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. 

Build and keep a good credit score

Many people confuse credit scores with a credit report.  A credit score predicts how likely you are to pay back a loan on time.  Companies use a mathematical formula called a scoring model to create your credit score from the information in your credit report. These scores usually range from 300 to 850. Banks, credit card companies, and lenders may use different credit scores to make decisions about offering you credit. Two of the most commonly used credit scores are FICO (calculated using formulas from Fair Isaac Corporation) and VantageScore (calculated using formulas from VantageScore Solutions). FICO shares this information with the public about what goes into its scores. 

How are FICO Scores Calculated? | myFICO | myFICO

The payment history tracks whether you’re paying your bills on time. The amounts owed tracks what you owe, including debts that you are paying down over time.  The length of credit history tracks how long you’ve had credit accounts. The longer the history, the more positive effect on your scores. New credit is tracked by measuring the credit inquiries about you made by creditors and others.  Lastly, it’s considered a good thing to have a mix of credit, such as a mortgage, an auto loan, and not too many credit cards.  These are some guidelines that can help you build a strong credit score.  

  • Pay your loans on time, every time. One way to make sure your payments are on time is to set up automatic payments or set up electronic reminders. If you’ve missed payments, get current and stay current.
  • Don’t get close to your credit limit. Credit scoring models look at how close you are to being “maxed out,” keep your balances low compared to your total credit limit. If you close some credit card accounts and put most or all of your credit card balances onto one card, it may hurt your credit score if this means that you are using a high percentage of your total credit limit. Experts advise keeping your use of credit at no more than 30 percent of your total credit limit. Paying off the balance each month helps get you the best scores.
  • Long credit history will help your score. The more experience your credit report shows with paying your loans on time, the more information there is to determine whether you are a good credit recipient.
  • Only apply for credit that you need. Credit scoring formulas look at your recent credit activity as a signal of your need for credit. If you apply for a lot of credit over a short period of time, it may appear to lenders that your economic circumstances have changed negatively. 
  • Fact-check your credit reports. If you spot suspected errors, dispute them. If you have old credit card accounts you are not using, keep an eye on them to make sure that an identity thief is not using them.