Homework: Stock Journal
This is the first of three stock journal homework that you will complete during this course. For this homework, two templates have been provided for your use. In one template, you will enter your chosen companies, the share prices, and the number of shares you will be purchasing given your budget of $25K. The other template is where you will write your rationale/summary. Please download both templates, and complete, save, then upload both templates to Blackboard when submitting your work.
Scenario
Capital markets and the ability to raise funds for corporate uses are essential to the U.S. economic system. For this homework, imagine that you have $25,000 to invest in U.S. companies. You are buying used stock. The company got the money when it issued the stock originally. You will be buying it from an existing owner.
You are investing, or buying, the stock because you believe the company will make money and pay you a dividend in cash. Each share of stock that you buy entitles you to any dividend declared and a vote at the annual stockholders' meeting.
The stock also allows you the ability to earn your money back by selling the stock. Of course, investing in stocks is risky and there is the possibility that the stock you buy will be worth less when you want your money back. The company is not obligated to give you any of your money back. You will only get your money back if another investor wants to buy your stock.
Instructions
Using the above scenario and the resources listed below, complete the following directions for your Stock Journal entry:
A. Select three US companies that are publicly traded using your knowledge and experience and make sure you are practicing good diversification. Jim Cramer, Money Manager, on CNBC, plays a game at the end of his show called "Am I Diversified." Check out the short clip, Am I Diversified - Mad Money [Video], to get a sense of industry diversification.
• Ideas for Sources of Information: There are many ways to find such companies and the stock prices, including the New York Stock Exchange, Google Finance, NASDAQ, and Yahoo! Finance.
B. Describe how you will divide $25,000 across the three companies (e.g. $10,000 in Company 1, $10,000 in Company 2, and $5,000 in Company 3).
• You decide the amount you are investing in each company. You do not have to provide any analysis to justify your decisions.
C. Provide a reason for picking each company.
• For example, you might invest in Ford because that company gets a lot of your money and you hear that Ford is doing well, and will continue to do well.
D. Identify the number of shares you are buying, and the price of the shares you are buying for each company.
• Once you decide the companies and the amount for each company, determine how many shares you can buy. For example, if Company 1 is selling for $42.16, then you may buy $10,000/$42.16, or 237.19 shares. But you cannot buy a part of a share, so you decide to buy either 237 or 238. In this example, you buy 237 shares at $42.16 per share, investing $9,991.92. You won't be able to buy exactly $10,000, or $5,000, or $25,000, but it will be relatively close.
Format your homework according to the give formatting requirements:
• The answer must be using Times New Roman font (size 12), double spaced, typed, with one-inch margins on all sides.
• The response also includes a cover page containing the student's name, the title of the homework, the course title, and the date. The cover page is not included in the required page length.
• Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.