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The stock market is one of the most beautiful things in the US economy.  It is a driving force that propels corporations to achieve great things in this country.  However, not only is the stock market a valuable resource to businesses but it can also be an advantage for you.  It is critical that you understand how the market works, and how to harness its ability for yourself. 

The stock market works by dividing companies into shares, small pieces of the company that once bought give you a small percentage ownership in the company.  These shares trade on the stock exchange which is where people buy and sell shares of companies. It is much like a grocery store for pieces of big American companies.

The beauty of the stock market is that it can provide a gauge to see how the economy is performing. A bear is a downward market and a bull is an upward market- these nicknames came from how the animals attacked opponents.  

Stocks are also a great investment, although at an early age I would not recommend investing in a single stock such as Apple (AAPL) or Microsoft (MSFT).  This is because these stocks can drop in price, and the lack of diversity could harm you. Diversity is spreading your investment across different industries (pharma, telecommunications, or banking).  With diversity, an investor can protect themselves better from fluctuations in the market or in a particular industry. 

Mutual Funds -a pool of money from different investors- can be a good early investment.  They are controlled by a trained professional for the most part, and offer investments across different companies.   

In the wise words of Warren Buffet – Chairman and CEO of Berkshire Hathaway- said that “Wide diversification is only required when investors do not understand what they are doing.”  Being high school students, we do not hold MBA or PHDs in Finance; therefore, if we want to put our money to work in a smart way (a) hand it off to professionals and (b) have diversity.    

Although allocating money for investing now might not be plausible, it is important to at least understand how the market works and what it is.  This makes us educated members of society.