Stock Market Questions

Before we begin today, go ahead and check your stock portfolio at: http://www.marketwatch.com/game/khs2014

Don't forget to turn in your stock pick paper from Monday.

Define the following in your own words:
(Don't print yet -- we have more questions at the end)

• Stock
• Stock Market
• Stock Symbol
• Dividend
• Investing
• Diversifying

Now let's look at some of the basics of the Stock Market:

What is stock?  A stock represents a share in the ownership of a company.  If you own a company's stock, then you are an owner [or shareholder] of that company.  A stock represents a claim on the company's assets and profits.  A stock is also known as equity.

The ownership percent of a company that you own is calculated by dividing the number of shares a person owns by the number of shares of stock outstanding.  For example:

• 1,000 shares owned
• 10,000 shares outstanding (total number of shares available)
• 10% ownership of the company

Remember, investing in individual stocks is not necessarily the best investment choice for most people.  I think you will find by watching our classroom stock challenge that investing is a difficult way to make a profit.  For most individuals who want to invest in the stock market, low priced index funds provide a low cost and more simple way to invest in a diversified portfolio of stocks.

Ownership of stock use to be represented by a stock certificate.  These days, when you buy a stock of a company, you usually do not get the actual stock certificates any more.  Instead, your ownership is tracked electronically, making it easier to buy and sell shares.

So when you have stock and ownership of a company, what can you do with it?  Not really very much.  You will benefit when the price of the stock goes up, or lose if the price goes down.  As a part-owner of the company, you are given the right to vote for the company's board of directors.

Another way you may benefit is if the company pays dividends.  Dividends represent a percent of the company's profits, and is paid to the shareholders.

Buying stock can be risky.  Although stock prices can go up, they can also go down.  And if the company goes bankrupt, you could potentially lose all of the money you invested in the stock.

If you are interested in learning more, The Wall Street Journal has a free booklet available to explain some of the basics of using the Stock Market: http://www.wsjclassroomedition.com/pdfs/stock_guide.pdf

While watching the Dave Ramsey video on Savings and Investing, answer the following questions:

• Never invest purely for _____________  _____________.
• Never invest using ______________ money.
• _______________ means to spread it around.
• Diversification ______________ risk.

Researching Individual Stocks

Today we will complete our Individual Stock Research project.  You are finding 9 stocks that are interesting to you which you will be using when we begin our Virtual Stock Exchange project.

We will also be discussing what the "range" means (52-week low/high) and what the news has to do with stock value.

Before you join our Stock Market Simulation, make sure you understand the rules.  You will receive $10,000 in virtual money (no, you don't get to keep it) to invest in stocks as low as $.50 in value.

You can join via Market Watch here: http://www.marketwatch.com/game/khs2014 (password: knights)

If you are required to join Market Watch, know that you don't have to provide much detail.  I gave them my real email address (which you will need to verify the account) and I set both my occupation and industry as "Education."  I gave them a birth year, but that's really not their business either.  Finally, note that I un-checked all of the "Newsletters and Alerts" and "Communications preferences" boxes.

There are a variety of strategies for "playing the market" -- and millions of dollars are made every year on books telling you how to do it.  The strategies are endless.  Some suggest investing in "penny stocks" -- others in "blue chip stocks".  Some tell you to buy when a stock has taken a total nosedive and some will tell you to buy when it's on its' way up.  Some tell you to invest in one risky stock and others advise you to diversify your investment.  There's no "right way" to invest in the stock market.  It's all at risk.

For my challenge (since it's not real money) I went to look for cheap stock [you can buy more stocks that way] but I wanted a large company.  I found an article for "Billion Dollar Companies With Stocks Under $10" here: http://www.cnbc.com/id/44962045/Billion_Dollar_Companies_With_Stocks_Under_10

The problems with having large numbers of low dollar stocks is that the value of your portfolio is more volatile.  I went from being in first place in our Stock Market Challenge to almost last place... and back to first within an hours time.

The Basics of Investing

Today we will begin discussing investment strategies and the Stock market:

• Today we will watch a brief cartoon about how the New York Stock Exchange works.  It's a bit choppy in parts, but I think it's a great explanation of how the Stock Exchange works -- and has worked since the cartoon was made... about 60 years ago!

• Finally we will begin researching individual stocks that you have an interest in.  For example, if you wear a certain clothing brand, drink a certain beverage, or play a particular video game, those might give you some places to start.  
• Go to http://finance.google.com
• Find 9 different stocks that you have an interest in
• Complete the following information about your stocks (you will receive a worksheet -- or you can download a copy here)

Individual Stocks:

• Company Name:
• Stock Symbol:
• Current Stock Value: $
• 52-Week Low: $
• 52-Week High: $
• News about this company: 

Make a note on your page about which stocks seem like they have the most earning potential -- and explain why.