Remember flea markets? Garage sales?
Meet swap meet.
Swap meet is when a flea market and garage sale have a baby. It’s informally defined as a fair or bazaar where objects, usually secondhand, are bartered or sold. To some, the difference between a flea market and swap meet lies in the fact that some swap meets involve strictly swapping goods with no money involved, as opposed to flea markets. The term has been in use since the late 1940s and early 1950s, though the concept predates it. Many swap meets can even be virtual, allowing for the potential of more customers or vendors to participate.
One popular example of a swap meet or a series of swap meets is the “one red paperclip.” Canadian blogger Kyle MacDonald, bartered his way from a single red paperclip to a house in a series 14 online trades over the course of a year.
In social simulation games, like Nintendo’s Animal Crossing, characters may participate in make-believe swap meets as part of gameplay.
It makes sense that swap meets would remain popular throughout the decades. Acquiring second-hand rare or antique items is considerably cheaper than paying full price. The rise of the internet has allowed for a greater number of swap meets as well, especially for niche interests—say, Japanese anime fashion.
Now, you’ve probably caught where we’re going with this….
Buying, selling, or trading stocks is the same as if you were to buy, sell, or trade an antique item in a swap meet.
Earlier we mentioned that swap meets can be virtual. In theory, the stock market is basically one big swap meet. You have your vendors (or sellers) and buyers. In some cases, you could be both.
For example, you have a booth set up to sell or trade your old textbooks, but you’re also interested in buying or trading the monitor in the booth next to you.
Let’s also say you have some stocks in the health industry but are interested in obtaining stocks in the tech industry. When you get ready to trade your health stocks for tech stocks, you’re not necessarily receiving “new” tech stocks. You’re simply receiving a “second-hand” stock.
Now we multiply this simple transaction by a lot. Think infinity since the stock market won’t disappear anytime soon.
Why is it important to have so many transactions or people involved?
The more people that come to the swap meet with their own items, the more options you have to choose from and keep you interested. Similarly, when there’s a higher participation in the stock market, there’s greater liquidity. And as a result, there are better exchanges or trades.
In the investment world, liquidity is defined as how quickly an asset can be sold for cash. After the global financial crisis of 2007, homeowners found out that houses, an asset with limited liquidity, had lost liquidity. Home prices often fell below the mortgage owed, forcing many owners to foreclose on their homes. This led people having more liquid assets, mostly investments in the stock market, to maintain access to cash in an emergency.
Next time you’re looking to gather high liquidity assets, shoot your shot in the stock market game. Also, ask a friend to tag along with you for better deals.