MARK GRAVENSTEIN, PROGRAM DIRECTOR MISSOURI COUNCIL ON ECONOMIC EDUCATION

1. MARK GRAVENSTEIN, PROGRAM DIRECTOR MISSOURI COUNCIL ON ECONOMIC EDUCATION gravensteinm@umkc.edu http://cas.umkc.edu/mcee

2. What is the Stock Market GameTM Program? • 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.

3. Basic Information • Team Fees • Based on number of teams each teacher enrolls • 1 – 4 teams: $25.00 a team • 5 or more teams: $15.00 a team • Up to 5 students per team • $200,000.00 Purchase Power • Able to trade stocks and mutual funds on the NYSE, AMEX or NASDAQ markets • Real Time Market Prices (5 minute delay) • Real Portfolio that generate interest and dividends • Website Supported by IBM • Local Help Desk

5. In The News connects stock market concepts to the classroom through current events. StockTalk newsletters provide students with an understanding of stock market terms.

6. 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

7. Let’s take the Stock Market Quiz

8. False False False False False True False True True False False False False True False Stock Market IQ Quiz

9. 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.

10. 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.

11. 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.

12. 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

13. 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.

14. 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

15. Increase Your Bond Investment There are two ways to increase your bond investment: • Interest Payments • Increase in the resale price of the bond

16. 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

17. How to Read a Bonds Chart

18. Bonds vs Stocks

19. Bond Information Information for:C419C.166.87Trade CUSIP12189TAB0 ISSUER DESCRIPTIONBURLINGTON 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

20. InvestinginBonds.com

21. How do I find a Stock, Mutual Fund or Bonds? • Newspapers • Internet • Stockbrokers

22. 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.

23. 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?

24. Search theINTERNET! Company web sites Investment advice sites www.yahoo.com www.bigcharts.com www.fool.com (The Motley Fool) www.marketwatch.com How do I find a Stock, Mutual Fund or Bonds??

25. What am I looking for? • COMPANY PERFORMANCE • Profit history • Growth potential • Good management? • What do you think of their products?

26. 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?

27. 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

28. Shareholders “win” when… • A company grows • Stock becomes more valuable • The firm is profitable • Management may send investors a shareof the profits • DIVIDEND

29. No/low profits NO! Is a win guaranteed? Stock prices can fall or fluctuate. Must consider your risk tolerance.

30. 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.

31. 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.

32. 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

33. 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 spin-off 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.

34. How to Read a Stock Table

35. 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.

36. Finding the correct Ticker Symbol • What do you think the symbol for General Electric might be? • (GE) • General Motors? • (GM) • Dell Inc.? • (DELL)

37. Finding the correct Ticker Symbol • Coca Cola Company Coke CCE KO 2) Kellogg TONY KG K

38. 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.

39. Types of Trades • Long Position • Buy • Sell • Short Position • Short Sell • Short Cover

40. 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.

41. 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

42. 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

43. 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 state-wide 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."

44. Calculating Maximum Percent Equity • 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.

46. Sample Team IDs & Passwords Please DO NOT change the passwords. Teacher ID: SIA_80_T182739Password RIF10027 Team IDs:SIA_80_A135Password SMGTRADE SIA_80_A136 SMGTRADE SIA_80_A137 SMGTRADE

47. Team Welcome Page Students in Grades 4-12 do not have access to the Learning Resource Center.

48. Account Summary

49. Account Holdings

50. Enter a Trade - Step One