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How Investing Affects the Economy




The stock market health is a good indicator of how the overall economy is doing, which is why it is often used interchangeably with the economy—but these two are not one and the same. To clear up the confusion, I’ll answer the question: how does the stock market affect the economy?

And how do your personal investments in the stock market affect individual businesses? Spoiler alert—they do affect businesses! When you invest in the stock market, you can actually impact the economy and make the world a better place.

If you want to learn how investing affects the economy, keep reading.

Stock Market vs. The Economy

The stock market is not the economy, but it is part of the economy.

It is a financial institution that allows businesses to sell portions of their companies to the public. Most of the big businesses you and I interact with on a daily basis are publicly traded in the stock market.

The U.S. economy, on the other hand, is the entire makeup of goods and resources in the country. The manner in which U.S. citizens, businesses, and the government produce and consume goods make up the economy.

The difference between the stock market and economic performance is that one is based largely on the feelings of individual investors, while the other is based on concrete data such as gross domestic product (GDP), employment rate, and consumer spending.

How The Stock Market and Economy Work Together

Because the stock market tracks all publicly-traded companies it can be used as a measure to track economic growth.

If the stock market is going up, it typically means businesses are doing well and producing more, and therefore GDP is going up.

How GDP is Affected

The stock market affects individual consumer spending as well, which also impacts GDP. GDP is one of the largest contributing factors to a healthy economy. In these ways, you can see how the stock market affects the economy.

However, the stock market can rise based on investor optimism or fall based on investor fear, which makes it far more volatile than the economy. In this case, the market is not always a true indicator of overall economic health.

How Does the Stock Market Affect Businesses?

Not all businesses are traded publicly in the stock market, but those that are are greatly affected by the price of their stock.

When a business initially sells part of its company on the stock market, it issues shares and receives the money from the purchase of those shares directly. Later, it can decide to sell more shares of the company to receive more money.

But in all other cases, when you or I buy a share of a company, the money goes to the seller of that share—not the company.

Although the company doesn’t always receive the money directly when you invest in it, your purchase still largely affects them.

Investing Helps Businesses

Investing in a company drives its stock price higher. So, why is a high stock price good for business?

First of all, the stock price helps a company determine its value.

Stock prices are based on supply and demand, so if the demand for a company’s share is high, the price will be high. Based on the demand for its stock, the company can evaluate how much it is worth. Knowing its value can help a company make better decisions for the business as a whole and for employees.

For example, based on that value, the company can offer payouts in the form of company stock to its employees. As long as that stock is valuable, shares of company stock can be a great incentive for employees and give companies an advantage over competitors.

The value of a company’s stock also comes into play when merging with or acquiring other companies. It can indicate the value of a company for sale, or sweeten the deal for employees being acquired.

Finally, the value of a company’s stock can help it secure funding from banks and investors to grow and scale. As you can see, your investment in a company’s stock is vital to its overall health.

How Does The Stock Market Affect The Economy?

As I mentioned above, the stock market is part of the larger economy and does play an important role in economic health.

It reflects the profitability and potential of so many large businesses that make up a large portion of the country’s GDP.

If the market is rising, it is a good indication that businesses are doing well and GDP is growing. If the market is falling, it can mean businesses are losing money, becoming less profitable, and maybe laying off employees, which can lead to shrinking GDP.

How Consumer Spending is Affected

The rise and fall of the stock market also affect consumer spending. For instance, if a person is employed and experiencing growth at work, they are likely to increase spend, whereas if a person is laid off, his or her spending will drastically decrease.

In another case, if a person’s investments are performing well, they are more likely to feel secure and spend money, but if investments are performing poorly, they are more likely to feel uncertain and rein in spending.

The stock market can cause an increase in or reduction in spending not only for individuals but also for businesses, which in turn affects the economy as a whole.

What Affects Stock Market Performance?

The stock market is affected by the thoughts and feelings of individual investors, which are influenced by a variety of factors, but boil down to excitement and fear.

Excitement and Fear

Excitement drives people into the market, and fear drives people out of the market. Excitement and fear can be caused by economic policy, business news, and world events.

World Events

World events such as wars and a global pandemic cause investors to fear the unknown and sell shares of stock.

When other investors see stock market prices begin to fall, fear mounts, and they begin to sell as well. This causes a ripple effect that can drive the stock market further and further down.

On the other hand, world events such as important elections and exciting innovations can make investors feel hopeful and put money into the market, thus driving it higher and higher.

How Does Investing Help The Economy?

When you invest in the stock market, you are contributing to the success of the businesses you are investing in and the economy at large.

Similar to a storefront, or business of any kind, a strong stock market depends on the number of purchases made.

If you and I are buying stock in a company, we are contributing to both the company and the stock market by causing demand for that company’s stock to rise, and therefore the price of that company’s stock to rise. Multiply that by millions of people investing in hundreds of companies, driving demand and prices higher, and you can see how the stock market goes up.

When the stock market is falling, it signals that there is a lot of fear in the market. This is a prime opportunity for Rule #1 investors not only because you have the chance to purchase a company’s stock at a lower price, but also because you have the chance to support that company.

The willingness to buy when there is a lot of fear can help establish the value of a business. By helping establish the value of a business you are making it possible for companies to stay afloat, employee stock options to stay valuable, and enabling that business able to go out and acquire other businesses that need rescuing.

When you jump into the stock market when it’s going down, you are shifting the narrative from fear to hope and you are doing an enormous service to the economy and businesses you are investing in. The capital you put in can be the difference between a company surviving a market crash or not.

How Does Investing Make The World A Better Place?

When you purchase the stock of a company, you are voting for that company with your money and contributing to its success.

As a Rule #1 Investor, I believe it’s so important to vote your values. The investment you make in companies helps ensure they will be bigger and better down the road.

If you invest in companies you believe in and whose mission you support, you are helping them to grow and continue to act on that mission.

We really do have the power to move the needle by investing in wonderful businesses. If a business is making the world a better place, you are making the world a better place by investing in it.

This is one of the coolest parts about investing: you can support real companies with real missions, with real employees. In fact, 85% of the money in the stock market is coming from individuals like you and me. We can have a real impact when we use our money to fuel a company’s growth.

How Does The Stock Market Influence The Finances of Individuals?

In addition to making the world a better place, investing can also help secure a better future for you and your family. If you’re wondering why you should invest in the U.S. stock market, this is reason enough!

Here is how the stock market can affect the average person like you or me:

  1. You’re able to own a part of growing businesses. I’ll say it again, investing in wonderful businesses that align with your values can help make the world a better place. You can play a part in the success of businesses you believe in and receive the positive financial impact of their growth.
  2. You’re able to beat inflation. Putting your money in a savings account is safe, but with interest rates under 2% at best, you won’t beat inflation in the long run. The stock market, on the other hand, gives you an average return of 7% year over year if you invest for the long run.
  3. You can have a much better retirement. By investing in businesses that will grow and thrive in future years, you can experience a great return on your money. If you can follow Rule #1 principles, you have the opportunity to generate passive income that will support you and your family in 10, 20, 30 years down the line.

If you’re ready to learn more about how to invest, get started with my Do’s and Don’ts of Investing Cheat Sheet. You will not only be prepared to jump into the market when it’s down and support the economy, but also be on your way to a better financial future.


By: Phil Town
Title: How Investing Affects the Economy
Sourced From:
Published Date: Tue, 07 Jul 2020 15:05:23 +0000

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Investment Advice

Are These Marijuana Stocks Built For Long Or Short Term Success?



Would You Invest In These Marijuana Stocks In 2021?

For the last several month’s investors have found a renewed interest in marijuana stocks. From mid-2020 to currently in 2021 cannabis stocks have been on the move. Many pot stocks from various niches have been rising in the market. Some marijuana stocks have not only reported record earnings but some have seen back-to-back all-time highs. With the amount of money being invested with the hopes of federal cannabis reform, people are trying to jump on board before the boat leaves the dock.

The cannabis sector as a whole has been on fire. Many companies in the cannabis industry have been preparing for what’s next to come. Meaning most cannabis companies are making operational adjustments to be able to adapt to the future of the cannabis industry. For example, 2 big-time cannabis companies both teamed up to make the biggest cannabis company on earth. Tilray Inc. and Aphria Inc. joined forces which have helped both companies market performance to a degree.

As well other companies have taken notice and may follow the same path. A lot is changing for the cannabis industry between legislation, more states going legal, and new regulations. All these variables play a factor in how this sentiment impacts the market. With more positive sentiment taking hold of the market is reflects in how well some marijuana stocks trade.

So far in 2021 cannabis stocks are moving up and seeing overall bigger gains. For this reason, many new and seasoned investors are looking to get involved and make some money. The cannabis industry is one of the fastest-growing markets in the world that is continuously expanding. The 2 cannabis stocks below are examples of when the sector is trending it resonates well with how marijuana stocks can or will trade.

Pot Stock Watch List This Month

  1. Green Lane Holdigns Inc. (NASDAQ:GNLN)
  2. Liberty Health Sciences Inc. (OTC:LHSIF)

Green Lane Holdigns Inc.

Green Lane Holdigns Inc. has been of the many marijuana stocks trying to climb higher in a volatile market. Back in 202 GNLN stock saw its price fluctuate quite often. This price fluctuation allowed for good entry points before GNLN stock had a spike in trading. Like many marijuana stocks, 2021 gave the cannabis market a nice push to start the new year. With Green Lane 2021 was no different.

In the first 2 weeks of the new year, GNLN stock shot up 25 percent in trading as it was starting to dip from this point. Even though Green Lane closed out the first month of the new year with a drop from previous highs in January the following month was a different story. Currently GNLN stock in February has been able to recover from January’s dip. 

The company has been able to even reach higher highs than last month. Within the first trading week of February, GNLN stock saw gains of 27 percent. This was a much-needed momentum booster to help the company recover from its trading at the close of January. So far for in February GNLN stock has had a nice upward push in the market showing over 60 percent gains in trading. This current momentum has signaled to investors that Green Lane may be a marijuana stock to watch in 2021.

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Liberty Health Sciences Inc.

Liberty Health Sciences Inc. has been an interesting cannabis stock to watch. Like many other cannabis businesses, it’s going to take more than a pandemic to stop the company from expanding. Back in January, the company announced that it will be opening a new location adding to its current portfolio of dispensaries. The Company plans to open two more dispensaries by the end of February 2021 with much more in the works.

Although in 2020 LHSIF stock traded mostly sideways with subtle spikes in trading the new year has provided a strong push in trading. Starting from December 21st LHSIF stock started to bounce and began to climb in the market. From the 21st to the 31st of December LHSIF stock shot up 90 percent. For those who held their position until this point, they made a healthy return on their investment. Pushing into the new year the company was able to sustain its market momentum and keep pushing up in the market.

In the first 14 days of trading of the new year LHSIF stock has a 13 percent increase in trading. The remainder of January’s trading resulted in a small dip. Yet overall gains for the first month of 2021 for LHSIF stock was an increase of 8 percent. This was a subtle push that helped the company sustain its current market position. Now that we have entered February LHSIF has continued to trade up in the market. Currently for the month of February LHSIF stock is up over 25 percent. If the company can continue this momentum it would intrigue more people to keep an eye on this marijuana stock.

The post Are These Marijuana Stocks Built For Long Or Short Term Success? appeared first on Marijuana Stocks | Cannabis Investments and News. Roots of a Budding Industry.™.


By: Daniel Chase
Title: Are These Marijuana Stocks Built For Long Or Short Term Success?
Sourced From:
Published Date: Thu, 11 Feb 2021 13:30:07 +0000

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Investment Advice

Price to Earnings Ratio Defined (P/E Ratio Formula)



Trying your hand at the stock market? Chances are, you’ve come across the term “P/E ratio”. If you’re like many who are new to the stock market, you’ve looked at this phrase and asked yourself, “What in the world is that?” 

P/E ratio, otherwise known as the price-to-earnings ratio, is a formula that investors use to determine the value of a company’s share. It is one of the most common formulas used to determine the value of a stock. The formula compares the price of a company’s share to the earnings per share (EPS) of the company in order to determine how much an investor is paying for $1 of the company’s earnings. Let’s take a deeper dive into the P/E formula. Use the links below to jump ahead to a section of your choosing. 

P/E Formula and Calculation 

First thing’s first: let’s learn the price to earnings ratio formula and how to calculate it. The price-to-earnings ratio formula is as follows: the price of a single share of a company’s stock (What is a stock?), divided by the company’s earnings per share (EPS). The ratio of these two variables will tell you exactly how much an investor is spending for a single dollar of the company’s earnings. 

Finding the cost of a company’s stock is extremely simple. In order to find the price of a single share of a company’s stock, all you need to do is enter the company’s stock ticker symbol (the series of characters that represents that company on the stock market) into a finance website, such as You’ll quickly find the current cost for a single share of that company’s stock. Google also keeps an up-to-date Market Summary for the prior day’s stock market, so a quick Google search will often bring exactly the answer you’re looking for. 

Determining a company’s earnings per share (EPS) can be a bit trickier. Earnings per share are broken down into 2 categories: trailing earnings and forward earnings. Trailing earnings, often shortened to TTM, are the company’s core earnings over the trailing, or prior, 12 months. This number is the profit that the company has generated over the past 12 months of business. Remember that we’re talking about the net income of a business, rather than the gross income (Need a refresher? Learn more about gross income vs net income.). P/E ratios calculated with trailing earnings are known as the trailing P/E (P/E TTM). Forward earnings, on the other hand, are the predicted earnings that the company will generate over the next 12 months. P/E ratios calculated using forward earnings are known as the forward P/E. Both types of earnings are divided by the total number of public shares on the market in order to generate their EPS. More on this later. 

Let’s try out an example. Say you’re looking to determine the trailing P/E of a fictional company AlphaBet Corporation, known on the stock market as ABC. Their share price is currently at $50 per share. Their trailing earnings per share is $5. Divide the $50 per share by the $5 EPS, and you’re left with a P/E of 10. This means that investors are paying $10 for every $1 in earnings per share. 

Understanding P/E Ratio 

So, ABC has a P/E of 10. What does that mean for you? 

In the most general sense, the lower a P/E ratio, the less an investor is paying for each dollar of a company’s earnings per share. A higher P/E ratio means that an investor is paying more per EPS. But, unfortunately, determining which stock to buy isn’t as simple as “look for the lowest P/E ratio”. 

It is imperative to remember that everything on the stock market is relative. “Good” and “bad” numbers are different for each and every industry. An electronics company and an automotive company are functioning in two vastly different landscapes. Therefore, in order to determine what is a good price to earnings ratio, you’ll need to understand the landscape of P/E ratios in the industry. Look at similar companies’ P/E ratios to better understand the relative value of your company’s P/E ratio. If ABC’s price-to-earnings ratio seems extremely high as compared to other companies in the industry, it may be an overvalued stock. On the other hand, if it seems extremely low as compared to other companies in the industry, it may be a very valuable stock. 

Let’s try another example. We’ve already determined that ABC’s price is $50 per share, earnings are $5 per share, and P/E is 10. A competitor, DOG, also has stock for $50 per share. Their earnings, on the other hand, are $2 per share, making their PE 25 (50/2=25). An investor would pay $10 for every $1 of ABC’s earnings per share, but they’d have to pay $25 for every $1 of DOG’s earnings per share. With a better understanding of the landscape, we can see how ABC sits relative to its competitors. 

A company’s price to earnings ratio may also be looked at relative to itself. Remember those two types of earnings we reviewed earlier? We can compare a company’s trailing P/E to their forward P/E to better understand the value of a stock. A company with a high trailing P/E ratio may have been rather unprofitable the prior 12 months because theywere preparing to ramp up business substantially, and took on a number of upfront costs. They may be expecting a boom of profits over the forward 12 months, leaving them with a substantially lower forward P/E. By reviewing these numbers in comparison to each other, we may see an opportunity for a long-term investment. 

Limitations of the P/E Ratio 

While the price to earnings ratio is certainly one of the most widely used calculations among stock market investors and analysts, it’s not a cut and dry way to determine a good or bad stock. It gives investors a good understanding of the value of stock in a particular moment, but it certainly has its short-comings. 

Just as the stock market is relative, it’s also in a constant state of fluctuation. It is re-evaluated and recalculated constantly. Why does this matter when it comes to the price to earnings ratio? Well, just look at the variables we use to determine the P/E ratio. 

First, we have the “price” of the price-to-earnings ratio: the cost of a single share of a company’s stock. Stock prices fluctuate every single day based on supply, demand, current events, and more. Typically, the cost of a company’s stock will be reported as the cost that it was when the stock market closed the prior day. Each time a company’s stock price changes, their P/E ratio will change. Certain companies may tend to have a greater fundamental volatility than others, leaving their stock price changing substantially each and every day. Even those with low fundamental volatility experience routine fluctuation. 

Next, we have the “earnings” in the price-to-earnings ratio. Both trailing and forward P/E ratios have their limitations. Trailing P/E can feel like the more reliable of the two numbers because it’s based on facts. We take their actual earnings over the prior 12 months into account. But, in many situations, a company’s prior 12 months may have little to do with their next 12 months. As mentioned earlier, a company may have spent heavy the prior 12 months in preparation to ramp up the next 12 months. The trailing P/E won’t show us any of that. The forward P/E, on the other hand, is based on predictions. And predictions are quite educated guesses, but at the end of the day predictions are still guesses. A company may fall short of their predicted earnings or blow completely past them. 

Looking to try your hand at the stock market? Don’t go at it alone. Consider opening an investment account with Mint. We believe that there’s no “one-size-fits-all” approach to investment. That’s why we offer a variety of investment partners, suited to each particular need. Let’s find the best to suit yours. 

The post Price to Earnings Ratio Defined (P/E Ratio Formula) appeared first on MintLife Blog.


By: Mint
Title: Price to Earnings Ratio Defined (P/E Ratio Formula)
Sourced From:
Published Date: Tue, 25 Aug 2020 19:37:02 +0000

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Will Marijuana Banking Be Apart Of Federal Cannabis Reform?



The Cannabis Industry VS Financial Institutions

As marijuana stocks and the cannabis industry as a whole awaits federal cannabis reform the sector keeps trending. Now if the U.S. can federally decriminalize cannabis some analysts feel it may cause some cannabis stocks to rally. As well as many new doors will that can open. For one many new markets will look to join the U.S. cannabis industry. Furthermore, with federal cannabis reform, it could be the start of initiating a banking system for the industry.

Currently due to cannabis still being federally illegal banks can not take money from a cannabis-related business. From the time states started going legal, it has been an issue that has yet to be resolved. The cannabis industry is one of the fastest-growing industries in the world, especially in the United States. Politicians have been working to pass various pieces of cannabis legislation.

The one bill that would be beneficial to the industry is known as the SAFE Banking Act. This bill would allow banks to accept money from cannabis-related businesses. On March 7, 2019, the bill was introduced to the U.S. House of Representatives by Ed Perlmutter and was introduced to the Judiciary and Financial Services Committees. Back in 2019, the Financial Services Committee voted 45 to 15 to advance the bill to the full House.

The SAFE Banking Act provisions were included in the HEROES Act COVID-19 relief bill passed in the U.S. House in May 2020. They were again included in a bill approved by the house 214–207 in October. A push to include the SAFE Banking Act provisions in the end-of-year COVID-19 stimulus failed, though hope remained it could pass in 2021 if reintroduced.

How Will The Cannabis Industry Work With Banks

When it comes to any business you can think having startup capital is important. Now not every person with money is willing to invest in a new venture which makes finding that more of a task. Especially with cannabis-related business and right now banks are no help. For a business to acquire a line of credit or some type of lending your business must be able to have some type of financial record.

This usually tells banks and lenders how good you are at paying things back and how reliable you are to do so. The bigger obstacle for cannabis businesses is how do you show you are trustworthy with no credit history. Once again this due to financial institutions not working with cannabis businesses. Let’s look at a few steps to help jump over some red tape.

First, you should start a new business that is a separate company from your personal credit. This will help when it comes time to do your taxes. The second step to take is you need to register for your EIN number. Next thing to do is open a new bank account and make sure you can show that you have continuous income which shows financial stability. Again with banks not accepting cannabis money the last step may be next to impossible to do.

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Will Cannabis Banking Actually Happen?

The way financial institutions offer other industries various banking options is not the same for the cannabis industry. Although there is some grey area with cannabis and banks yet most banks won’t offer services for how high risk the industry is. This leaves many cannabis businesses left out from what other traditional retail businesses would have. Look past the risk banks also look at taking cannabis money as to much work. This would result in following regulations and keeping data on all money. This process has been established by the Bank Secrecy Act of 1970. Also, working with the large amounts of cash cannabis businesses generate may affect how a bank can operate.

With this roadblock between banks and cannabis money, it shuns cannabis businesses from establishing a form of credit. This issue alone is why the industry operates only in cash with very few places to keep it. Also, this issue can do much harm to future relationships with other companies and businesses. If a cannabis business can not establish a credit history no lender or bank can help. That’s why it’s important to have an industry as big as cannabis have some form of credit being reported to credit companies. This will tell other lenders and banks that a particular business is profitable enough to pay back any loans.

What Will The Future Of Cannabis Banking Become

It’s wild to think that an industry that is generating a high volume of cash is being blocked from showing the reliability needed to secure lending. Some feel if the cannabis business can earn the trust of financial institutions by being transparent with its earnings. This may be a step to banks feeling more comfortable with working with a cash-intensive business. Hopefully, with federal cannabis reform, it will help push cannabis banking in the direction needed to help out the industry.

The post Will Marijuana Banking Be Apart Of Federal Cannabis Reform? appeared first on Marijuana Stocks | Cannabis Investments and News. Roots of a Budding Industry.™.


By: J. Phillip
Title: Will Marijuana Banking Be Apart Of Federal Cannabis Reform?
Sourced From:
Published Date: Tue, 09 Feb 2021 18:34:56 +0000

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