MARK GRAVENSTEIN, PROGRAM DIRECTOR
MISSOURI COUNCIL ON ECONOMIC EDUCATION
gravensteinm@umkc.edu http://cas.umkc.edu/mcee
What is the Stock Market Game
Program?
TM
•A 10 week Internet educational simulation the encourages
student to learn about stock markets, personal finance and the
American economic system.
•Over 1 million students participate nationally.
•Over 12,000 students annually participate statewide.
•Produced by the Missouri Council on Economic Education &
the Foundation for Investor Education.
Basic Information
• Up to 5 students per team
Team Fees
• $200,000.00 Purchase Power
• Based on number of
• Able to trade stocks and mutual
teams each teacher
funds on the NYSE, AMEX or
enrolls
NASDAQ markets
• 1 – 4 teams: $25.00 a
• Real Time Market Prices (5
team
minute delay)
• 5 or more teams: $15.00
• Real Portfolio that generate
a team
interest and dividends
• Website Supported by IBM
• Local Help Desk
StockTalk newsletters provide students
with an understanding of stock market
terms.
In The News connects stock market
concepts to the classroom through current
events.
Basics
- Every student registered in SMG is eligible
- Write an essay for your grade division
- Each topic (different for every division) relates to
investment principles linked to the SMG Program
- Both teachers and students have a chance to win gift
certificates, laptop computers, trips to Disney World or New
York City
Let’s take the Stock Market Quiz
Stock Market IQ Quiz
1)
2)
3)
4)
5)
6)
7)
False
False
False
False
False
True
False
8) True
9) True
10)False
11)False
12)False
13)False
14)True
15)False
What is a Stock?
• Stock: Ownership in
corporation.
• Share: A unit of stock owned by
an investor.
• Shareholder: A person who
owns the shares of stock.
• Portfolio: A collection of
investments owned by an
investor.
What is a Mutual Fund?
A mutual fund is a collection of stocks, bonds and
other securities owned by a group of investors and
managed by a professional investment advisory
firm. This investment advisor (also called the
mutual fund’s manager) collects money from many
investors and invests the pool of money for all of
them.
What Advantages Are There to
Investing in Mutual Funds?
• Mutual funds provide professional management.
The fund’s manager makes the buy and sell
decisions, based on the fund’s management
philosophy.
• Mutual funds offer diversification. A mutual fund
often invests in one hundred or more securities.
Bond Basics
• Bonds are a loan made by an investor to a
government or company with the promise
that the principal amount borrowed will be
repaid, usually with interest, at a specific
time. Usually a year or more in the future.
• Over 3 Million domestic options
– Government
– Municipals
– Corporate
Bond Terminology
• Face Value: the amount of money borrowed by the issuer.
• Maturity Date: date by which the issuer must repay the
principal amount borrowed
• Coupons: interest payments made by the bond issuer to
the bond holder.
• Accrued Interest: the interest that has accumulated since
the principal investment, or since the previous interest
payment.
• Yield: the market rate of interest on the bond.
• For all SELL Transactions the SEC Fee of 5.6 cents per
$10,000 trading amount is always added.
Bond Pricing
Bonds are priced per $100 of bond principal
A $4,000 bond with a price of $99.50/$100 will cost you:
(40 x 99.50 = $3,980) + accrued interest + 2% commission
If you sell a $4,000 bond you will receive:
(40 x 99.50 = $3,980) + accrued interest – 2% commission – SEC fee
Increase Your Bond Investment
There are two ways to increase your
bond investment:
• Interest Payments
• Increase in the resale price of the bond
How to Select Bonds for the
SMG
• Buy early in the game
• Look for highest current yield
• Select bonds with an interest payment:
– close to the game end date
– Frequent payment schedules
• Fed rate cuts indicate a good bond buying
time
How to Read a Bonds Chart
Face Amount
Date of
Purchase
Coupon Rate
Maturity
Date
Total
Interest
Earned
$5,000.00
5/30/2000
7.50%
5/30/2010
$3,562.00
$1,000.00
5/30/2001
6.80%
5/30/2011
$646.00
Bonds vs Stocks
BONDS
STOCKS
What you get…
IOU
Ownership in
company
How you trade…
$ value
shares
Cusip
Ticker Symbol
How to find…
Bond Information
Information for:C419C.166.87
Trade CUSIP12189TAB0
ISSUER DESCRIPTION BURLINGTON NORTHN SANTA FE COR
ISSUING DESCRIPTIONDEB
DATED(ISSUE) DATE 02/15/1996
MATURITY DATE 02/15/2016
PREVIOUS PAYMENT DATE 08/15/2008
NEXT PAYMENT DATE 02/15/2009
INTEREST RATE (%) 6.875
INTEREST PAY FREQ SA
SP RATINGBBB+MDY RATINGN/Rl FTH RATINGN/Rl
CURRENT PRICE/100 ($) 94.70100
CURRENT YIELD (%) 7.2597
InvestinginBonds.com
How do I find a Stock,
Mutual Fund or Bonds?
• Newspapers
• Internet
• Stockbrokers
How do I find a Stock,
Mutual Fund or Bonds?
• Brands: a name that sets apart a product.
• Public Company: a company with shares that can be
purchased by anyone.
• Parent Company: a business that controls another
company by owning most or all of its stock.
• Subsidiaries: a company that has at least half of its stock
owned by another company.
• Private Company: a company that doesn't sell shares to
the public.
• Stock Symbol: a grouping of one to four letters used in
place of a company’s full name.
How do I find a Stock,
Mutual Fund or Bonds?
• RESEARCH, RESEARCH, RESEARCH!
– Annual reports
– Company profiles
– Analysts’ reports (ask a broker)
– Reference books
• Value Line
• Standard & Poor’s
• Moody’s
– Newspapers
How do I find a Stock,
Mutual Fund or Bonds??
• Search the INTERNET!
• Company web sites
• Investment advice sites
• www.yahoo.com
• www.bigcharts.com
• www.fool.com (The Motley
Fool)
• www.marketwatch.com
What am I looking for?
• COMPANY PERFORMANCE
– Profit history
– Growth potential
– Good management?
– What do you think of their products?
What I am looking for?
• THE BIG PICTURE
– Is this a growth industry?
– Impact of world events?
– Does a recession hurt or help the
company?
What Determines a Stock’s
Price?
SUPPLY AND DEMAND
• The stock market is like an auction . . .
– When more people REALLY want to buy, a
stock’s price rises
• Rosy profit picture
• Company’s growing
• Popular products
Shareholders “win” when…
• A company grows
• Stock becomes more valuable
• The firm is profitable
• Management may send investors a share
of the profits
• DIVIDEND
Is a win guaranteed?
NO!
Stock prices can fall or
fluctuate.
No/low profits
Must consider your risk tolerance.
Diversification
• Due to the risks associated with investing, you
should avoid putting “all your eggs in one
basket.”
• By diversifying your portfolio you can reduce
the risk of experiencing serious financial loss.
• Example: An investor might purchase a
variety of stocks, bonds and mutual funds to
minimize their risk.
Don’t forget
Commissions
The fee paid to have
your stock purchase or
sale executed.
Brokers Fee in the
SMG is 2% for all
transactions.
Important Concepts
•
•
•
•
•
•
•
Parent Companies
Finding the Correct Ticker Symbol
Financial Risk
How to read a stock table
Buying on margin
Short Selling
Maximum Percent Equity
Parent Companies
• A parent company is a company that controls other
companies by owning an influential amount of voting
stock.
• Companies can become parent companies by many
different means. The two most common ways are through
(1) acquisitions of the smaller companies and (2) the spinoff or creation of subsidiaries.
Examples:
• Proctor & Gamble (PG / NYSE) owns: Gillette, Clairol,
Pringles and Pepto Bismol (to name a few).
• PepsiCo (PEP / NYSE) owns: Pepsi Cola, Quaker Brands,
Frito-Lay, Lipton and Gatorade.
How to Read a Stock Table
1
2
3
4
5
6
7
8
9
Open
YTD % Change
52 Week
HI / LO
Stock (Symbol)
DIV
Yld %
PE
VOL 100s
Close
Net Chg
56.38
11
59.85
Yum! Brands
(YUM)
1.1
2.0
37
15863
55.50
-0.88
Buying on Margin
Buying on Margin means using the stock in your portfolio
as collateral for borrowing money from your broker. In
the SMG the maintenance requirement is a minimum of
30% after borrowing on margin.
Therefore, if the Total Equity in your portfolio falls below
30% of the value of your long and short positions, your
team will receive a margin call.
Finding the correct Ticker
Symbol
• What do you think the symbol for General
Electric might be?
• (GE)
• General Motors?
• (GM)
• Dell Inc.?
• (DELL)
Finding the correct Ticker
Symbol
1) Coca Cola Company
Coke
CCE
KO
2) Kellogg
TONY
KG
K
Financial Risk
• Risk: The Likelihood of suffering losses or
earning less than expected on financial
investments.
• Investors must consider how much money
they can afford to lose and the minimum
amount of return they can stand to earn on
an investment.
Types of Trades
• Long Position
– Buy
– Sell
• Short Position
– Short Sell
– Short Cover
Short Selling
Short selling is the reverse of the standard investment
process. Investors sell a stock and then buy back the stock.
1st step - Short Sell:
Investor “Borrows” stock from a broker to sell on the market.
2nd step – Short Cover
Investor buys back stock and returns it to broker. This is done
this in hopes of buying it back at a later date for a lower price
than sold to earn a profit.
10 Investing Tips from Warren Buffet
•
•
•
•
•
•
•
•
•
•
Be frugal
Wait for the 'fat pitch'
Be a contrarian
Stick with what you know
Don't depend on others to say you're right
Buy companies cheap
Look for companies with economic moats
Buy big, concentrated positions
Hold for life
Believe in America
Important Rules
• May only transact common stock on
the NYSE and NASDAQ markets
• Minimum purchase order of 100
shares
• $5.00 per share price limit minimum
• 2% broker’s fee on all transaction
• 7% interest
Missouri 33% Rule
In the Fall of 2003, a new Stock Market Game rule was
established in as an enforceable reminder that diversity in a
portfolio reduces both short and long term risk, the new
rule is called the Missouri 33% Rule. This rule is enforced
in addition to the above rules in the State of Missouri. The
rule is stated below.
"In order to qualify and be recognized as a regional or statewide winner (first or second place), a team may invest no
more than 33% of their total equity in any one company. If
a stock in which a team has invested increases in value
above the 33%, the team will be able to maintain that
position but will be unable to purchase additional shares of
that company."
Calculating Maximum Percent
Equity
1.
2.
3.
4.
Total Equity on Account Summary Page.
Multiply Total Equity by 2. (This accounts for the ability
to buy on margin.)
Multiply by 33%.
Answer is how much you can purchase / hold in one
stock that day.
Total Equity = $100,000
Multiply by 2 = $200,000
Multiply by 33% = $66,000 can be spent on one
individual stock the first day of SMG session.
Sample Team IDs & Passwords
Please DO NOT change the passwords.
Teacher ID:
SIA_80_T182739
Password
RIF10027
Team IDs:
SIA_80_A135
SIA_80_A136
SIA_80_A137
Password
SMGTRADE
SMGTRADE
SMGTRADE
Team Welcome Page
Students in Grades 4-12 do
not have access to the
Learning Resource Center.
Account Summary
Account Holdings
Enter a Trade - Step One
Enter a Trade - Step Two
Trade Order Preview
Pending Transactions
Transaction Notes
Transaction History
Rankings (Page 1)
Regional Rankings (Grade level & Location)
Coordinator Rankings (State-wide Rankings)
http://www.stockmarketgame.org
MARK GRAVENSTEIN, PROGRAM DIRECTOR
MISSOURI COUNCIL ON ECONOMIC
EDUCATION
gravensteinm@umkc.edu
http://cas.umkc.edu/mcee