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Investwrite
By Caleb Brackett (Dec.12)
Dear Melissa,
Hey cousin, I sure had fun at your birthday party last week. But I
noticed that fat pink piggy bank of yours. It has all that money in it and
sticking out the top and overflowing onto the dresser. Just leaving it out
like that is asking for trouble. It might get stolen or you might be tempted
to spend it.
So you need to invest your money. You’ll make more and you will
prevent Cousin David from sneaking in and taking it. By investing you
will have a great chance of making more money. If you don’t invest then
what you have now is all you’ll have.
Yes, you can lose money in the stock market, but, according to
“Money Essentials,” the stock market has returned about 10 percent a
year on large stocks since World War II, so you have a good chance of
making money and not losing.
What do I know about investing? Plenty! I played the stock market
game at school this semester and my team turned $100,000 into
$108,000 in just nine weeks. You can do the same. Well, I know you don’t
have $100,000 in that piggy bank, but you can make a profit with what
you have and continue to invest more every year.
When you invest you’re not just buying a piece of paper, you are
buying a portion of a company. The best way to get a good stock is to
use common sense and logic. Look at stocks with your head and not your
heart. Buy low, sit on it and then sell high. Sounds simple, but it takes
research, courage, perseverance and some luck.
Jim Cramer, that crazy guy on Mad Money, believes the stock
market is the best path to prosperity. He calls research “homework”
because its time consuming and a little boring at times, just like real
homework from school. Mr. Cramer says after you’ve done your
homework you should know a lot about a company and be able to explain
in three sentences why to own that stock.
One stock that I did my “homework” on while playing the stock
market game is Nike (NKE). It is doing well and it was our Stock Market
Game’s best stock. According to Yahoo! Finance the PEG
(Price/Earnings to Growth ratio) is 2.16 and the MR (mean
recommendation) is 2.1. Based on research, both are good investment
numbers.
Nike has increased its dividend payout each year for the past
seven years, so the company is a strong choice to invest in. Fox Business
believes it will hit $140 a share in a few years. Right now it’s selling for
about $97 a share. Finance expert Louis Navellier lists Nike as one of
his top 50 stocks to own. Using a complicated formula, he gives the
company a strong B. Nothing against Mr. Navellier, but I think it is an A
company.
Now when you invest in a company like Nike, what does it do with
the money? A company uses it to expand or try new ideas or products.
Right now Nike is trying out a new idea. They have just opened two
“women only” stores –one in China and one in Los Angeles. Now that’s
trying something new.
I like Nike, but do your own research. The key is to buy low, sell
high and I’m here to help you. See you at the skating rink next weekend.
Your Cuz