Wall Street 101

You may be thinking: crowds of people in perfectly tailored suits, bags of money, scandalous secrets. But what is Wall Street really all about? We made an outline that couldn’t be clearer, to give you a rundown of everything that goes on in the financial district. Yes – there may be a mention of one or two Armani suits.

What is Wall Street?

First and foremost, it is a street in downtown Manhattan, but when most people refer to “Wall Street,” they’re talking about the U.S. Stock Market in New York City. Located at 11 Wall Street, the New York Stock Exchange is where stocks are bought and sold (it’s also the largest stock market in the world!).

The stock market is analyzed by indices like Dow Jones, NASDAQ, and S&P 500. Each of these indices are basically just listings of companies. For example, The Dow Jones Industrial Average consists of companies like Apple, Disney, and Coca Cola. We look at the performance of these stocks within the Dow as an indicator of how our economy is doing.

How does it work?

When a company wants to raise a lot of money, they “go public,” meaning they offer portions of their company in the form of shares (stocks). Now the company has the money people paid to purchase the shares, and the company goes into a whole new cycle on Wall Street: depending on the company’s success, the value of their stock will increase or decrease.

For example, let’s pretend that Starbucks wanted to open 50 new branches all over the United States. Obviously, they’re going to need a lot of money to start these new stores. What do they do? They offer shares on the stock market. People buy their stock, and Starbucks has more than enough money now – they can even create new Frappuccino flavors!

What do the people who bought the stock do? They benefit in a different way. If Starbucks continues to be successful, the value of their stock goes up and they can be sold for a profit. If Starbucks gets bad publicity, then the value will go down.

The aim of the game for those purchasing the shares is to buy low and sell high. Meaning, they would buy shares of Apple right before they launch an incredible iPhone. After they launch, the stock value will go up because everyone is talking about the latest device. Then, the stock owners will sell their shares for a higher price!

Who are the people on Wall Street?

There are many positions which can be held in Wall Street. Some of these roles include stock brokers, investment bankers, analysts, hedge funders and officers working for the SEC. They can spend their days trading stock, funding companies to go public or overseeing the markets.

Why do they wear such great suits? Besides for the fact that most Wall Street salaries make it easily affordable to purchase an Armani suit or twenty, it’s all about the confidence. People are more willing to trust others with their money if they’re polished and well-dressed. That’s why they take care of their appearance painstakingly. They want to be taken seriously by dressing for success!

How does this affect me?

Ever heard of The Great Depression? Want to know what was a major cause? Wall Street. After that era, many regulations were instituted to try to ensure that it wouldn’t have such a catastrophic effect in the future, but the Stock Market still controls much of the global economy.

Can teens invest in the Stock Market?

Yes, although you will need your parents’ help most of the time. Read some books on teenage investing like The Teenage Investor by Timothy Olsen before you take the plunge.

You can also practice online with sites like Investopedia, which allow you to play the market just to gain experience, without risking real funds.

 

Cover Photo: Shot by Adelle Goldenberg &  featuring Stefanie Agovino in BCBGeneration. ©

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