(This is a four-page instruction packet that can be printed as a handout)
The Stock Portfolio Game provides a step-by-step demonstration on how
to pick, buy, monitor, and sell stocks; It also shows how to calculate
financial goals. Integral to the game is the Internet, which students will
tie into for each step of the game. While being an effective tool for
individual beginning investors, the Stock Portfolio Game is also designed
to teach a high school economics class about stock investing over a
period of four to eight weeks.
Students are asked to view the game with caution since they may not be
reflective of the long-term results typical of stock investing. Click here to
play the ThinkQuest Stock Game.
(http://tqd.advanced.org/3096/text/6collab.htm)
Step # 1 Picking Stocks
Picking stocks may not require the Internet since our daily experiences and research in
the library may give you ideas about which companies may be good bets. However,
collaborating with others across the Internet might lead to more effective results by
visiting Investing For Kids' Collaboration. Here are three stock picking recommendations:
- Choose companies that manufacture the favorite things in your daily life, such as
soft drinks, shoes, clothes, restaurants, etc., and make sure they are publicly traded
companies by checking the labels and packaging of the products.
- Get company names from work places where your parents, friends, relatives, and
neighbors have firsthand experience about the quality of the company.
- Use The Value Line Investment Survey at the reference desk in the library. From
the first booklet, which is a summary of the 1,700 companies rated by Value Line,
take the 100 stocks with a rating of "1" for Timeliness. Next, narrow down to those
companies with a Safety rank of "1," "2," or "3." Also, check on the industry
ranking on these companies. Narrow down your stock selections to the companies in
the top 20 industries.
Visit Investing For Kids' Stock Learning Center to learn more about stocks.
Step # 2 Making a Stock Buy List
To make a stock buy list, narrow down your stock picks to not more than 10. Each of your
stocks should be from different industries so you will have a diversified portfolio. Here is
the screening process:
- Identify the stock symbols for your publicly traded companies by using the web site
called Public Company Search Engine at
http://www.researchmag.com/cgi-bin/cosearch.exe.
Simply type in the company's name such as Coca-Cola to get the symbol, KO.
- Use the Internet at the Wall Street Journal Briefing Book web site, which contains
summary information of company backgrounds, financial overviews, stock
performances, company news, and press releases of over 7,000 companies to check
the following criteria:
- The stock price is above its 200-day moving average
- The company's earnings and sales has been growing more than 15% annually
in the past few years; thus, the earnings per share will double in about five
years.
- The P/E ratio is not higher than the growth rate
- Return on equity is higher than 15%
The address of the WSJ Briefing Book is
http://interactive.wsj.com/edition/resources/documents/bbsearch.htm
When you get to the web site, enter the following:
Username : thinkquest
Password : think
The Wall Street Journal Briefing Book, company web sites, and the like are
essential tools for screening stocks according to the above financial criteria. You
cannot rely solely on recommendations or on favorites or firsthand experiences in
picking stocks. For example, you might have originally picked the stock of Apple
Computer because you saw many people using Apples in school. However, when you
check the financial performance of Apple in the Briefing Book, you will discover that
it does not meet the selection criteria.
- Visit the company web sites to make your final stock buy list. Recommended sites
for finding company web pages are
Bill Gates said, "Perhaps the most efficient way to find information about a
company is by studying the company's site on the Internet's World Wide Web. Not
every company has one but more and more do each day. In fact you can often learn
more about a company on the Web than you would actually spending a day at the
company."
Company web sites provide more information about companies than does the Wall
Street Journal Briefing Book. They provide the "story" of a company with its
successes and setbacks, not just financial data.
Visit Investing For Kids for more background on Stock Analysis.
Step # 3 Setting up a Stock Portfolio
- Individual or team portfolio
For the spirit of investing, pick a name for yourself or your team such as Wall Street
Wizards, Buffett Kids, Bull Men, or Stocks R US. The web site to setup a portfolio
for yourself or for your team is DBC's Personal Portfolio, at http://www2.dbc.com/
DBC's Personal Portfolio has inputs for
- Symbol
- Purchase price
- # of shares
- Purchase date
- Commission
- Notes, such as comments for buying the stock
- Sell price
- Sell date
It calculates
- Total value of portfolio
- Amount of profits or losses for each stock
- Percentage gains or losses for each stock
- Total amount of profits or losses
- Total percentage gains or losses
To setup this paper portfolio, you can use a theoretical $100,000 to buy stocks or
any other value assigned by your teacher. For example, you can pick five stocks and
put $20,000 in each. But make sure you are invested fully in stocks throughout this
game; in other words, be sure you have spent all your $100,000 to buy stocks. You
should also limit your portfolio to ten stocks at a time, the maximum allowed by the
DBC portfolio.
- Class Portfolio
A teacher or an organizer can monitor individual portfolios of the class by using the
S & P's Portfolio Tracking Services at http://www.wsbi.com/spweb/
S & P's portfolio allows inputs for
- Symbol
- Trade date
- Trade price
- # of shares
- Commission
It calculates
- Day's closing price
- Gains or losses for each stock
- Percentage gains or losses for each stock
- Total gains or losses
- Total percentage gains or losses
The S & P Portfolio has no limit for portfolios per class.
Step # 4 Monitoring a Stock Portfolio
- Get the daily Data Broadcasting Corporation's and S & P's printout of your portfolio
profits or losses. Also, get the printout of stock prices, volumes, and graphs from
DBC.
- Read news events that will affect your stock investment. The recommended news
sites are
Visit Investing For Kids to get more information on Stocks in Cyberspace.
Step # 5 Selling Stocks
- Buy and sell stocks while playing the Stock Portfolio Game. Below are hints for
when to sell stocks:
- Sell when the stock price drops below its 200-day moving average (found on
the WSJ Briefing Book).
- Sell when the stock price drops more than 15% below the market represented
by the S & P 500 index. For example, if the S& P 500 index drops 5%, you
should sell the stock that drops more than 20%.
- After selling a stock, make sure you use the proceeds to buy back stocks worth the
same value. In other words, you should be fully invested in stocks, or should spend
all of your money, throughout the game. Use steps 1 and 2 to choose a new stock.
- Hold stocks until the end of the game, when you will sell all of your stocks.
- Use the DBC's Personal Portfolio to help keep track of gains and losses after the
sale of a stock. Don't forget to include dividends as profit.
Step # 6 Reevaluating Your Investment Goals
Visit the Web site, Investing For Kids to use the Financial Goals Calculator
Input your final rate of return from your stock investments, the money you started with,
your monthly contribution, and your goal. The calculator will tell you how long it will take
to reach your goal.
Other Economics Link
Download a file to play the Young Investor Computer Game developed by Liberty
Financial to teach kids about money and investing. (http://www.lib.com/)
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