Your Mission: You have received £10,000 (10,000 points) as a graduation gift and want to invest it for your future. You have learned about saving and investing and have decided that you will purchase stocks with this money. You have nearly 40 years until you retire, so this is a chance to find some companies with good growth potential that will provide a good return on your investment. You want to minimize your risk by having a diverse portfolio, so you plan to include five different companies from three different sectors.
You plan to use E*Trade for your stock purchases, so keep in mind that they charge £6.95 per trade. These fees need to come from your £10,000.
You know that in order to find five solid companies, you will have to research twice as many, so you have your work cut out for you. You plan to use some standard factors to compare your companies so that you are basing your decision on performance, not on your intuition. Let’s get started.
Companies in the Dow Jones
Begin by researching companies in the Dow Jones. Use this website to find the current companies. Choose five companies from the list. Click on the ticker symbol to go to the CNN Money info about this company. Look over the press releases, the financial overview, and especially the forecast information. Use the spreadsheet below to gather the specific information about these companies that you will be comparing.
Companies in the S&P 500
Next you will research companies in the S&P 500. Use this website to find the current companies. There are 500 companies in this index, so take some time to explore. Remember you want to have a diverse portfolio so you don’t want to have five companies that are all related to consumer goods or to financial services, etc. Choose five companies from the list. Click on the ticker symbol to go to the CNN Money info about this company. Look over the press releases, the financial overview, and especially the forecast information. Use the spreadsheet below to gather the specific information about these companies that you will be comparing.
| Stock #1 | Stock #2 | Stock #3 | Stock #4 | Stock #5 | Stock #6 | Stock #7 | Stock #8 | Stock #9 | Stock #10 | |
|---|---|---|---|---|---|---|---|---|---|---|
| Company Info | ||||||||||
| Name of company | ||||||||||
| Ticker symbol | ||||||||||
| Current Price | ||||||||||
| What does this company make or sell? | ||||||||||
| P/E Ratio | ||||||||||
| Profile Tab | ||||||||||
| Sector | ||||||||||
| Industry | ||||||||||
| Market Cap | ||||||||||
| Charts Tab | ||||||||||
| What has happened to the stock’s price in the | ||||||||||
| Last 1 year? | ||||||||||
| Last 3 years? | ||||||||||
| Last 10 years? | ||||||||||
| Forecasts Tab | ||||||||||
| What do analysts predict will happen with this stock in the next 12 months? | ||||||||||
| • Forecast (high, median or low) | ||||||||||
| Financials Tab | ||||||||||
| Income Statement | ||||||||||
| • Gross Income | ||||||||||
| • Net Income | ||||||||||
| • EPS (Earnings Per Share) | ||||||||||
| Cash Flow Statement | ||||||||||
| • Net Cash Flow – Operating Activities | ||||||||||
| Balance Sheet | ||||||||||
| • Total Shareholder Equity | ||||||||||
Now that you have researched 10 companies, you are ready to compare your data. Remember that you want a diverse portfolio, so look at the industry and sector information for your companies in addition to comparing their financial and historical data. When comparing financial numbers, use the Information to Know About Trading Stocks resource for some reminders about what you are looking for.
Narrow down your 10 companies to your top 5 choices. Complete the table below to explain your decision including details of the key financial indicators that influenced your choices.
| Companies you selected | What made you believe these companies would be a good investment for your portfolio? | |
|---|---|---|
| Choice #1 | ||
| Choice #2 | ||
| Choice #3 | ||
| Choice #4 | ||
| Choice #5 |
Remember that you have £10,000 to spend for the stock purchases and your broker fees. The price of each stock will partially determine how many shares you can purchase. Your confidence in these companies may also influence your decision to purchase more or fewer shares of one company compared to another. Make your decision, calculate your costs, and record the numbers below to show how you decided to spend your investment money.
| Company Ticker Symbol | Current Price | # of Shares You Will Purchase | Broker Fee | Total Cost of this Purchase | |
|---|---|---|---|---|---|
| Choice #1 | |||||
| Choice #2 | |||||
| Choice #3 | |||||
| Choice #4 | |||||
| Choice #5 | |||||
| Total Money Invested | |||||
Your final income (in points) = 10,000 - total money invested + stock price after three days x # of shares you own - broker fee