Investing Basics: Buy Nikes, or Buy Nike? 

Which would you prefer to own: a pair of Nike Air Jordan Deluxe Year of the Dragon™ shoes, or some of Nike Corporation? There could be many reasons to select the shoes. Clothing is a necessity, and if you play a sport, having the right footwear can help performance and protect from injury. Shoes might be desirable for the image they project or the way they look you wear them. Nike shoes could even be considered a collector’s item. But if you have an investing mindset, you might consider owning a piece of Nike Corporation instead. 

Let’s discuss what that means.

Investing is buying something with the expectation that it will make money for you, usually by increasing in value.  You won’t have the actual money to spend until you sell your investment. Investing is different than saving money. Saving is setting aside money instead of spending it, so it can be used for something later. Savings are usually safe and available when you need money to spend.

How can someone who is not a billionaire buy Nike Corporation? The answer is to buy Nike stock. Most large corporations are publicly owned, meaning individuals can buy and sell pieces of ownership in them. The ownership is represented by shares of stock.

Companies need money to grow. One way to raise this money by issuing and selling shares of stock.  They use the money to build new factories, develop new technology, hire more workers, and buy more resources for making products. Stocks in large companies, such as Nike, are traded on the stock market.  Anyone can open an account with an investment company and request to buy and sell stocks. 

Now let’s compare buying Nike shoes to buying Nike stock. The Air Jordan Deluxe Year of the Dragon was introduced around February 15, 2012. Depending on the seller, the shoes could be purchased at an average of approximately $290. The shares of stock were selling that same day for $23.70, so 12 ¼ shares could be purchased for the cost of the shoes.  Ten years later, the same shoes new could be sold for $200, but the stock was worth $1,777! 

ChoiceMoney Spent February 15, 2012Value February 15, 2022 (average)
Buy Nike Air Jordan Deluxe Year of the Dragon™ shoes$290$200
Buy Shares of Nike Stock Instead (12 ¼ shares)$290$1,777

It is important to know that buying stock can be risky, and shares can decrease in value. Shares can even become worthless. It is important to research and select stock purchases carefully. Nike was used in this example because it is a product that people like to buy. That is a good consideration when choosing an investment. 

Wise investors understand the company that they are buying, as well as their products or services. 

Building Wealth with Extra Cash

Tax season is over for most.  Maybe you’re looking forward to a refund check, or have already received one – what will you do with that cash? Are you ready to think about investing that money so it can grow for you?*  

Investing for wealth growth is a different mindset than putting money into savings. Both are important.  Having emergency savings for sudden or unplanned expenses, and planned savings for anticipated purchases, are both smart financial strategies. However, investing is a method of building wealth over the long term so that some of the money you have worked for actually works for you.  

There are many ways you can invest. Some common examples are financial instruments such as stocks, bonds, and mutual funds. You can also invest in real estate by purchasing a home or rental properties.  Some individuals invest in tangible goods, like art, coins, or antiques. Starting and growing your own business, or helping to finance someone else’s business are also considerations.  

How can I have enough money to invest? The key to building wealth is to earn enough to cover expenses and savings goals, with enough left over to invest. The good news is that you don’t need a lot of money to start an investment plan. Many financial institutions allow you to open a small account and start investing by buying one stock share at a time, or in small dollar increments. 

Regardless of the investment, there are several questions to ask yourself before investing your money.     

1. How much risk am I comfortable with? Risk is the possibility that the value of the investment can decrease, or increase less than expected. Investments carry different levels of risk, and someone who is uncomfortable with risk should pay careful attention to their choices.  Unlike a bank savings account which is insured against loss, investments can decline in value.  

2. How much time and research are you willing to put into your investment strategy?  Rental real estate and collectibles can require a significant amount of time and skill. A beginning investor might want to consider an index mutual fund, a collection of stocks chosen based on widely used stock indices. Mutual fund managers take care of the investment selections, and the fees are fairly low.  

3. How much do you want to be personally connected to your investments?  A family home, art, or collectibles can bring enjoyment and fulfillment which cannot be measured in dollars. Owning rental property often means managing repairs and negotiating contracts. These are both very hands-on, as opposed to stock investments that can be managed by a financial professional.

Investing can be rewarding and challenging. It is important to research choices thoroughly and be comfortable with risks. Despite the risks, building wealth opens up opportunities for your future and the future of your family. It can expand your ability to start a business, feel financially secure, travel, give to charity, pay for education, and provide for the next generation.

Learn more about UME’s financial wellness programs at https://extension.umd.edu/programs/family-consumer-sciences/financial-wellness.

*This article is for general information and not intended to be investment advice.  For guidance about creating a personalized investment plan, please consult a licensed investment advisor.