Download Making it on The Street – Wall Street!

Me, Myself, My Money
Instructor’s Guide
Making it on The Street –
Wall Street!
Learning Objectives
Learning Standards
(grades 9-12):
■ Business and Economics
• Students examine the role of
saving and investing in creating a
financial plan. (National Business
Education Association –
Economics & Personal Finance)
• Students differentiate between
types of decisions and identify
those for which a formal decisionmaking process should be used,
and apply the decision-making
process to various types of
decisions at different stages of
the life cycle. (National Business
Education Association –
Economics & Personal Finance)
• Students differentiate between
saving and investing. (National
Business Education Association –
Economics & Personal Finance)
• Students apply criteria for
choosing a savings or investment
instrument. (National Business
Education Association –
Economics & Personal Finance)
• Students explain why a savings
and investing plan changes as
one proceeds through the life
cycle. (National Business
Education Association –
Economics & Personal Finance)
Students will:
■ Identify the investment alternatives available to investors –
stocks, bonds, mutual funds, money market accounts, and
certificates of deposits.
■ Explain how investment risk affects investment strategies.
■ Identify the suggested investments and allocation models
for various life stages.
■ Apply the concepts of diversification and asset allocation
to an investment scenario.
■ Explain the composition and purpose of the Dow Jones
Industrial Average (“the Dow”) and Standard & Poor’s 500 Index (“S&P 500”).
Presentation Suggestions
First, use “Alphabet Soup” to introduce and define investing terms and concepts.
Then, use “Fast Facts” to:
■ Compare and contrast stocks and bonds in terms of risk and return, noting that stocks are suggested
when financial goals are long term, while bonds are suggested for short-term financial goals.
■ Explain that changes in interest rates, company earnings, and consumer confidence in the
stock market all affect the price of stocks and the value of bonds.
■ Explain that the primary advantage of mutual funds is that an investment is diversified based
on the composition of the fund, and that the success of the fund often depends on the
expertise of the fund manager.
■ State that the primary stock exchanges are the NYSE and the NASDAQ, noting that each
exchange sets minimum requirements – such as number of shares issued, market value,
sales or revenue, and assets – a company must meet in order to trade shares of stock.
■ Explain that most new or start-up companies begin trading on the NASDAQ because the
minimum requirements are less than that of NYSE, and although many of these companies
eventually meet the minimum requirements of the NYSE, they remain listed on the NASDAQ –
Microsoft is a good example.
■ Explain the purpose of the Dow and S&P 500 indices, noting that the Dow is the oldest and most
widely known and is based on the belief that the 30 companies in the Dow reflect the movement of all
stocks traded on the NYSE, while the S&P 500 uses 500 companies to track the movement of stocks.
■ State that the the Dow and S&P 500 indices, among others, are used to forecast whether stock
prices will increase or decrease, but that the indices were created merely to track the
movement of stocks, noting that “Past performance is not indicative of future performance!”
■ Complete the activities – Wall Street Willy, Andy Allocation, It’s Your Money!, and Wall Street
Wrap-Up – with the class.
Me, Myself, My Money
Making it on The Street – Wall Street!
Instructor’s Guide
Wall Street Willy
Willy – just 8 years old – has inherited money from a great uncle and plans to invest his
inheritance. Willy is considering investing in stocks, mutual funds, bonds, and U.S.
Treasury bonds, and has requested your advice.
1. If Willy wants to invest his inheritance to pay for college, in what should he invest?
Stocks; Willy has approximately 10 years before he begins college and
stocks historically return the greatest amount over the long term.
2. If Willy invests in stocks to pay for college at age 8, how might he modify/adjust his investment strategy
when he reaches his early teenage years?
Consider investing in mutual funds, which may earn less than stocks,
but through diversification and asset allocation, offer less risk.
3. When Willy is 16 and less than 2 years away from entering college, what should he do with his investment?
Consider investing in bonds and U.S. Treasury bonds, which offer steady income and little or no risk.
4. Based on his experience saving for college, Willy is preparing the following table as a reminder of the risk associated with each
type of investment. Assist Willy by identifying each type of investment as “low,” “moderate,” or “high” risk.
Type of Investment
Risk
Bonds
Low
Stocks
High
Money market accounts
Low
Blue-chip stocks
Low
Growth stocks
Moderate-to-High
Mutual funds
Low-to-Moderate
Andy Allocation
Andy is researching investment options that include stocks, bonds and money market accounts. Andy is only 25, but is looking to the
future to the day he can retire – hopefully at age 65 if his investments “go right.” Andy is presented 3 investment options – one for
each life-stage: the primary working years (age 25-55), the pre-retirement years (age 55-65) and the retirement years (age 65 and
beyond). Identify for Andy the investment option that is most appropriate for each life-stage.
Investments in
Option A
Option B
Option C
Stocks
20%
55%
75%
Bonds
65%
35%
20%
Money market account
15%
10%
5%
Life stage
Retirement
Pre-retirement
Primary working years
Me, Myself, My Money
Making it on The Street – Wall Street!
Instructor’s Guide
It’s Your Money!
The investments that each person makes in stocks, bonds and other investments are not only based on financial goals such as
college and retirement, but on tolerance for risk. Considering that stocks are the most risky investment, but offer the greatest
chance for financial gain, complete the table below based on your tolerance for risk.
Life stage
% in Stocks
% in Bonds
% in Money Market Account
Age 25-50
Age 50-65
Age 65+
Point out to students that there is no single “correct” answer for investing – that each investor’s strategy is based on the
time frame or proximity of their financial goal and their personal tolerance for risk. Explain to students that investors are
characterized as either risk adverse (they are not risk-takers) or risk tolerant (they are risk-takers).
Wall Street Wrap-Up
1. What are the two fundamental investment strategies everyone should use?
Diversification and asset allocation
2. What is the primary advantage of investing in mutual funds?
An investor can achieve diversification and asset allocation through a mutual fund,
as well as the benefit of a professional fund manager’s expertise.
3. Explain the difference and similarity in the Dow Jones Industrial Average and the S&P 500 Index.
Both the Dow and the S&P 500 indices were created to track the movement of stocks;
however, the Dow uses the stock price of 30 “blue chip” companies while the S&P 500 uses 500 companies.
Presentation Notes:
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