Imagine this. One day you go to your local store to buy a bag of your favorite potato chips. Going to the chip aisle, you see that they are only priced at $3. “That’s a really great price,” you think to yourself. You decide to buy a lot of bags, because these are your favorite kind of potato chips, and go home. A few weeks later you return to the store and see that price has increased, but only to $5. “Now that’s kind of expensive,” you think to yourself, knowing that a few weeks ago you bought the chips for $3.
A few more weeks go by, you show up to the store and your favorite potato chips are priced at $50! You’re amazed at how much the price has fluctuated, and you look around and almost everybody is trying to buy a bag of these amazing chips. You don’t really know why people want to buy these chips for such a high price, and at such a large quantity. The chips are good but they aren’t that good. You think to yourself about how you could open your own store, and sell the chips you still have at a much higher price than you bought them for, because of the high demand. After much thought you decide to sell your potato chips for $50, and you make a lot of money. Good thing you didn’t eat them a few weeks ago!
This is what has happened to GameStop over the past month.
When the stock market opened in January, GameStop was priced at around $18 per share. On the verge of bankruptcy, GameStop was a failing business. Buying and selling disc video games and other items in brick-and-mortar stores is quickly becoming a thing of the past. Some of the new video game consoles that came out late last year weren’t even designed to take discs. With the ongoing COVID pandemic, going inside stores was no longer an option. But, the stock grew over 1600% with some even buying the stock for over $480 per share! Mostly credited to r/WallStreetBets, this shows how powerful the internet can be, and how much a group of people can affect the stock market. That group of millennials told other people on r/WallStreetBets to buy GameStop because, for many frequenters of the community, it gave them good memories as a kid. Many of you know that feeling of walking into a GameStop in the early 2010’s and looking for that one game. That game your friends have been playing, and you’ve been wanting to get in on it as well. You’ve been to other stores, but they just don’t have it. So, after convincing your parents to stop at a Gamestop, you search the shelf of games. You look and there it is, all this searching has finally paid off! Gamestop never let us down then, so we can’t let them now down. People all over the world decided they wanted to be a part of this trend, because they felt the same way, and they gave their money hoping the stock would rise astronomically or “go to the moon.”
While these people made a lot of money with the increase of Gamestop, people lost a lot of money as well.
Perhaps you’re thinking to yourself: “Why should I care about what happened to GameStop or stocks in general?” Great question! Let’s return to our potato chips analogy. Wouldn’t you want to be the person to buy the bag of potato chips at $3 and then sell them at $50? And better yet had someone tell you to buy them at $3? This is basically how the stock market works, buying stocks low, while selling them high. Usually, stocks are determined by people seeing how well a business is doing at a certain time, and investors buying the stock in hopes of other people buying the stock as well, by also seeing how well the stock is doing. So, if you have any extra money, try using that money to invest in a company you think will do well or in a stock that a lot of people are buying. It is important to put money aside to invest now, so you could have that money grow in the future.
But I have always been told the higher the risk, the higher reward on an investment and vice versa. To be honest, a lot of people have lost a lot of money with stocks, including myself. With every person that makes money, there is someone that loses money. The term “volatility” refers to how much a stock fluctuates over time. For how much the stock can go up, it can go just as far down. It is important to not invest in just one company, but to “expand your investment portfolio” by spreading out your money in multiple stocks you think will do well, and thus reducing the risk of your total investments.
Start thinking about making some longer term investments. Perhaps you’ll even give day trading a try. Who knows? You might get lucky and buy the right bag of potato chips.
The Student Movement is the official student newspaper of Andrews University. Opinions expressed in the Student Movement are those of the authors and do not necessarily reflect the opinions of the editors, Andrews University or the Seventh-day Adventist church.