Download What is the Stock Market, anyway?

What is the Stock Market,
anyway?
Introduction (or refresher) to the
Georgia Stock Market Game
What is the Stock Market?
• The Stock Market is a market in which the
public trades stocks it already owns.
How do I buy stock?
• In “shares,” or parts, of company
ownership.
• When you buy stock, you “share” a part of
the company’s profits or bear some of its
losses.
Why would people invest in the
Stock Market?
• People usually buy stocks with their savings.
They do so hoping that their stocks will increase
in value, thus making their savings grow. (All
investment decisions involve some risk. There is
the always the risk that stock may not gain value
or may even lose value.)
• People hope that their stocks will increase in value
and help them to make more money. So many
people are affected by the stock market that the
federal government must regulate it even though
the companies being traded are private
institutions.
What part of the federal
government regulates the stock
market?
• The real “S.E.C.”
• a.k.a. The Securities and Exchange
Commission
The Language of Economics
• Economize: To base decisions on an
assessment of costs and benefits, choosing
the best combination of costs and benefits
among the alternatives.
• Risk: The chance of losing money. Risk is
the opposite of safety.
• Saving: Setting aside some of today’s
income for future spending.
How does economics relate to
our study of Latin America?
• TRADE of products
• Where are major companies based?
• NAFTA
REMEMBER:
• Stock markets allow people to benefit from
growth in private businesses.
• No decision to save money is without cost
or risk.
Which of the following decisions
will guarantee that a person will
make money in the stock market?
• (A) Buy the stock of a big company like IBM.
• (B) Buy the stock of a small company like
Starbucks Coffee.
• (C) Purchase stocks after the stock market has
dropped for two days in a row.
• (D) None of these decisions will guarantee that an
individual will make money in the stock market.
If a company starts purchasing its
own stock, what are the company
leaders attempting to do?
• (A) To raise company profits
• (B) To increase company expenses
• (C) To show that the company believes the
price is too low
• (D) To confuse the Securities and Exchange
Commission
What are markets?
• The process through which buyers and
sellers exchange with one another.
What is a Stock Exchange?
• A Stock Exchange is one of the organized
stock markets with a centralized trading
floor. In this market, auction-type trading
allows traders to sell stocks to the highest
bidder or buy stocks from the lowest
supplier. These markets consist of the New
York Stock Exchange(NYSE) and the
American Stock Exchange (AMEX), both
of which are located in New York City.
What about the Nasdaq?
• NASDAQ= National Association of Securities
Dealers Automated Quotation
• The Nasdaq Stock Market is an electronic
marketplace where buyers and sellers get together
via computer and hundreds of thousands of miles
of high speed data lines. More than 5,000
companies list on Nasdaq’s computerized market.
Nasdaq is not actually an exchange because it
doesn’t have a central floor.
How do I find out how stock is
doing in certain markets or
exchanges?
•
•
•
•
•
Your phone!
Newspapers
TV news
Internet
Stock Market Game website
What about a Stockbroker?
• A broker who accepts orders to buy and sell stock
and then transfers those orders to other people
who complete them is a stock broker.
• In the Georgia Stock Market Game, you will have
an online broker.
• The broker gets commission (a percentage) of
your trade. In the game we will play, there is a
2% broker fee for each transaction.
“Today on Wall Street…”
• “Wall Street” is an actual street name in
New York City which is also frequently
used to refer to the market for stocks.
More vocabulary and key
points…
• Mutual fund: collection of stocks over time
(usually a long-term investment)
• Preferred stock: “safe stock” --less risky
than “common stock” traded on the market
• Remember that RISK can equal REWARD,
but RISK can also equal LOSS.
• The market is driven by two things: FEAR
and GREED!
The Stock Market Game
• Game takes place
• Groups are given $100,000 of “pretend money” to
invest.
• Transactions are made and research can be done at
the game’s website, http://www.gcee.org
*Click on “Play the Stock Market Game” on the
right and you are ready to begin!
• Each team is given a UserID and a password to
enter the game and make transactions.
What CAN I do in this game?
• You CAN invest for ten weeks in common stocks,
mutual funds, or preferred stocks online in the
game.
• You CAN use very risky strategies to try to win
this game that you would not be likely to use in
“real life” with “real” money!
• You CAN win lots of college scholarship money
and other prizes if you place among the state
winners in this competition.
What CAN’T I do in this game?
• You CAN’T hold on to all of your money
without investing any of it. There is
actually a 5% savings fee if you don’t use
your money in this game.
• You CAN’T buy or sell stock without the
majority of your team’s consent.
• You CAN’T buy stock that costs less than
$5 a share.
What MUST I do?
• You MUST buy “round lots” of shares
(100’s).
• “3x3x3 rule” added last year…
– You must make 1st buy within 3 weeks
– You must own at least 3 stocks (or mutual
funds) at the end of competition
– You must hold 3 different companies for at
least 3 weeks at a time at some point
throughout the competition.
Will you be checking on me?
• I will be checking rankings weekly and updating
them in the hallway, but I will not be checking the
3x3x3 rule. That is your responsibility to
implement. If you win the competition, the judges
will look over your portfolio to be sure that you
followed this rule!
• We will be doing weekly activities in class to
monitor your learning about the stock market
through this competition.
So how do I win?
• The value of the portfolio=the winning
team! Last year’s winning team in the state
made $1.4 million!
• Play with a high risk strategy, but don’t end
up being a “Pig!”
• Don’t sell all of your stock at the end—it’s
the value of your final portfolio that will be
measured.
Stock Market Nicknames:
• “Bear market” refers to a time where stock
market prices are falling as a whole.
• “Bull market” refers to a time where stock
market prices are rising overall.
• “Pigs” are people who try to make a lot of
money short-term in the market and end up
getting slaughtered!
What can we do to get ready for
competition?
• Begin researching companies you might be
interested in investing in (look up ticker
symbols—you can find these on the game
website or Yahoo Finance).
• Look online for annual reports.
• Check the value of companies that interest
you online, in the paper, or on the news
daily.
• Discuss possible investments with your
group.
My favorite helpful research site:
http://finance.yahoo.com