Economics II MILE: Project
Since the early twentieth century the stock market has played a major role in the U.S. economy. Although investing in stocks is risky, people all over the world buy and sell thousands of different stocks everyday. For your project, you, too, will experience the highs and lows of the life of a stockholder. You will write about your decision and the progress of your stocks in a final paper. This paper is worth 30% of your final grade.
I) The Task
a) Choose a stock: You have an imaginary $10,000 with which to get started. You MUST invest the full amount in one company’s stock. Remember, $10,000 is a lot of money, and you don’t want to lose it in a week! Therefore, you need to choose wisely. Don’t pick a company because you like its name or one of their products. You also want to avoid choosing something that’s especially risky or in an unstable industry. You need to do research before you choose your stock. Choose a few companies that seem to be good investments and review the history of the company, the stock, and the other companies in the industry. Whichever company appears to be the most likely to yield a return on your investment is the one you want to choose! You can find information in the business section of most major daily newspapers (especially the Wall Street Journal), Business Week and other business-related magazines, and on the companies’ websites. Most companies will send you their annual reports if you ask nicely!
b) Track your stock: At least once a week you should check to see if your stock has gone up or down. You might want to keep a journal so that you remember the exact price of the stock from one week to the next. After checking the changes in your stock, assess why that change occurred. Was their a major world or economic event that may have had an impact on your stock? Is that company facing a particular scandal that might make their stock decline? Did the company introduce a new product or receive funding or approval for a product that’s on the horizon? Is the economy going well or poorly at that moment? There are myriad reasons for your stock to go up or down; make sure you take the time to figure out what’s happening with yours. This analysis is a major part of your grade and integral to understanding the market for those who might want to really invest in it later.
c) Decide if you want to hold onto your stock, buy more, or sell what you have: After 6-8 weeks of stock ownership, it’s time to make a choice. Have you made a profit? Do you want to hold onto the stocks you have or, possibly, invest some of your earnings in more shares? Have you lost money? Do you want to get out before you lose your entire original investment? Maybe you’ve made money but think that your stock can’t possibly go any higher? These are the decisions that you must make. Whatever decision you make you need to support it with outside research. Look at other instances when your stock was high/low. What happened then? Is the company facing greater competition in the weeks and months ahead? Does the company do more seasonal business, making it wise/unwise to hold on through the winter? Think about the economy. Does it seem to be on the verge of improving, thereby making it worth it to hold onto your stocks? Does it seem like the economy might tank, making your stocks worthless? You must consider these questions and many others when making this final decision. For information, you may look in many of the same sources mentioned in the first section, including newspapers, magazines, annual reports, and company websites (identify and look at the competition, too!). The best stockholders are those that make informed decisions!
II) The Assignment
a) Explain the process you used to choose your stock and discuss what you learned about the company whose stock you ultimately bought as well as the other companies you considered. Make sure you evaluate why you chose one company over the others. You will need to use at least three sources to thoroughly research your choice.
b) You must analyze your performance in the stock market. Discuss the status of your stock over the course of your ownership, including your hypothesis on why the stock went up or down at particular points. You must include an evaluation of your performance. What did you do well? What would you change or improve next time you invest in the stock market? After this experience, do you think that you will invest in the stock market? What have you learned about the market that may guide you in doing so? Lastly, based on the trends you noticed during your simulated ownership and the economic status of the nation, predict where you see the stock going over the next six months. Do you think that it will increase? Decrease? Remain stagnant? What factors influence your prediction? How does paying careful attention to one stock augment your ability to predict what it will do in the future?
Your paper should be 3-4 pages typed with 12 point font and 1 inch margins. You must include a chart showing your stock’s activity from the time you “purchased” it through the due date of this project. This chart can be made by hand or using a computer program. You must use and cite three outside sources (citations can be either footnotes or parenthetical) and you must include a properly formatted bibliography
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