What happened in the stock market?
Have you heard anything about the U.S. Stock Market in the last month? If you are on any social media platforms, chances are, you have. If you do not have any knowledge on how the stock market works, you probably do not understand what happened. However, it is quite interesting because it is unlike anything that has ever happened before. It also may have a greater effect on you and classmates than you think; so this is what happened.
The Stock Market is a very complex place with lots going on. Here are the explanations for two terms that you need to know to understand what happened:
Hedge fund – A professionally-led investment fund that multiple people invest in; it deals with all types of investments, unlike traditional investment funds.
Short selling – If an investor thinks a stock will drop soon, they can borrow it from someone else and sell it for what it is currently worth. Then, once the price does drop, they can buy it back and return it to who they borrowed it from, making a profit. This is 100% legal.
A few months ago, when the pandemic started taking over, hedge funds made the bet that companies such as GameStop were going to crash and burn and decided to short sell. The more GameStop’s stock price went down, the more money the hedge funds made. One day, amateur investors gathered on Reddit starting a group called “WallStreetBets” and realized what was happening. They then convinced other investors to buy GameStop stock.
In less than a week, the price per share shot up from about $30 to $340.
The early investors made millions, and even some of the last ones made it out with hundreds of thousands. However, this means that the hedge funds, who made the bet that GameStop would completely burn out, were completely wrong.
Obviously, this made hedge funds and other professional investors furious. They lost at their own game fair and square, and all they could do was complain. These complaints caused different trading platforms such as RobinHood to shut down purchases of the retail stocks that shot up. As a result, all of the prices dropped back. It is up to you and the rest of the world, to decide if the outcome of this historical event is fair.
If this stock market fiasco has proven anything, it is that anyone can invest in the Stock Market. This includes you, Apex High students, as long as you are of age (eighteen). If you are not old enough yet, you should observe your parents and learn from what they do. The earlier you start and learn, the more successful you can be in the future. Just remember, some random guys joined a Reddit group one day and were millionaires a few months later. Anyone, including you, can be a successful investor.