Atharv Dua Week 12 - MONEYY
Met a senior recently? The ones I’ve seen keep crying about the stock market simulation that many of them were assigned in AP Econ (apparently it’s worth 500 points??). The goal is to perform better than the S&P 500, which basically tracks the performance of the top 500 companies on stock exchanges in the US, and a bunch of the people I’ve talked to (or at least the ones who’ve complained about it to me—is there a correlation there?:) are finding it hard to even make a profit, let alone beat the S&P 500.
Even still, the stock market and other forms of investing (bonds, etc.) remain one of the best ways to earn financial freedom at one point or another during one’s life, especially when one is employed. It isn’t easy to retire off of savings alone, because even if you save your money in a high-yield savings account, the rate of inflation usually beats whatever rate the bank you use offers, leaving you with less valuable money overall, kind of like a dollar being much less valuable today than in the 1960s.
Now that we’ve established the importance of the stock market for the average consumer (as opposed to solely traders by occupation, which sell and buy stocks quickly instead of making long-term investments or the companies that actually get this money once you invest in them), it is important to highlight the fact that many people don’t actually know how to navigate the market, and this is usually underprivileged people that lack financial literacy. This leads to financial inequity, because it is easier for the rich who know how to use the stock market to their advantage to get richer, while the poor, who don’t have the financial literacy required for that, get poorer because the money they do have is less valuable. Financial literacy thus becomes a sort of power, and that power is distributed inequitably.
When money is concentrated in the hands of the few, it is important that we keep as much as possible to ensure we have the highest chance of retiring early, and working to live instead of living to work. Maybe the AP Econ teachers do know what they’re doing:).
Hi Atharv! Yes! Along with there being a difference in financial literacy, the economy in a way acts like a positive feedback loop. The more money you have, the more you can invest, and the more you can risk. Those who are less fortunate cannot earn a profit that’s reasonable enough to risk losing, and let alone have that extra money lying around to give to a gamble. The essential value of that money also plays a role, since that money doesn’t really go anywhere in a billionaire’s bank account, so why not just invest in it since it’ll lose its value to inflation anyway? But for the people who use the money in their bank accounts regularly, it just seems more worth it to spend on something more tangible than on a a risk to get slightly more money (the percentage is low unless you invest a lot of money).
ReplyDeleteWhat’s even more insane about the economy and about the distribution of wealth is that the common folks are more taxed (in terms of the ratio between their income and their tax rate). Since we are the larger number, we consume more goods and services, and the taxes for those certain goods with tariffs and other financial restrictions build up. If we want a better society and system, the rich folks need to step up and propel the middle class, because even affording rent for the next month seems like an unlikely possibility for some people, let alone retiring. It really does seem like a privilege now to comfortably retire at 60, even though that was the expectation back then.
Thank you for acknowledging this issue, Atharv!
Ever since fifth grade, my dad has always been pushing me into learning about personal finance. While we eat dinner, he’ll always have some video about updates from the stock market or the newest clips from his favorite finance YouTubers playing in the background. This year marks the second time he’s given me a finance textbook as a gift for some holiday. I used to brush this off in the past, not really seeing any value in it. I could always learn this stuff later, right?
ReplyDeleteYour blog post reflects the reason for all this pushing that never registered in my mind for the longest time. Growing up, my dad wasn’t poor, but he wasn’t living the most comfortable life either. Despite being the son of a bank manager, he didn’t get the opportunity to learn about personal finance or the stock market until after he got his bachelor’s and master’s degrees, respectively. He worked long hours for years and years to build a stable financial foundation, and has made many sacrifices to get to where he is now. As someone who won’t have to go through these struggles because of those sacrifices, I can’t imagine having to do all that purely because of a lack of financial literacy. Maybe I’ll go pick up those textbooks after all.
Hi Atharv! I agree that the AP Econ stocks assignment is such a great assignment. It seems like such a fun way to learn about the stock market and investing! Especially since lots of people are financially illiterate, especially in stocks which, as you pointed out, was one of the best ways to learn financial freedom.
ReplyDeleteI always appreciate your style of writing, especially the inclusion of parentheses which allow so much of your personality to shine through these blogs. In this blog in particular I thought that the parentheses were a nice way of adding humor into your blog and at some points further explaining concepts without disrupting the flow of your blog which I really appreciated!
Anyways, I loved reading your blog this week and just have one question, if you had to do this assignment what stocks would you invest in?