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Not Playing the Stock Market? Why You Should Be

by horsecrazyirishgirl


We all have heard of the Neopian Stock Market and if you are like me, you probably have occasionally bought and sold some stocks throughout the years. Buying 1000 stocks a day is a hard habit to get into and does have a sticker shock depending on how many neopoints you have. However, the stock market can be much better for you and your neopoints than having them sitting in the bank. This guide will explain why you should be investing daily in the stock market to increase your income.

I have seen time after time people asking for ways to make more neopoints. Normally, these people are looking for short term results. That is a topic for another guide. The stock market is not a get rich quick game. It requires dedication and attention to make the most. That said the time needed daily for the stock market is not a lot. All that is required is a couple of minutes a day to buy a stock and to check on your portfolio to see if there are any stocks at your sell price.

Basics of the Stock Market

This is not a guide to about how to play the stock market. I'm not going to go into stock ratings and sell points but a brief basics might be helpful to those who rarely pay attention to the stock market.

Buying Stocks

You can buy any stock that is above 15 unless you have the "Cheaper by the Dozen" Obelisk Boon. With that boon you can buy any stock that is 10 or above (huge opportunity to increase your profits!). You can only buy 1000 stocks per day—you can split this between different companies (i.e., buy 500 of KAUF & 500 of ACIF). To maximize profits, try to buy stocks at 15 and 1000 stocks per day. To make things easier use the bargain stocks to find all the companies whose stocks are below 20 (NOTE: this includes stocks that you cannot buy).

Selling Stocks

Sell when the stock hits a price where you like the profit margin. This will vary by the individual and their approach to the stock market.

Why you should start buying stocks...

Every time you come on Neo, you go to your bank and collect the interest—am I right? (well if I'm wrong you really should start doing that! Free neopoints!) Well what if I told you that your neopoints are better spent invested in the stock market than sitting in the bank collecting interest? Even if you have the enough neopoints to have the highest interest rate this still holds true.

Now here's the math proof for the skeptics out there. If you buy 1000 of a stock at 15, you spend 15000 NP. The highest bank interest rate currently is 12.5%. So if you didn't spend that 15000 on stock but instead left it in the bank over the course of a year it would make 1996.86 NP in interest. This is if you collect your interest daily and with daily compounding (since if you collect your interest you will then earn interest on the interest). Now if you don't have the highest interest rate at the National Neopian Bank there's a table at the end listing how much 15000 NP make in interest every year. What this yearly 1996.86 represents is the opportunity cost of investing 15000 in the stock market. This means that if you buy a stock and it increases in value 2 points (stock price of 17) you make basically the same as if you did not invest. Most stocks will increase in the course of year more than 2 points (at least once) which means you can easily make more neopoints from the stock market than simply leaving money in the bank.

If you don't log on every day, stocks make an even more attractive option. Bank interest only reaches the highest potential if you log on every day and collect it. In an ideal scenario this would happen however, logging on every day is not always possible. In this situation, the amount you have invested in stocks could still be earning potential profit unlike any money you have sitting in the bank.

If you can't find a stock to buy at 15, which does happen, do not worry! The table at the end also lists the amount of yearly interest on 16000 and 17000 (buying at a stock price of 16 or 17). If you buy at those prices just aim for an increase of 3 stock points to cover the interest (this will still provide profit). This would be a minimum sell price of 19 or 20 over the course of the year.

Those minimum sell prices (to cover the yearly interest) are definitely on the lower than what most people end up setting their sell points for. I don't actually expect many people to sell at such a low price unless they need neopoints to purchase something but just remember that that is what you need to break even (not lose any money or gain any money in comparison to the yearly interest). Anything above that is profit and will help you generate more wealth!

Table of interest rates and yearly interest

Below is a table detailing how much interest 15000, 16000 and 17000 earn yearly at different bank levels. Those amounts represent buying 1000 of a stock priced at 15 or 16 or 17. The interest is compounded daily as if you collected the bank interest every day. If your bank level is not listed then follow the lowest interest rate level listed for guidance.
Bank Level Interest rate Yearly Interest on 15000 Yearly Interest on 16000 Yearly Interest on 17000
Ultimate Riches! 12.5% 1996.86 2129.99 2263.11
Neopian Mega-Riches 12.0% 1912.12 2039.59 2167.07
Millionaire Mega-Platinum 11.5% 1827.80 1949.65 2071.50
Millionaire Double Platinum 11.0% 1743.89 1860.15 1976.41

In Conclusion

Stocks can be a much better option for your neopoints than sitting in the National Neopian Bank. You have the potential to make much more than you would in interest on what you invest. However, remember that there is some risk in the stock market! Stocks came and have gone bankrupt which is why it is important to not buy only one company but diversify and have a number of companies in your portfolio. The stock market is also not a get rich quick game but can definitely help you earn more neopoints over time especially if you are lucky. Best of luck!

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