INVEST Ed. Alex Bohn, 9th Grade. Mr. Francois Boda, Personal Finance I. Mount St. Mary s Catholic High School. Oklahoma County.

Transcription

1 INVEST Ed Students Tracking and Researching the Stock Market Alex Bohn, 9th Grade Mr. Francois Boda, Personal Finance I Mount St. Mary s Catholic High School Oklahoma County Central Region Fall Semester 2014

2 I remember when I was younger, my dad would talk to the television about how his stocks were doing, and I was always fascinated about the different aspects of the market. I used to ask what the red and green arrows meant, what it means with "blue chip stocks" and "bull markets," and when I could get started. He would always answer my questions thoroughly. This is why he was the first one to get me really excited about investing. The day I learned about the Invest Ed project in my Personal Finance class, I was elated to finally get to take part in the stock market. Coach Boda got me started, and further explained the market. Then the journey began. I went through the process of tracking, researching, and buying my stocks. Now, I have learned many things on my journey through the ups and downs of the stock market, and I hope to be able to use these methods as an adult when I can invest in the stock market for real. The process of finding the stocks that were just right to buy was long and tedious, but it did give me that first little taste of the stock market. During the first week of the project, I made a portfolio with Google Finance named "PF InvestED" and picked out 15 stocks for companies that I was familiar with such as Apple and Starbucks. I then used a website to determine which stocks met my criteria of having a stable management for the company to have a foundation on a positive trend for prediction purposes, and had a growth potential so I could get a return on my money. The website helped me to decide which stocks I should keep and which ones needed to be replaced with a stronger stock. In addition, it gave me an expert rating out of ten, and it helped me by providing an expert's opinion in a simple format. I also used the Google and Yahoo stock screeners to see which of my stocks were rated as a "strong buy" or "buy." I found that most of the stocks I chose were good stocks to buy. Apple, for example, had a 10/10 rating; its management was stable, and it was shown as having a growth potential with a "strong buy" rating. Finally, after much research and planning, I finalized my portfolio. I proceeded to check my portfolio twice every week since the beginning of September. 1

3 Coach Boda emphasized the importance of goals in the project, so I made a list of three goals that I wanted to complete. My first goal was to earn a 4% return on my investments. At the peak of my portfolio on September 19, I met my goal. I had earned 20, U.S. dollars, having an increase of 4.09 percent. The second was to know what makes a stock a good or bad buy. I learned this through both my buying and research process. I learned about proper criteria of a good investment. The third was to learn about risk and how to take the proper amount of it. I definitely learned about risk and how it pertains to me. Risk is the possibility that an investment will lose value, resulting in the loss of money. With this burden comes rewards because the more risk involved in an investment, the greater the possible rewards. For example, a savings account is a low-risk investment because you will not lose your money; however, the gain associated with it is rather low. A penny stock is a low priced stock of a small company with no record of stock history, and it is an extremely high risk investment because these companies have a decent possibility of failing which will result in the loss of all your money. If it does succeed, you can gain a large sum of money. So risk does have its pros and cons, and different people balance these pros and cons in different ways. I used the risk assessment tool at and scored a 52, making me a moderate risk investor. This means that I am not scared of taking risks, but I do not take all the risks I can find. I feel that my portfolio reflects this because I started with some blue chip stocks, like Apple and Microsoft, that had a positive past and appeared to have a successful future, but I did have some more minor companies, like Caterpillar, that were a risk that I decided to take because I knew it could yield a large amount of money. The process of diversification is what I used to minimize my risk while I invested. I quickly learned that diversification is one of the keys to being a successful investor. Diversification is the process of investing your money in a wide variety of stocks to minimize risk. This way, if one kind of stock starts to go down, others will come up and make up the 2

4 difference. I used this strategy by buying stocks with an unsure future as well as stocks with a future that looked successful. Also, I found the strong stocks in many areas of business; ranging from energy and technology to pharmacies and hardware stores. One example of how diversification really helped me was in September. My shares in Chesapeake were thriving, and they made up for some of my other stocks like Google that were not doing as well. This way my portfolio's overall value would stay up instead of crashing as it would have if I had not diversified. Chesapeake was my most successful stock. I originally invested 5,094 dollars into this stock, and its market value at the end of the project was 18,500 U.S. dollars meaning I gained a shocking 3,406 U.S. dollars and a 263 percent increase by the end of the project. I did some research of why it had jumped so high, and I found out that Chesapeake had accomplished some big steps in the advancement of the company. One change they implemented was to appoint Brad Sylvester as their new Vice President of Investor Relations and Communications. Sylvester is "a highly talented and proven investor relations professional with more than 20 years of solid experience in the exploration and production industry," also he "has consistently been recognized as one of the industry's top investor relations officers by both buy-side and sell-side analysts and investors." I saw this as a big positive for the company because with Sylvester's skill and leadership, they could really advance in their field. I believe this is a major contributor as to why this stock had such a high return, and looking back, I wish I had bought more shares. Other stocks with a high return percentage were Apple Inc. with a return of 8.34 percent and Nike Inc. with a return of percent. Apple started to do really well when the iphone 6 came out. My research told me that many people would be lining up for this new phone and that stocks were sure to rise. Knowing this I decided to invest another 25,000 dollars into Apple, and now I see that the risk paid off. Nike saw potential with its new additions to the "Air Jordan" and "Lebron" lines. However, I decided not to buy any more shares because of a lawsuit they are 3

5 involved in with Converse Inc. Converse claims that Nike copied their original "Chuck Taylor" shoe design. If prosecuted, Nike's stock could drop. So for this reason, I decided not to invest any more money in Nike. Besides professional ratings and numbers, I also used my knowledge and my observations to determine whether or not to buy or increase my shares in a company. For instance, about a month ago, my friends were talking all about how they were going to go to Starbucks for their favorite time of year. They wanted to go for their Pumpkin Spice Lattes. I figured a bunch of other Americans were going to do the same, so I did purchase a few more shares in Starbucks. I also recently bought more shares in Wal-Mart and the Home Depot because people are going to start shopping for their Christmas and Thanksgiving items soon, and this could result in a boost in their stock prices. My investment in Google had a surprising result near the end of the project. It was losing 5.5 percent of the original investment. I expected Google to do rather well because I use it almost every day, and I know millions of others do as well. I decided to do some digging on why this happened, and my search turned a possible reason. Google is facing severe penalties in the 6 European Union countries of Germany, France, Spain, the Netherlands, Italy, and the United Kingdom. Google may have violated its own privacy policy which could result in huge fines, causing their stock to take a blow like it did. Even with all of this knowledge, my money is not worth anything if I do not know how to prevent investment fraud. Investment fraud is any deceptive action that entices investors into making a financial decision on the basis of false information, frequently resulting in the loss of the victim's money. The first step in beating a con-artist is to educate yourself about finances. Con-artists often target those who know little to nothing about finance and money. While watching a few videos in my Personal Finance class, I learned that con-artists do not wear black 4

6 hoods and trench coats; they look like your friendly neighbor or your accountant. This is why people usually do not expect con-men to be con-men. They trust them with their property, their kids, and their money. This trust enables them to run various schemes; a common one is a Ponzi Scheme. This is where the con-artist collects money from hopeful investors promising high returns like 60%, 70%, 80%. They then use other investor s money to provide returns without actually investing in the market. For example, the con-man, Jones, uses the investor's, Tim's, money to pay off another investor, Billy. This cycle then repeats over and over and the con-men can win huge sums of money. To protect myself from fraud, I learned to look out for big and fast returns, people who say that you must invest now because a good deal will be there tomorrow, and a lot of papers to sign. Also, many con-artists will supply late or no bank statements, excessive check or extra money, large terms to make an investor confused, and may suddenly change businesses. Some ways I learned to protect myself are to ask hard questions like "Why are you changing businesses?" and "What is your criteria for investing?" and press until you get a detailed answer. Also, you should only accept checks with the firm's name and not your broker's, and you should only make out checks to the firm and not the broker. I advise others to take these precautions because some scams make an investor lose a lot of money; in a scheme in Oklahoma, victims only collected 10 cents for every dollar lost. Knowing all of this I feel fairly protected against fraud and con-artists and can invest safely with the ability to identify con-men so I do not fall victim to their schemes. Through this project I learned the difference between good and bad investments by identifying their management, trends, and potential. I learned how to identify bad management and other problems that could negatively affect a business. I also learned how to balance risk and profit, and how to minimize risk with the strategy of diversification. Another thing I learned during this project is that the stock market fluctuates every single day, so you must keep up with your portfolio. Devon Energy Corp. was a prime example of this. Yesterday, it was gaining around 1,000 dollars, but today it is losing 288 dollars. 5

7 All this happened in less than twenty-four hours. This is one of the reasons that the stock market is so hard to predict. With all this said, one of the most important things I learned was how to protect myself from fraud because what good is it to make money if it is just going to be taken away by con-artists. Finally, my future goal is to successfully follow Coach Boda's plan for investing because the stages do not progress in a pace that is too fast, nor is the pace too slow. Also, instead of jumping right into different investments, his plan allows me to settle into the different varieties. Firstly, he advises that I start a savings account with compounding interest like I stated before. This is a safe investment that practically guarantees money for my needs now and in the future. Then I should invest temporarily with conservative, low risk stocks and to diversify to help with my needs even more and to get some tax advantages. After that I would start permanent investments for long term retirement planning to help secure my future finances. As one of the final stages, I would get a range of medium return, 5-l 0 year investments to lower the risk of losing money as I start the last years of my professional job. Finally, during the very last years of my professional job, and into a "hobby job" like teaching or coaching, I would invest in some decently high risk stocks and other investments with about $15,000. Using this method I hope to retire by my late 50's or early 60's and enjoy my last years of life. This was my first real experience of the stock market, and it was one I will never forget. I have learned so much through it, and I hope to carry this newfound well of knowledge with me throughout my high school career and adult life; this way I can get involved in the stock market as a successful adult. 6