. from the whitest white shirted CEO to the
bluest of blue collar workers. for many union workers stocks represent almost
all of their net savings whether they realize it or not, and their stock
ownership has produced some really perverse outcomes. take profit Co vastly
over staffed. it had an awesome union negotiator who got the corporation's
weak-kneed CEO to hire twice as many workers as the company actually needed.
that over employment scenario was great for the fatten happy employees who would
otherwise be out of work, but it was bad for the company that now had to find the
financial resources to cut double the number of paychecks. as a result company
earned 50 cents a share instead of the dollar they would have earned if they
had right-sized the labor force. but typical union worker in the
factory had essentially all of her wealth tied up in this company. well as
part of her pension plan she had been forced to buy the company's stock. about
five thousand dollars worth of stock every year for decades. well the company
moved on and grind it away and did reasonably ,well she suddenly found
herself nearing retirement with a hundred thousand shares in the company [woman nears finish line with a banner called "retirement" above it]
whose stock was trading at five bucks a share or about ten times earnings. right
in time and $5 right? well. that's half a million dollars of savings
fully invested in one stock. our own company .lots of risk owning just one
stock see our video on diversity if you want to argue. but all that money was
invested in a stock that pretty much everyone thinks is undervalued and
underappreciated by Wall Street so it trades at a very low multiple of
earnings .that's at ten times things. well why only ten times? because the CEO was a
pushover. well lunatics ran the asylum and now the
lunatics are suffering under a very low stock price. and many need cash from
sales of that stock for retirement. you know winnebago home buying and high
stakes antiquing and golf and stuff. so along comes a new CEO. Tuffy MacTuff who
wants to fire two-thirds of the union workers and close right-size the company
deploying robots at the same time. well if Tuffy has his way the company will
earn $1 a share this year unlikely $2 a share in two years, you know since he
fixed the bad low profit margin structure of the company by getting rid
of all those employees .Wall Street he knows will love this and they'll bid up [chart showing stock prices rise]
the stock. so strangely but logically Peggy in accounting cheers when she is
actually fired by Tuffy. why? well all her wealth a hundred thousand shares of
stock she owned has now been bid up big-time shares go from trading at ten
times earnings of 50 cents to trading at 20 times earnings of the projected $2 a
share their going to earn in a couple of years or $40 a share and it's a huge
wealth swing. she went from looking at retiring
in Prius style on a half a million bucks to shopping for a hot new 23 year old pool
boy named Bjorn with her 4 million dollars in stock wealth. and it can be
the same story for Martha the tennis instructor or Barry, the pastry chef or
Samantha the bed pan maker. to move those things. well their stories might not
follow the same trajectory but as long as you own shares of a stock you have
the potential to reap major rewards and suffer major losses. you know so that [people of different occupations line up]
you've to have a chance to retire in an early age from bed pan making yeah. we
want to do that.