Stock Portfolio Project Instruction
Welcome to the world of investments! The simulation can be accessed by first creating
an account at: https://www.howthemarketworks.com/register/125959
Once you register at the above site, you will have a brokerage account with an initial
sum of $100,000 in fictitious money that you will use to trade stocks and mutual funds
for almost the entire semester.
Before making the trades, you are required to research your companies and develop
written rationales on why you select the company/mutual fund for investment. In order
to make intelligent investment decisions, you need to do your homework. That is,
research the companies, the funds, the stock performance, the industry, and analysts’
opinions or evaluations of a particular company that you may be interested in.
Below is a short description of your trading choices:
Buy
Buying means you are buying a stock expecting it to move higher in price.
Sell
Selling a stock means you want to close (liquidate) the long position you hold.
Sell Short
selling a stock short means you are borrowing the stock from the broker and selling it
at market expecting it to go lower. If it goes lower in price, you are making a profit,
whereas, if it goes up in price while you have it short, you are losing money in that
transaction. Using the Learn Trading tab will help you better understand all of these
options.
Cover short
When you have sold a stock short, you can buy that stock at a later date to repay the
broker. While you held the stock, if the price of your short position has gone down,
you are making money. If it has gone up, you have a loss.
A WORD OF CAUTION: Although you can sell a stock short, and over the short
position, it is highly advisable to focus on buying and selling stocks and avoiding the
short selling of the stocks. Given the complexities involved in the stock market, this
is a simple tip as you are learning.
The stock price of the company that you choose must be $5.00 or higher in value. You
should have the stock ticker symbol for your company to be able to buy or sell stock,
For example, software giant Microsoft trades under the ticker symbol MSFT and Cocacola trades under the ticker symbol KO. Every time you buy or sell a stock, you willbe charged a commission. You can trade any stock listed on the following stock
exchanges: NYSE, NASDAQ, and AMEX.
As you follow your portfolio and those of your competitors, you should review market
performance on a regular basis. Trading can be exciting and interesting. However, there
will be terms that you encounter that you may not be familiar with. Please make sure to
read online glossary to understand terms that may not be familiar to you.
In this semester, your task is to identify two top industries of your choice and three top
competitors in each of these industries. You should select the industries and the
companies within the industries based on research you do and your assessment that the
companies within the industries should be top investments. Before committing to the
industries and the companies within these industries, develop a one-page rationale for
your choice of each industry and about a half-page rationale on one company from each
industry as to why you would want to invest in them. The other two companies in each
industry should be the key competitors of your chosen company for investment.
Keep in mind the five criteria when selecting investment options to achieve your
objectives:
1. Investment risk
2. Yield
3. Duration
4. Liquidity
5. Tax consequences
Throughout the course of the semester, monitor the performance of these companies in
your portfolio. If there is any movement of more than one dollar or 5 percent in the
stock’s price of these six companies, you should:
• Make a note in your journal
• Identify the reason for the price movement
o The overall market was up
o Company introduced a new product or analyst upgrade
• Keep a daily record of the closing prices of the six companies, two industries,
and S&P 500 Index
• Develop separate charts for each industry including its three companies and
S&P 500 Index.
At the end of the semester develop your final report which should include the
investment objective, your rationale for the selection of industry and the companieswithin the industry. Assess your chosen company’s performance as compared to that
of its competitors. Which industry performed better? Why? Did your company
perform better than the competitors? Why or why not? What did you learn about
your research in the beginning of the semester and what would you changes in the
research having gone through the process? Explain.
Your research report should include investment objectives, economic/market/industry
analysis, analysts’ opinions/evaluations, and rationale for buying or selling equities or
mutual funds.
