SMG Investment 2020 Vision in a Wall Street Bear Market (6-12th Grade)

Welcome Stock Market Game students to
Investment 2020 Vision in a Wall Street Bear Market. I am your host Jim Ford.
I am the Colorado, Florida, Maine, New Hampshire Stock Market Game
Coordinator. And if you have any questions about today’s webinar for
students please reach out to me at [email protected] So as you can see students we’re here today to keep taking you forward
with The Stock Market Game. Believe it or not even in this bear market that has
arrived to our economy it could be, if you have cash left in your SMG portfolio
uninvested, the perfect time to actually enter into the market in stocks, mutual
funds and of course bonds would be flight to safety and that’s always a
good thing to do. So basically we just want to identify what a bear market is
because the economists, the analysts are talking that language right now. When a
stock market makes a movement to the downside based on the impact that the
coronavirus is having a globally– and now here in the United States a lot of
industries have, as you can tell all around you, have closed down. And that is
going to take some time for them and people who have lost jobs to recover.
That massive slowdown of production and goods and services and employment is
going to lead us in the weeks ahead into what is already established by the fall
of the market, a bear market. All right so we got to get rolling. Here are our 3
major indexes that analysts talk about each and every day that you’ll see in
the news and the papers and online. And it is the Dow Jones Industrial 30 big
blue chips of the New York Stock Exchange. We’re going to show you who
those companies are a little bit. The S&P 500 are 500 big companies on the New
York Stock Exchange with large valuation. We call that capitalization in the markets. Nasdaq is the composite of all of the
companies that are in that large growth orientated exchange. As you can see the
Nasdaq and the S&P has faltered less than the Dow since that third week of
February. So we went from a major correction in the first week of this
downturn and to clearly now what economists would call a bear market. And
how long will you be moping along in this– hopefully not for too long. The
other key term that comes up often by analysts is the word recession. Recession
means again like a bear market a downturn of economic activity. And
usually if you’re in an economics class you’re going to hear the
definition of a recession as two consecutive or three consecutive
quarters of negative gross domestic product. What is gross domestic product?
It’s a leading economic indicator of our economy. It tells us whether or not goods
and services are being produced more today than they were last month, last
year, and in those comparisons are made for the GDP (gross domestic product) total
amount of goods and services produced in the United States.
So these are some remedies, some strategies that investors use to offset a bear
market and I call them the lucky seven. And no the stock market is not doomed
but it’s a fun looking caption to make us a little bit of nervous for a while.
But the diversification reduces risk and you’ll get instant diversification the
minute you buy an exchange-traded fund or a mutual fund. Because when you buy a
share of those or 10 or more as you know you have to do in the stock market game,
you are immediately buying 50-100-500 or more companies in a fund that reduces
risk because obviously they’re not all going to have difficulty depending on
market conditions. A few stocks that may not go up can be easily offset by
stocks that are exceeding because they’ve got great earnings and profits
and that type of thing. So changing how you’re invested called
asset allocation could be something you could do. As a matter of fact just be
careful now because you may look at your portfolio and go I’ve lost $30,000. Okay well so has everybody else who’s been fully invested
lately. Well, should you sell? Think about it. You want to go stock by stock and think
about what would or could recover in the next weeks ahead if we control the virus
and we get back into full employment here in the United States. All right,
dollar cost averaging, we’re going to show you an example of that today. Short
selling is a topic for another webinar but if you’re aware of it, it is where you’re betting that a stock price is going to go down. Anybody who short
sold in the last three weeks probably made some serious money but it’s risky
and you need to know when to cover and get out because when the market starts
going back up that’s when you’re going to lose the profits you made by shorting. So
topic for another day but that’s a quick introduction. Buy low, sell high.
That’s the formula to success on Wall Street. Buy a lower price, sell at a point
when you’ve made a profit. And look for companies that have dividends. Dividends
are extra interest rate based profits that companies will
give, not all so you got to check your stock quotes to see if they have a
company’s dividend payable. It’s where a board of trustees gets together and says
yes we want to keep everybody happy at let’s say a company like Apple, and we’re gonna share some of our profits with all of our wonderful
shareholders. Keep them aboard. We don’t want them selling because of every start
selling their Apple stock oh boy the price is going to go down. That’s the law of
supply and demand on stocks. So buy and hold is a long
term important investment strategy. You’ll be using those someday when you
hear that magic phrase– would you like a 401k? That’s a long term tax
sheltered investment. You may even yourself initiate Roth IRAs,
individual retirement accounts, or traditional ones, you may become
self-employed, own your own business, and then you can do a SEP, as its referred
to for self-employed people. So as you can see markets when there is turmoil, when
there is a cloud upon us, you can see on the chart here that a correction was
around 10%, a bear market is 20% or more which we’re in right now and we need to
stay away from the crash. Just want to quickly just throw this
30-year chart at you to demonstrate the history of the markets. The markets will
come back. It’s proven historically. Can I say that for sure? No, shouldn’t say that
because you never know. We could be in a bear market for 10 or more years. That’s
never happened as you can see in American history, didn’t happen in these
last 30 years from 1988 through 2018. You will always notice
that after there was something like in Y2K (year 2000) there was a decrease for a
couple of years, actually 3 years of downturn to the stock market and it made people
nervous after a while. But then things rebounded a bit to 2008 and then came
another obstacle with the banking crisis. So people may have sold, sort of– I can’t take the stock anymore. But if they would have had the patience, of course you know if someone’s
ready to retire well they’re going to make some important decisions, but for those
who still had time, and students you have time, you have 50 or more years ahead of
a working lifetime and your ability to take a little more risk that someone
ready for retirement is clearly there. So from 2008 all the way to 2018 we were in
that wonderful bull market into 2019 and here early February 2020. And then
here came the virus. Okay now we have a Stock Market Game Student Activity
Packet that our SIFMA Foundation has put together. And many thanks once again to
the SIFMA Foundation for all they do to promote the next generation, which is you,
of American students with The Stock Market Game so you are the investors
coming up to join the ranks of Americans on Wall Street very soon. So the
simulations that you’re playing now with The Stock Market Game is the practice,
the learning practice for you doing some big things when investing for your
financial future. So I want to take you there
just a scroll and tour for a while and I’ll stop on some key pre-activities you
could be doing that you could do now after our webinar is over and pre-
or as you would call it the post webinar activities too once you’ve gained a
little bit more knowledge of our webinar today and you also have had a chance to
read everything that is there to help guide you in the packet. So here are the
topics that will be presented throughout the 32 pages. Great opportunity for you
to go beyond just buying stocks into mutual funds and even some bonds. Reading a
quote is an essential key skill with The Stock Market Game. You’re going to see
quotes, they may be shaped differently but they’re going to include these key
things to look for: obviously you need to know the company
symbol, you’ll be looking at what was the action of the prices throughout the day, the day’s range, the 52 week high and low, and right now many of the stocks are
near the low so boy it’s like picking apples off a tree. There are a lot of
companies that are great values right now. All right,
the volume number of shares– volume is how many shares are being traded on the
market. And the only thing you can usually decipher from let’s say from whether
the markets up or down on a given day, well if the market is, and I’m looking at
my charts right now, the market seems to be retracting a little bit and the Dow
right now is barely above positive, Nasdaq’s holding on at 1.7% on
the upside, so this could be one of those days where we fluctuate in and out of
profit on Wall Street but the volume depending on what the market is doing, if
the Nasdaq is up 2 or 3% you can probably bet that there is more buying
going on on Nasdaq than selling on that given day. So that’s just something
to understand volume but often times what a quote will do is tell you what’s
the average number of shares bought or sold each day on that stock and then you
could see whether or not today’s action is meeting or exceeding or not the
volume of shares on the marketplace, more active trading days or not. Alright and
then market cap is the current market value of all outstanding shares of a
company and that’s important because we do have some rules about the minimum of
a stock in order to trade. Price to earnings it gives you a number that
tells you how much the current price per share of a stock is in comparison to the
company’s earnings. And you don’t want to be overinflated there so a number of 30-
40-50-60 times earnings start setting up a red flag to investors. Then
dividends, like we said earlier, dividends are going to be a huge addition to making
profits with The Stock Market Game. Beta shows that volatility like we’re
understanding here in this bear market, down 30% in many cases or more.
And those are some of the important things. So take that current price, and I
like to immediately take the current price and
look at the differences between the high and low of a stock to see if it’s down
at the bottom and it is a good solid company to potentially invest in. Okay
moving on, let’s take a quick look at the quote that we’ve selected here in the
packet– it’s Chipotle Mexican Grill. Maybe you’ve been to one of those
establishments. Well you can see, and this is of course not time-sensitive to today,
but it’s $879, an expensive stock. It was slightly off, that’s what this is showing
here, $0.07 on this trading day, a fraction of 1%. And then like I
said, let’s go see that range and there it is, it’s $518 for a low and $887 for
high. So Chipotle at this point of the quote is very close to its 52-week high.
Does it have the potential to break through the 52-week high? But
right now you’re going to find a lot of companies closer to that 52-week range
down here. The volume in comparison to the average volume was much lower if
this is a closing price on the market. But it’s not, as you can see the time was
11:54 a.m. Eastern Standard Time. So there’s still more time in the trading day
as this snapshot was taken. There’s your market cap which is good, it’s
way up there in the billions of dollars. The beta below 1 so the volatility is
very good. Price to earnings ratio, be careful it’s got 80 times earnings. You have to
be careful with that. Doesn’t mean you know want to buy its stock but as the
earnings and sales and popularity of Chipotle continuing to grow– I know when
I’m at an airport, I’m looking at which line has the best line
to get food at a food court Chipotle Mexican Grill usually has the
biggest line. Ex-dividend date, it’s not available so
that’s telling us they probably don’t pay any dividends. It may show you
away from a stock especially when it’s at its high right now at this point when
the snapshot was taken. And then they give you a target in this quote that it
should be up as high as $880 so it looks like it’s arrived. You may be late to the
party on this stock. You may want to move on to another based
on that. But that’s again a choice, a decision of your particular
team. So here’s where you would go into your own individual stock quote
and you would fill out this information. This is one of the first activities I
recommend. There are the averages like we talked about before, but
what I want to do is take you to, quickly right now, look at how to search for
stocks on each of the indexes. So let’s back up here just a little bit and go to
Yahoo Finance which I think is the best one to go to when you’re first getting
started using a research browser. So there are your 3, and you can see
as of this moment here afternoon time, it is again the Dow is holding on barely 1%,
S&P is hanging on and the Nasdaq is still up at 1.7%. A smaller
composite of the entire Nasdaq is here it’s called the Russell 2000 and it’s
doing pretty well and a lot of those are those smaller up-and-coming growth
companies. But let’s go to the Dow 30. If you click on Dow 30 look where it’ll
take you. It’ll take you into looking how the Dow is doing as a whole and you can
see charts over 1-5 five years or more how the Dow has performed. But what
we want to do is hit components. When you hit components you’ll now see all 30
companies of the Dow Jones starting off with Home Depot. Notice you’ll see the
last price, you’ll see the change that is going on with all of our 30 blue chips
of the Dow and that they’re in the red but it means they’re down today if
they’re in the green woohoo they are making some profit back for shareholders
today, and then there’s the all-important volume column. So these are household
names right Caterpillar, Apple, Verizon Chevron, Nike, Visa, 3M. Let’s see what’s
really doing good today– the healthcare group United Healthcare it looks pretty
strong. 3M
I’m surprised it’s down today with the news that they’re going to be providing a
lot more surgical masks. I’m surprised that stock’s down today. Walmart has been
a steady, people are shopping for their needs right now at
Walmart. The banking seems to be coming back with JPMorgan. So notice that the
Dow consists of many different industries. It’s a beautiful blend of
America’s industrial sectors as it tries to give us a blanket idea of how the
entire stock market is performing. But there are some medicals down. Merck here
is down 2.4%, Procter & Gamble, so when you see a company that you’re really
interested in and why is it up oh here’s one we got to go jump at. There’s two
biggies– McDonald’s and Disney are having excellent days
making a little bit of a comeback at 5.5% plus percent. So let’s go
to Mickey D’s. Click on that symbol. Now let’s take a little better peek at it. There’s Mickey D’s and you can see that it’s currently at $144.76.
It’s up 5.4% which is really good.
And as you go through the quote, which we did a few moments ago, look at the range.
So McDonald’s still has a nice jump to where he could come back from $144 to a
previous high of $221. So if it could make that $70 jump you
could make 33% back on McDonald’s and it looks like it’s heading in that
direction today. Price-to-earnings, we’re very good at 18. Does it pay a dividend?
It does. Look at this. McDonald’s has paid in the past 3.4% profit. Think about that. You’re lucky to be getting a half of 1% in a money market account or in a savings account right now based on low
interest rates so what a win-win situation McDonald’s could be if it
makes a run back to the $200 range. This might be a stock to throw into your
portfolio. You can see it’s making its move today so that would be a good
situation too. So that’s what the challenge is now, can you go find some of
those stocks that have been hurt by the recent bear market and can you add them
to your team portfolio. Do you want to maybe rebalance some teams. Maybe there
are some stocks you feel aren’t going to make a comeback in the next 5-10
weeks of the session, then you may want to maybe make a change. And the nice thing
about our system now is that you’re only going to be charged $5 per transaction of
buying and selling. So that will ease some of the pain. But
if you sell a stock that has lost you money, you’re locking
in that loss that you’ll have to recover. If you lost 25% in the stock that you’re
about to sell then you’re going to have to make 25% on the profit side just to break
even. So keep that in mind if you decide to sell anything in your team portfolios. So I want to continue in the packet very quickly.
And again some great questions you can answer related to the stocks you’re
selecting whether it’s McDonald’s or any other. You can also check the S&P 500
from that same Yahoo page and also the Nasdaq, so you’re going to have thousands of
companies you can quickly see whether they’re up or down today on the markets.
All right we want to get in to diversification now. This is
really important. A key phrase- do you want to put all of
your money into 1-2-3-4 stocks? Well in the future that would be
very risky. So if you’ve done that in The Stock Market Game, you’re going to find
out that you did invest in early February your 4 stocks have probably
lost anywhere from 20-30% unless you did indeed get into
some stocks that have held their own during this bear market. But
the great thing about diversification 101, it’s going to talk about what mutual
funds and ETFs are. This is showing a nice blend here. A blend of having 50% in cash. So let’s say you have your $100,000 in the game.
Maybe you haven’t invested 50% yet– so where would you invest that today if you wanted to finish your entire
portfolio? 30% is currently in stocks and 19% is in mutual funds so
that’s not a bad asset allocation blend. I would probably call that a
slightly moderate risk portfolio. And then you could look down and divide
your team portfolios up into specific companies as you can see in Portfolio A
or B. And then mutual funds will go into the types. Now my PowerPoint will also
bring this to you in just a minute because I’m going to jump to that shortly,
but I want to continue through the packet. And here you’ll see very similar
a quote for the Fidelity Emerging Markets Fund is right here and it looks
like it’s got a great rating from Morningstar– and that’s another nice
activity you can do too as you can see here is another great worksheet to
complete where you get information about from the quote on that particular fund,
answer the key questions, and then identify that Morning Star rating. Another
great activity to demonstrate your learning to your teachers here during
this break. Here is really a culminating, this is definitely a post activity to
demonstrate your learning from this wonderful activity packet.
You’re going to show how you’ve been blending your investments and maybe
created a whole new strategy now based on the bear market that we’re in.
You will need diversification in mutual funds. This particular portfolio is
showing Bank of America as one stock and the number of shares. Here a mutual fund
is bought at 15 shares. And a municipal bond at $10,000.
So you can fill out that wonderful chart right there to demonstrate your learning
of how to re-asset allocate your team portfolio. So here is showing risk– low,
medium, and high risk in an asset allocation portfolio. Notice here this is sort of a
flight to safety portfolio where we only have 2 stocks, Apple and Netflix, and
then we’re into mutual funds. If you buy the S&P 500 Index Fund you have
bought a little piece of all 500 companies on the New York Stock Exchange.
Wouldn’t that be cool. Not all of them, I’m sorry, 5 selected stocks of the many
of the New York Stock Exchange which takes you into the thousands. The
balanced fund would include bonds and income stocks like the S&P 500. But you
can note that the conservative risk portfolio today has moved more towards
corporate bonds at $30,000. It may pay a little more interest than government and
municipal bonds. But $60,000 of the portfolio is sort of a indeed a flight
to safety. The risk is more minimal obviously when you have a balance
of bonds versus invested stocks through mutual funds. And the rate of return
could be 4-5 % and that would still hopefully be at inflation.
Moderate takes you into a larger exposure to stocks. Aggressive,
very high exposure to stocks or possibly when you get into funds you’ll go into a
technology fund, it’s all one sector, which is done pretty well up until
bear market. And then growth funds traditionally outperform in many cycles
the traditional balanced fund or the traditional market
performance because Nasdaq seems to be the little more risk area but more
reward area when it comes to stock or mutual fund selection. When it comes
to the traditional mutual funds, these are the categories basically companies
today have created their funds by: growth funds our Nasdaq up-and-coming companies. Income funds are New York Stock Exchange big established companies. Balance could
be a combination of bonds and stocks. Here a fund manager creates one
where you have Nasdaq and New York Stock Exchange funds blended in. Sector funds
could be technology stocks, healthcare stocks, airline stocks, energy stocks, I
can go on and on with industrial sectors. Global funds would have companies from
Europe, from the Pacific Rim included in the investment pool of
companies. Bond funds would be a good flight to safety as we said. And then
money market is where we have a safe harbor for our emergency fund of let’s
say 3 months of income in case we become unemployed. And there’s all kinds
of specialty funds out there today. But one thing I want to quickly sneak in is
the differences between an ETF and a mutual fund. The ETF’s are more modern
than mutual funds. ETFs do show its share price throughout the day 9:30-4pm EST. Mutual funds only roundup the cost or price of the share at the end of the
day. You’ll be able to see more on an ETF because the holdings will be there, each
day the top 10 holdings of a particular fund, and I think we’ll take a minute to
show you that here in a second, and whereas the mutual funds will only
update you once a month or every 3 months on that. But remember one key
point about the differences, the difference is that when you buy an
exchange-traded fund it’s being considered a stock in our Stock Market Game.
So you’d want to get the symbol of the ETF and place a trade under the stock
page not the mutual fund page. A mutual fund will come with a symbol at the end
that ends with an X. Here you can basically break down 3
different mutual funds and so be a great example that you’re going pick one of
these and actually place it into your portfolio, the best fun that you can find.
So what are you looking for when you’re breaking down a mutual fund?
Obviously the information here is important of what is the symbol? What is
the price of that fund? What category did it fall into? Growth or income let’s
say? What are those 5 top stocks in it? And how has it performed? And then what are
the ratings? How was it rated? Was it given 5 or 4 stars? Those are all
really important. Let’s take you to the Charles Schwab
S&P 500 fund. Now when I take you to Charles Schwab in fund you can see that it has
done really really well over the last 10 years. The chart is taking us upward.
There’s our most recent bear market drop at the end here. It was up around 36,000 or
so. It’s dropped down now what appears to be about 32,000 and that can
happen when we get into a little bit of a bear market. Currently,
and this is a fund as of yesterday’s close, it was off $2 a share or 5% based on the market yesterday. So what’s in the portfolio?
This is what is the gift of mutual funds. It is telling us that the fund has taken
the S&P 500, major companies, and has weighted the stocks they feel have the
best chance of profit. So rather than give everyone the same amount of weight
in the fund they will excel certain stocks as you see here. And Microsoft is
5% of all of the assets or money that’s in the fund. Apple right behind it at 4.6%,
what do you know those two competitors. And then it names you know Amazon,
Facebook, Alphabet which is Google, different classes of that, Johnson &
Johnson and Visa. The gift is if you’re looking for stocks one of the
greatest things you can do is look at some really good mutual funds like this
Charles Schwab S&P 500. Just go look at their top 5 companies and
those could be good stocks you can individually place into your own team
portfolio. Then what is the performance? Click on performance to see
how it’s done. This is also in our chart to compare 3. Now you’ll notice
in the last month everything’s in the red as we entered the bear market here,
but when you look outward you’ll notice that this is had an impact of course but
we are still in the green when you look at the average return over 3-5-and
10 years. Basically what I mean by a benchmark on our form is that the
S&P 500 can be compared to the weighting of this Charles Schwab S&P 500 here.
You’ll notice that it really does follow very closely the same earnings
performance profit or loss in this case of the SP trust. And then a large blend,
you can see there’s been a little bit more volatility here to the side down
and a couple in terms of comparison. So that was something hopefully to get
you introduced to mutual funds and it will help you because mutual funds, you
have professional money managers helping you to make the selections. Once you
buy their funds you’ll be watching their moves for you. Instant
investment diversification and safety and it’ll be the types of investments
you’ll be placing in your 401Ks in the future and your IRAs. So thank you so very much for staying with
us today. We hope that the virus is going to pass quickly and your family is safe
and well. We certainly hope that we can provide activities like this from
The Stock Market Game to enhance your learning and make a difference in real
world learning for your future. So thank you very much for attending today we
hope to have you back at another student Stock Market Game webinar soon. Take care now.

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