My high school economics teacher is giving us each $20 to invest in stocks. Any advice?
My high school economics teacher is giving us each $20 to invest in stocks. Any advice?
An Exchange Traded Fund is similar to buying a share of a mutual fund. Find one that tracks an index of the stock market like the S&P 500 or the Dow Jones Industrial average.
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Look at how the unemployment rate inversely correlares to education level. Tell the teacher you would be better off investing in developing your personal humans capital at this point insrard of investing in equities - assuming you cannot do both. Since a main idea of economics is how to allocate scarce resources, I think this response would be suitable.
Also, you'll be paying more in fees than you'll be receiving in stock.
This seems like a stupid project from the perspective of your teacher. First, no students in the class will know enough to make an educated purchase. Second, $20 is barely enough to cover the transaction costs of buying and selling the stocks ($9.99 each on etrade, for example), and even if you don't factor in transaction fees, $20 still doesn't cover the vast majority of stocks on a price/share basis. Seems a more worthwhile project would be a virtual one in which everyone in the class "buys" two or three stocks and then follows them for the duration of the class. Just my $0.02.
Forget equities. Invest that seed money in gold, baby.
Peter Lynch wrote:
This seems like a stupid project from the perspective of your teacher. First, no students in the class will know enough to make an educated purchase. Second, $20 is barely enough to cover the transaction costs of buying and selling the stocks ($9.99 each on etrade, for example), and even if you don't factor in transaction fees, $20 still doesn't cover the vast majority of stocks on a price/share basis. Seems a more worthwhile project would be a virtual one in which everyone in the class "buys" two or three stocks and then follows them for the duration of the class. Just my $0.02.
Right, transaction costs are a very real cost in the real world. Second, the time frame probably isn't enough to really teach you much.
Often these things are done as contests, in which case you would be best just to gamble on a volatile beaten up penny stock, which is terrible in the real world but the best strategy to "win" a game like this.
Snake Oil Salesman wrote:
Forget equities. Invest that seed money in gold, baby.
Gold is king this year.
You are both right. $20 is not enough, given transaction costs. The time frame involved isn't nearly enough for serious investing in the stock market....all true.
BUT more importantly you are both wrong. The kids will learn a whole lot by playing this game. They will learn to think in terms that they otherwise would never think of. Profits, revenues, growth rates, book value, volatility, maybe even cash flow, expanding markets, room to grow, overall market dynamics...the list goes on and on. The kids will pick up so much more just because there is "real" money involved and because it is a contest.
Kudos to the teacher.
As far as advice to the OP: Pick 3 - 5 companies that you know something about. It doesn't matter what they are, just as long as you have some familiarity with what they sell. It could be McDonalds, Google, Apple, wherever kids buy clothes today. Then look up the numbers I mention above (profits, revenues...). Compare them across these companies on a per share basis. Then compare them to the price of these companies per share. Start from there. Oh, and don't worry too much about winning the contest. For such a short time frame and small amount of money winning is essentially 100% luck.
paper trading, dinguses
CCTC baby. Ride it up, sell, it crashes, rinse, repeat. I've made a ridiculous amount of money on this pump and dump.
Real money or pretend money? Figure out how to short the Argentinian Peso.
Plastics.
Get Robinhood to avoid transaction fees and then put all your $20 on UWTI because yolo on oil all day
Bogleheads.org - for devotees of the investment philosophy of John Bogle of Vanguard Funds, pioneer of index investing for the masses - has forums and a Wiki for research and posting your own questions.
Short the Chinese economy. Anybody know how to do that?
Borrow shares from your classmates to short sell the Down Jones.
None of this matters for a contest that runs from now until the end of the school year or shorter. If this were a 5 year contest then it would be applicable. Unfortunately this kind of contest teaches kids that investing is short term and equates to gambling. So why bother with an IRA?
Heard it here wrote:
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This, or lambs wool volatility index. Both solid choices.
Or use RobinHood and get some index funds. Picking stocks is another form of gambling. Give yourself the best chance and pick the only things that a relatively constant in the NYSE, index growth.