Curtis Carroll is a sought-after and respected financial advisor whose insights into investing and trading stock have earned him the nickname “Wall Street,” or “Street” for short. But he’s a long way from the trading floors of Lower Manhattan — Carroll is an inmate at California’s San Quentin State Prison. He grew up in the flatlands of East Oakland, the illiterate son of a crack-addicted mother. He hid his learning disability by ditching school, seeking refuge and friendship in the streets, and providing for himself with petty crimes like boosting quarters from video games. He drifted through his early teens, a lost and confused kid.
In 1996, at the age of 17, he planned and participated in an armed robbery that resulted in the murder of one man and the shooting of another. He was tried as an adult and sentenced to 54 years to life. Although Carroll says he did not pull the trigger, he states that the robbery was his idea and that he was just as responsible for what happened as the shooter. For his first several years in prison, he remained illiterate. Then, one day, he accidentally grabbed the stock section of the newspaper. An older inmate noticed and encouraged him to study it because, as he tells it, “that’s where white folks keep all their money.” Intrigued, Carroll (TEDxSanQuentin Talk: “How I Learned to Read—and Trade Stocks—In Prison”) decided to learn more about the stock market. But first, he had to learn how to read, which he calls “the hardest thing I’d ever done in my life.”
Carroll recognized that financial ignorance was a decisive factor in the bad decisions that led to his incarceration. And he’s not alone: More than 70 percent of those in prison have committed or have been charged with money-related crimes, according to the California Department of Corrections. So in 2012, Carroll cofounded San Quentin’s financial literacy program to teach basic money skills to his fellow inmates: how to save, control expenses and borrow wisely. He connects financial independence with self-control and self-empowerment, expelling the myths and misconceptions that keep people from investing wisely — or prevent them from managing their money at all. “Incarcerated people need these life skills before we re-enter society,” he says. “You can’t have full rehabilitation without these life skills.”
“When trading, you hold onto a stock for a short period of time, but if you’re investing in a company, you have to have a long-term approach, because your money is going to be tied up with that company for many years. For the people I teach here — incarcerated folks, many of them older — the odds of investing in their 40s and 50s and making enough money to retire are slim to none. So I advise them to focus on trading. Trading gives them a lot more education and practical experience while it brings in income. Then, if they decide to invest, they’ll have much more knowledge about what to look for and how to invest wisely.”
“Successful investing and trading are about trying to figure out three things: Is the stock overpriced, underpriced or fairly priced? That’s it. People ask me, ‘Well, how would I know that?’” That’s where the research comes in. Find out what kind of company it is, and how long ago it was founded. What kind of products or services does it provide? How many employees does it have? What is the company’s revenue, profits, debt and market cap? Who are its competitors? These are all important to know, and they’re common sense. If I walked up to you and asked to borrow some money, what would you say? You don’t know me, so you’re gonna say no. And if you did, you’d ask what I needed it for and how I was going to pay it back. You want to know the same things about companies you invest in. Market conditions make things more complicated, but this information can serve as the foundation for your decision.”
“I believe 90 percent of the markets trade on emotion. For example, Apple recently reported they had record pre-orders for the new iPhone X but there would be a delay in shipments. Apple stock started rallying six or seven percent on the news of these pre-orders. Then, it was reported that a UPS truck full of iPhones got stolen — a relatively small number of phones — but to me, it was a good reminder that none of the revenue has come in yet and people were buying Apple stock based on emotion. It’s better to wait to see if the revenue comes in first. Never follow the herd, because the herd follows emotions. It’s easy to know where the herd is because you’ll see stock prices rise very rapidly in a very short period of time based on information that has little to do with facts.”
“Stocks historically move based upon earnings calls. When the end of, say, the first quarter comes, and companies announce earnings, large investors like mutual funds and hedge funds buy stock based on that, and increases through the quarter are sustained based on the amount of revenue earned that quarter. The next quarter, the same thing. But when you see rapid increases or decreases in a stock in the middle of a quarter, be wary and don’t rush to invest. Wait for the announcements. If the numbers don’t come out the way they’re supposed to or if they miss expectations but beat their own projections, the stock prices can still fall.”
“Buying large blocks of shares is how you can build wealth and portfolios, but regular people don’t have the kind of cash they need to buy that much stock in the big companies that are easily predictable, like an Apple or a Facebook. Someone who has a couple thousand dollars to invest is better off buying larger amounts of stock from smaller companies, even though they are more volatile. For example, if I bought a thousand shares of Apple right now, I’d have to spend around $168,000. If Apple stock jumps three dollars, I make three grand — but I had to spend $168,000 to make that. That is a return on investment of less than 2 percent. Now if I buy 10,000 shares of a 30 cent stock, that will cost me only $3,000. If the price jumps 10 cents, I am going to make $1,000 from a $3,000 investment. That’s a return on investment of more than 30 percent. Right now, Amazon is trading at over $1,000 per share. What are you going to do, buy one share? People are doing that, but it’s not even worth the purchase. You won’t ever have enough shares to see that strategy mature.”
“Trading lets you learn the markets, earn money and actively create and manage different strategies for your success. It’s what allows you to take ownership of your own life and your overall livelihood. That’s what I consider good risk.”
ABOUT THE AUTHOR
Ari Surdoval is a writer, editor and content strategist, and the founder of Spoonful Communications a boutique strategic communications and content creation agency. He lives in Nashville with his wife, two children and an ever-expanding pack of rescued animals. This piece was adapted for TED-Ed from this Ideas article.