Business: Investing Strategies Summative

My Stock Market Game:
In Business class, we began to take part in a virtual stock market game in September. Since then, our class has been following the stock market each week. The game is designed to mimic the actual stock market, providing us with an opportunity to educate ourselves about investing and trading stocks. I finished with a relatively favorable ranking: 3rd place out of 22. Throughout the past couple of months, I have watched my ranking rise and fall, but managed to end near the top.

My first investment was Microsoft (MSFT), an american technology company that "develops, manufactures, licenses, supports and sells computer software, consumer electronics and personal computers and services." I did some research prior to my transaction, and decided that it would be a good idea to invest in the company based on the information I found on the internet. I bought 287 shares of this company.

My second investment was PayPal Holdings, Inc. (PYPL), an American company that operates a global online payments system for online money transfers, and serves as an electronic alternative to traditional paper methods like checks and money orders.  I also conducted research before investing, in an attempt to acquire more information about whether this company would be a good option.

My third investment was JPMorgan Chase & Co. (JPM), a "multinational banking and financial services holding company headquartered in New York City." I decided to invest in this company because my father, who is in the business industry, mentioned it to me. My brother also interned at JP Morgan as an analyst in 2011, so I concluded that investing in the company would be interesting. I decided to purchase 409 shares.

I also invested in Wells Fargo & Co (WFC), an American international banking and financial services holding company headquartered in San Francisco, California. However, as weeks passed and the company didn't seem to be doing well, I decided to sell the 216 shares of the company I had purchased.

Out of my 4 investments, I think PayPal was my best investment. The company's 1 year return is 11.69%, which is considered relatively good. This means that the company gained 11.69% in income and the capital gains relative on an investment.

What did I learn?

Prior to this course, I had little knowledge regarding investing and trading. I knew what profits were, and the general idea of investing, but I was unaware of the many details that comprise investing and trading. During my participation int the stock market game, I encountered some challenges. One was finding companies to begin with. I didn't want to invest in a company that many people in the class were going to; such as Apple Inc., as I knew the stocks were especially unpredictable because of the launch of the iPhone 7. I decided to invest in Microsoft and Paypal on the same day because they both were doing well this year. A few weeks later, I decided to invest in Wells Fargo. However, I encountered another challenge during this time, because the company ended up not doing well in the market, and as a result, I sold my shares of the company. An important thing to note about the stock market is that it its movements are unpredictable- they're constantly changing. One day a company's shares can be doing well, and the next day it can be plummeting. 

The "Couch Potato" strategy is "a technique for building a diversified, low-maintenance portfolio designed to deliver the returns of the overall stock and bond markets with minimal cost. After taking this course, I have a much better understanding of how the stock market functions. I found this unit to be especially interesting, because it is extremely relevant in our lives. The strategy can reduce a typical investor’s costs by as much as 90%, while at the same time beating the majority of mutual funds and professionally managed accounts. Other investing strategies include "growth investing" and "value investing". Each of these strategies consist of pros and cons. Growth investing is when investors invest in companies that exhibit signs of above-average growth, even if the share price appears expensive in terms of metrics such as price-to-earnings or price-to-book ratios. Value investing is a strategy where stocks are selected that trade for less than their innate values. Value investors actively look for stocks in which they believe the market has "undervalued." The pros of growth investing include: Successful investments may rise at a much faster rate than the overall market. Investment selection is focused on attractive companies with earnings perceived as above average and sales growth. Investors are exposed to industries that are rapidly evolving and are exciting to watch. The cons of growth investing include: Higher risk, time concentrated. Now, let's take a look at the pros of value investing. They include: investors are able to take advantage of assets that are devalued when others are panicking. Daily price fluctuations are not much of a concern to value investors, as they are focused on the value of a business instead of external factors. Investors can experience steady and consistent gains that may outperform benchmarks such as the S&P 500. Cons include: Investors may lose out on larger returns because they search for companies with a margin of safety. It can be difficult to determine if a stock has "bottomed out" or could continue falling further down. Finding investments can require a lot of time and research. 

Final Notes:

While participating in the Stock Market Game, I particularly enjoyed watching which of my companies' stocks rose and fell, and during what time this happened. For example, watching the stocks fall after this year's U.S. election. If I were to do this again, I would try investing in more of a variety of companies, as I only bought shares from 4 companies. My plan for getting started in investing is to save a relatively small amount of money and receive seed money from my parents within the next few years, as it is effective to begin investing early. I will continue to conduct research to find out which companies are the most worthwhile to invest in. From there, I will invest in several companies to diversify the risks.