I Asked ChatGPT To Explain the Stock Market Like I’m 12 — Here’s What It Said
Written by
Madeline Duley
Edited by
Rebekah Evans
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It doesn’t matter if you’re 12 years old or 65, the stock market can feel like an exclusive club you didn’t get invited to. It’s intimidating, hard to understand and difficult to break into. That is — until today.
It’s time to make the stock market accessible so that everyone can get a piece of the earnings pie. Because the truth is: it’s really not that complicated.
Who better to break it down than ChatGPT? Below we share how ChatGPT explained the stock market to us like we’re 12 years old — so no matter your age, you can start to understand how the market works and how to grow your money.
On a more high-level of investing, here’s how ChatGPT explained investing to us.
It’s like a Giant Store
The stock market isn’t that different from your local Vons or Safeway.
“Let’s say there’s a big store where you can buy tiny pieces of companies — like Apple, Disney or Nike. These tiny pieces are called stocks or shares,” ChatGPT said. “When you buy a share, you’re buying a small slice of that company. It’s like owning one Lego brick of a huge Lego castle.”
Why Do Companies Sell Shares?
So, in theory, these “stores” — aka the stock market — are where people go to buy and sell pieces of companies. But why would a company want to sell its shares to begin with?
“Companies want to raise money to grow — like opening new stores, making new products or hiring people,” ChatGPT said. “So they sell pieces of themselves (shares) to the public in the stock market.”
How Do People Make Money in the Stock Market?
It’s actually pretty simple. There are two common ways to make money from stocks.
“1. Buy Low, Sell High: If you buy a share for $10 and later sell it for $15, you make $5,” ChatGPT said. “2. Dividends: Some companies share profits with you by paying you a small amount of money every few months. That’s called a dividend.”
But, People Also Lose Money
While stocks can go up and grow your investment, they can also fall.
“If the company isn’t doing well or the economy is shaky, the stock price can drop,” ChatGPT said. “That means if you bought it for $10 but it goes down to $6, you’ve lost money — unless you wait and hope it goes back up.”
It’s Kinda Like a Popularity Contest
Ever heard so much hype ahead of a movie release that you paid extra to buy tickets early, only to leave the theater woefully disappointed by the movie? That’s kinda like how the stock market works, too.
“The stock market is like a giant scoreboard showing how people feel about companies,” ChatGPT said. “If people believe a company will do great, they buy shares and the price goes up. If they think it’ll do badly, they sell and the price drops. Emotions and guesses move prices up and down, kind of like hype for a new movie or video game.”
How To Invest Safely
Thankfully, there are ways to protect yourself.
“We can never fully predict what goes up and down because most of these impacts are out of our control, so it’s always good to own/buy in a way that spreads out your risk (potential of loss),” said Gloria Garcia Cisneros, certified financial planner (CFP) and wealth manager at Lourd Murray.
Garcia Cisneros compared the stock market to a farmers’ market, where fruit and vegetable sellers all gather to buy and sell from one another.
“It’s good to own all the fruits and veggies for a balanced diet and the same goes for your investments (or ‘portfolio’),” Garcia Cisneros said. “The fancy word for this is diversification. You aren’t betting on just one fruit or veggie to do well. You have your money in a lot of businesses.”
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