Back to School: Stocks 101

Imagining a bunch of grown-ups trading candy with each other, with Ian Tam and Guest Host Mikayla Pe

Ruth Saldanha 31 August, 2020 | 12:46AM

 

 

Mikayla Pe: Hello, my name is Mikayla Pe and today I'll be talking to Ian Tam about the stock market.

Hi, Ian.

Ian Tam: Hi, Mikayla.

Pe: Hi. What is the stock market?

Tam: Well, Mikayla, that's a very good question. And maybe a good way to explain to it is, if you think about the last time there was Halloween and maybe you went trick-or-treating with your mom and dad. So, after you went trick-or-treating, you got a bunch of chocolates, chips, candies, all the stuff that you really like, and maybe afterwards you got together with your sister and you traded some of that candy. So, maybe one bag of chips will be traded for two chocolate bars or two lollypops will give you one chocolate bar. You probably traded a little bit with your sisters. So, the stock market is actually kind of the same thing. It's a place where people can come together and trade stocks just like you would trade Halloween candies.

Pe: Why are there different kinds of stock markets?

Tam: Yeah. So, a long time ago, when people started trading stocks, they came together at different places. So, maybe when you're trading your Halloween candy, you may have done it in the living room or perhaps you did it in the kitchen, a bunch of different places. So, a long time ago, when people started trading stocks, they came to central areas. For example, in the U.S., New York is a large stock exchange, a place where people could come together and trade stocks. And up here in Canada, Toronto is the stock market where people can come together and trade stocks. So, it has to do with what happened a long time ago and where people decided to start trading stocks.

Pe: What does it mean when people talk about a bull market?

Tam: Yeah, it's another great question. So, a bull market is what happens when the prices of stocks are moving in the upwards direction. And a good way to remember that is if you think about a bull, the bull's horns are usually pointing upwards. So, when the bull's horns are pointing upwards, that means the stock market is moving upwards as well.

Pe: What's a bear market?

Tam: Yeah. So, a bear market is the opposite of a bull market. So, if you think about a bear, the bear's head usually is pointing down. So, when there's a bear market, that means the stock prices are moving downwards as well.

Pe: Thank you for your time, Ian. For Morningstar, I'm Mikayla Pe.

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Ruth Saldanha

Ruth Saldanha  Ruth Saldanha is Senior Editor at Morningstar.ca

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