“Stocks 101”: Everything to Know About Stocks, Investments, and More!

On November 29, 2020, Girls For Business hosted its third virtual event, “Stocks 101.” “Stocks 101” featured two professionals in finance, Anne Li and Taylor Price. They shared the basics of stocks, exclusive financial and business tips, as well as career guidance based on their experiences.

Anne Li is from the DC area and is currently a junior at Vanderbilt double majoring in economics & computer science and minoring in business. “Investing is as much of an art as it is science,” Li says. Investing requires setting goals, doing the research, as well as adapting to markets. She emphasizes that there are no black and white right or wrong answers when investing in stocks. Her work experience includes Citi Orient Securities, Golub Capital, and Goldman Sachs. She enjoys her work because in “business and marketing areas [she] can create a tangible impact with the clients.”  

Taylor Price is the CEO and founder of TAP Intuit, where her mission is to close the financial literacy gap by helping Gen Z improve financial literacy. She is a content creator on Tiktok with over 800,000 followers and an Instagram influencer with over 65,000 followers (@priceslesstay). Price has been featured in a variety of financial publications including Yahoo Finance, USA Today, and Bloomberg.

In Li's breakout room, she talked about career options and her personal path to business. She discussed the basics of different kinds of investing and asset classes.   

What is Corporate Finance and how does it relate to investing?  

When asked about how Anne decides to pick a stock or decide if a company is worth investing in, she mentioned the importance of corporate finance (how a company does its financial planning). By analyzing financial statements and assessing a company’s corporate finance, we figure out whether a company is worth investing in.  

Investment Banking vs. Consulting as a Career Choice  

Anne states that consultants provide expert analysis and recommendations to help businesses solve problems. A team of consultants goes into a company and learns about its financial statements. They usually consult on specific projects, such as figuring out a marketing campaign strategy for a new product or coming up with ways to streamline internal operations. 

Investment banks, on the other hand, help private companies go public (meaning selling a company’ stock, i.e., partial ownership of the company to the public) or help two companies merge into one. Investment banks help companies go through all of the steps of these complex transactions. One such step is called underwriting, which is about determining the risk and the price at which a company should go public. 

Different Types of Asset Classes 

Anne also explained the different types of asset classes include equities, fixed income, and bonds, as well as styles of investing, such as passive investing and active investing. 

Equities are partial ownership of a company. They most commonly come in the form of stocks. 

Fixed income is a type of investment where investors are paid a fixed interest or dividend payments until its maturity date. 

Bonds is debt that can be invested in. Corporate bonds are company debt that you can invest in. There are also government bonds like Treasury bonds and Treasury bills.  

Active investing usually means investing in equities with aggressive strategies. Active investors believe that there are market inefficiencies, which mean that the price of the stock of a company does not fully reflect the potential or the valuation of the company. The active investor invests based on his or her own perception of the potential or the valuation of the company.

Passive investors, on the other hand, believe in market efficiency, which means that the price of the stock of a company fully reflects the potential or the valuation of the company. Instead of investing in individual companies, passive investors invest in index funds, such as the S&P 500 and other exchange-traded funds (ETF). These index funds are combinations of stocks of a large number of companies. In passive investing, the investor aims for returns the same as the market’s return in general. 

Why would I invest in bonds? 

Anne explains that although bonds offer lower return for your money, they are of lower risk than stocks. Additionally, bonds typically do well when stocks do not do well. Having some bonds therefore reduces the volatilities (the dramatic up and down) of an investor’s total investments.

When did you personally start investing and how did you go about it?  

In middle school, Anne participated in a program called the stock market game. It was a simulation of the stock market where teams had to pick stocks to invest in and see if they could beat the other teams. She has since then begun investing in actual stocks and learning about financial analysis and built models to use past performance to predict future performance. 

Anne encourages high school girls to start investing in high school if they feel comfortable. She recommends starting with mutual funds, which invests your money into a combination of stocks. For example, a common mutual fund is the S&P 500 index fund, which is basically a fund that invests in the stocks of 500 large companies that represent different types of industries in the United States. When compared to the stock of just one individual company, index funds typically are not very volatile, which means that there is a smaller chance of losing a significant portion of your investment.

What are some of the best resources for learning more about stocks and growing your knowledge? 

Li responds that taking business classes has prepared her for job positions and motivated her to learn more about the stock market. She recommends using Investopedia as a finance resource that explains the basics of investing. MarketWatch, which has more news based info, is also a great resource to learn more about the stock market.

How do you research stocks and make your decision on which stocks to invest in? 

Li likes to balance her stock portfolio with both growth and value of stocks. Growth stocks are the stocks of companies that will likely grow fast. Value stocks are the stocks of companies that are currently undervalued. Growth stocks and value stocks tend to behave differently. By investing in both Li reduces the volatility of her investment. Additionally, investing in more companies hedges the risk of one company going completely bankrupt because stocks of other companies hold their value unaffected by the bankruptcy of one company. She buys growth and value stocks in different sectors so that if one sector goes down, the other sectors will back her up.

During Price’s breakout room session, she explained how to effectively plan, track and manage investments, and answered other investment related questions. Price emphasized four fundamental points to wise investment: listing your goals, managing your money, reading books, and investing early.

Before putting any money into a stock company, Taylor stressed the need to list one’s goals. She remarks that “a failure to plan is a plan for failure”; without a clear plan-of-attack, goals cannot be attained. Price uses a SMART goal, which is specific, measurable, attainable, reasonable and time bound, to effectively achieve objectives and assess her progress. Price adds that a SMART goal can be used as a guide for goals outside of the finance field as well. Although reaching financial goals is commonly associated with being affluent, Price believes that “wealth is the ability to fully experience life” and is not necessarily measured with money. Instead, wealth is beneficial in the long run and holds value that is deeper than dollars and cents.

When it comes to investing, tracking one’s money is just as important as having a well-thought out goal. Taylor highlights that money management, which includes being conscious of spending habits, is crucial for any investment. After all, having money left to invest is a simple prerequisite of investment. Price breaks down spending habits into three main categories: impulsive (purchasing at first sight), compulsory (essential purchases), and habitual spending (common but often overlooked purchases, such as coffee). Another crucial component of money management is considering the cost of the expenses, which generally falls into two categories, fixed or variable. Fixed expenses do not vastly change in price (such as rent), while variable expenses tend to range in price (e.g. weekly meals). Because such purchases accumulate overtime, it is important to keep track of one’s money. Taylor recommends downloading budgeting apps such as “Mint” that help to organize and regulate personal finances. A good rule to follow is the 50-20-30 rule: 50% of your money should go to needs, 20% to savings, and 30% to wants. Price explains that this rule is a general outline that differs based on each person’s goals and resources. To summarize, conscious spending, effective budgeting, and being mindful of one’s goals are crucial in investing. 

Price also highlights the importance of reading books when it comes to smart investment. Reading is proven to make one smarter and improve focus, memory, and concentration. Books are a quintessential method in understanding the process of investing. Price mentions that reading opens up minds for new ideas and perceptions that the reader may have not thought of before. Reading is also the fundamental way to learn new concepts and test one’s understanding. She recommends books such as Rich Dad Poor Dad and Think and Grow Rich, which not only help readers understand the investment process, but also offer valuable and practical advice and knowledge.

While investing may initially seem daunting, early exposure can help individuals familiarize themselves and prepare for a deeper dive into the finance field. Prior to doing so, Price mentions that a budget, simple savings account, and establishing a credit score are the foundations for investing. For starters, custodial accounts may be beneficial. Custodial accounts are accounts in which a parent or guardian can monitor transactions and help individuals in financial budgeting. In addition, Price stresses the importance of having a long term growth oriented mindset. Price notes that those who do not have a long term growth mindset “tend to do very poorly” when investments do not go as planned at a given point of time. In contrast, a long term growth oriented mentality— especially in times of economic recession— tend to help individuals do well in the long run despite suffering initial or temporary losses.

After explaining the importance of listing goals, managing money, reading books, and investing early, Price answered finance-related questions from attendees.

Q: How much should I invest as a beginner just starting out and how do I know what to invest in?

“Within your budget, you calculate your needs, wants and savings,” Taylor remarks. Within the savings, one can determine how much they would like to use to invest. She points out that all financial situations and goals are uniquely different, which is why a certain amount of money is not set. For beginners, Price recommends starting with index or mutual funds such as S&P 500 index funds or other index funds offered by Vanguard and other well known financial service providers. 

Q: What platforms do you use to keep up with finance/investing related news and info?

Taylor recommends using a variety of sources to look at finance or investment related news. Because news sources can often be biased, striking a balance and finding different sources can allow individuals to extrapolate a more objective and articulate different viewpoints based on the same information. Taylor recommends looking at a multitude of platforms including Seeking Alpha, CNN, and FOX.

Q: How did you view investing at a young age?

Using the grocery store analogy, Price breaks down the basics of her early investment. She uses the grocery store analogy to represent the stock market world. A grocery store (the stock market) is vast and is split up into different sections, such as fruits, vegetables, and poultry. Each section of the market can be associated with the different “fields” of stocks, such as technology, manufacturing, and utility. Within each supermarket section, there are multiple items to choose from. Similarly, a field like technology has numerous stocks such as the well known examples including Apple, Google, and Microsoft. She notes that a broker handles the transactions within the stock market and their purpose is similar to a cashier at checkout. In order to purchase or sell stocks, one must go through a broker in order to make a transaction. 

Throughout Girls for Business’s Stocks 101 event, participants received valuable, practical, and immediately-applicable knowledge to help them wisely invest, budget, and engage in their financial journey. The advice regarding long term growth mindset, goal setting, and careful planning goes beyond their direct applicability to an individual’s finances. Such skills in fact can have great influence on every aspect of one’s daily life.