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!
|Choice||Money Spent February 15, 2012||Value 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.