Along with basic terms to get you more acquainted with investing, there are also some universal tips that can guide you. 

• Diversify your portfolio. Whether it’s investing in value stocks or growth stocks, it’s good not to put all your money into one type of method. When the market is doing well, it’s  beneficial to have growth stocks and cyclicles because there’s more money being spent in the economy. If the market starts to crash, however, you’d want to have value stocks because of their relative stability and also non-cyclicals because, no matter the economy’s state, people are always going to need food, oil, healthcare, and other necessities. 

• Keep your emotions in check. Invest using facts and research, not emotions. Try not to get constantly caught in the ups and downs of the stock market. Although it can be very rewarding to see a stock go up and very disheartening to see one go down, remember that the stock market isn’t your life. You’ll make your best decisions when thinking rationally.

• Buy stocks in an area you are interested in and understand well. You don’t have to know every detail of a company’s product, but it’s beneficial to have an idea of how the business will act in the future and how external factors will affect it. For example, let’s say you’re a fan of cars and notice the rise in electric vehicles in response to climate change. After doing some research, you find out Toyota is working on a brand new lithium battery to use with its vehicles. This battery is more efficient and cheaper than those of current models, so you believe it is the battery of the future. This could potentially be a good situation to invest in, because you’ve done your research and you care about what you’re investing in. Now all that is left to do is for you to decide how much money you’re willing to allocate for the stock, and how much risk you’re willing to take. 

• Focus on the long term. It’s safe to buy stocks you’d be happy to hold for ten years. Long term investing can provide you with the most stable returns, especially when compared to short term market fluctuations. By taking advantage of the panic that comes with market fluctuations, you can secure stocks in good businesses for the long term. After all, the primary reason people invest in the stock market is to get more money later down the line. And, you’re more likely to get money later in life from investing if you’re patient and focus on the long term.   

Stocks to watch out for at the start of 2021

Photo credit: Tesla

Tesla (TSLA): 

The same day Elon Musk became the richest man in the world, brilliant Serbian inventor Nikola Tesla died penniless in 1943. This is quite the contrast, especially when looking at the soaring stock of Tesla Motors. The company had its most successful quarter at the end of 2020, and just barely missed its goal of delivering 500,000 units in 2020. Add in the incoming Biden administration and recently democratic-controlled Congress, both of which are looking to facilitate a greater transition to renewable energy and electric vehicles, and Tesla is only looking to improve on its record-breaking year. The company is also working on two new Gigafactories, one in Europe and one in China, with the latter expected to account for a growing number of Tesla’s sales. 

GameStop (GME):

You’ve probably already heard the news. GME stock has made national headlines across the country for its sky-rocketing stock during the start of 2021. What’s also unheard of is the manner in which the stock rose in value. A single stock of GME was worth $42.29 at 12:00 pm on January 21st. It rose to $70.12 at 1:00 pm on January 22 and dropped to $55 within the next hour. When the stock market reopened after the weekend on January 25, it was worth $96.80. The stock then remained extremely volatile, including a $30 drop-off on January 25, until a tweet from Elon Musk sent GME to $209.52 on the 26th. The reason for this trend is in part due to groups of retail investors, led by the Reddit group WallStreetBets, buying large amounts of GME stock. Not only are these smaller investors earning substantial wealth from these stocks, but they are also able to combat short sellers with them. Short sellers are investors who bet against stocks in order to make a profit. They borrow a stock and sell it for whatever it is worth. Then they wait, in hopes of the stock falling in price, to buy it again for less and give it back to the lender. This way they can keep the difference. However, when these “amateur” retail investors from Reddit or Discord buy large amounts of shares in GME, the stock value skyrockets. This forces shorters to re-buy the stocks at a higher price in order to cover themselves, further increasing the value of each stock. The news of Gamestop is also notable because it shows a shortening gap between the Wall Street hedge fund managers and your every-day investor. Each rise in the stock undermines the traditionally powerful short sellers, and is due to the combined effort of low-profile investors who seek to more equally stake their claim in the stock market. In a way, it’s a challenge to the established Wall Street hierarchy. The truth is though, that this stock is so volatile that its values are changing on an hourly basis. Buying it presents a certain degree of risk. By the time this article is published, who knows where the stock will be? 

(Courtesy of John Minchillo/AP)

AMC Entertainment (AMC):

AMC stock was on the decline before the pandemic. When the coronavirus hit, movie theaters shut down, and the stock hit a low of $2.27 in April of 2020. But fast forward to January 26, 2021, and the stock had experienced some steady growth and was worth $4.96. The next day, thanks to the same shorts-squeezing tactics Reddit investors used with Gamestop, the stock saw a 409% increase to $20.30. However, a day later, the value fell to a low of $7.51 showing, like Gamestop, the extreme volatility of the stock.

Hilton Hotels (HLT):

Like most companies in the hospitality industry, Hilton was hit hard by the pandemic. However, with the successful rollout of the covid vaccines and growing frequency of travel, the company has seen its stock value steadily increase and recover to 50% of pre-pandemic levels in 2021. Most of this growth is due to increased leisure travel, but a revitalization in business travel could even further raise the stock value of Hilton. Employees simply want to travel for business and get together for meetings and events because it has been such a long time since they’ve been able to do so. The growth of this business demand along with travel during the summer holidays and even wider vaccine distribution will very likely make Hilton a safe bet for the long term.

Dogecoin (DOGE-USD)

Originally started in 2013 as a joke, Dogecoin is a form of cryptocurrency that markets itself as an internet-friendly trading tool without the traditional banking fees. There is a circulating supply of 127 billion Dogecoins, with the vast majority of them already having been mined. When the currency started trading, a single Dogecoin was worth $0.000232. As of January 28th, thanks to the support of another Reddit group called SatoshiStreetBets (named after the unknown founder or founders of Bitcoin), a single coin was worth $0.070755. The Reddit community is advocating for holders not to sell their shares of Dogecoin in order to keep the crypto’s value from decreasing. Instead, they want people to hold on to the currency in an effort to equate one Dogecoin with one U.S. dollar. Elon Musk even tweeted a magazine cover of a Dogue (A dog on the cover of Vogue), leading many to believe he was supporting the cryptocurrency. However, there is warranted caution of such hype because it can lead to pump-and-dump schemes. These happen when a stock or cryptocurrency is heavily hyped and more and more people buy into it. However, those who were able to purchase the stock earlier and for less are able to sell high, whereas those who came in later and bought high end up losing their money.

With all this info, investing can seem even more challenging. However, if you’re able to focus on the long term, invest in businesses you care about, and understand there’s more to life than the stock market. You’ll set yourself up for a rewarding experience.

Sources:

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Stankiewicz, Kevin. “Hilton CEO: Business Travel Is Back to about 50% of Pre-Covid Levels, but Some Markets Are Stronger.” CNBC, CNBC, 5 May 2021, www.cnbc.com/2021/05/05/hilton-ceo-business-travel-is-back-to-about-50percent-of-pre-covid-levels.html. 

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Cover photo credit: John Minchillo/AP