Suggested Target Age: Grades 6-12

Topics Covered: stock market investing and other investment options; investment risk and return rates; reading stock tables and researching stocks

Time Required: 45 minutes

What Will the Students Learn?

• How to read the stock pages of a newspaper
• The concepts of capital gains and dividends
• The lesson will reinforce principles from the All About Investing Part 1 lesson on risk, rates of return, liquidity, and diversification

State Contents Standards Key
Virginia: Civics and Economics: CE.10; Economics and Financial Literacy: Objectives 1, 14.
Indiana: Economics: E.1.11;
Florida: Social Studies: SS.D.1.4 Mathematics: M.A.A. 3.3
California: none identified

NOTE: This lesson requires computers or Internet access at the end. If there are not enough computers for all the students to use at once, you can divide the class in half and have half of them play the Loss or Gain? Game while the other half uses computers to log into Economis. Then have the groups switch.

Materials Needed:

• Auctioneer Instructions
• Auction Bidder Profiles
• Copies of the article, Stocks: The Basics
• Investment Options Chart
• Investment Risk Pyramid
• Copies of the Business/Finance section of a major newspaper such as the New York Times or the Wall Street Journal
• All materials for the Loss or Gain? Game
• Money Smarts Quiz and Answer Key

NOTE: Instructors for this lesson should study the article, Stocks: The Basics, and the Money Smarts Quiz and Answer Key and get familiar and comfortable with the language and concepts in these documents. If this information is very unfamiliar, it may be a good idea to invite a guest speaker from a bank or investment firm in to teach this particular lesson.

1. Read and review the Loss or Gain? Game Overview and complete the necessary preparations as instructed. Preparations will vary depending on whether you choose to do the Bucket Toss Version or the Water Balloon Version of the game.
   
   
2. Read the short article, Stocks: The Basics and make enough copies for every student in the class. Note the author’s use of the analogy of an auction for the stock market. You will begin today’s lesson by having students participate in a short, pretend auction.
   
   
3. Write the definitions of rate of return, risk, liquidity, and diversification (see below for the definitions) on the blackboard, whiteboard, or some other prominent place in the classroom.
   
   
   • Rate of Return – how fast your money grows. Sometimes investors use “interest rate” as a synonym for rate of return.
     
     
   • Risk – the degree of uncertainty about the expected return from an investment, including the possibility that some or all of the investment may be lost.
     
     
   • Liquidity – the ease with which an investment can be turned into cash, without a significant loss of value.
     
     
   • Diversification -- the reduction of investment risk by spreading your invested dollars among several different investments.
     
     
4. Make copies of the financial pages of a major newspaper showing the info on stocks and give one copy to each student.
   
   
5. Print out and familiarize yourself with the Auctioneer’s Instructions. Print out and cut up the six Auction Bidder Profiles.
   

Lesson Plan:

1. Following the auction, ask the bidders how they knew how much they could bid. (They had to determine the highest unit price they could afford.) Explain that the auctioneer’s job was to serve as a matchmaker between the sellers and the buyers (bidders). Now state that the stock market works much like an auction. Pass out copies of the short article, Stocks: The Basics. Tell the students that today you will be focusing on learning about stocks.
   
   
2. Reiterate the point from the article that the stock market is like an auction. The stock market acts as an intermediary, just as the auctioneer does. The bidders were not buying the products from the auctioneer; he/she was just a match-making, trying to match sellers with buyers. The prices of stocks on the stock market are determined by how much buyers are willing to pay for the stocks.
   
   
3. Ask the students what investments they have already learned about. (They should be able to mention things like CDs, savings accounts, and money market accounts from the previous lesson.) Tell them that over the long-term, one of the best investments in the USA has been the stock market. As the article, Stocks: The Basics, says, “In the history of the U.S. stock markets, common stocks have had an average annual return of about 14 percent since the end of World War II.” Of course, the stock market does go up and down and there is risk involved in investing in stocks. Ask them to name problems they may have heard about with the stock market (e.g., the “Great Crash” of 1929 and the subsequent Great Depression, and the big drop in the stock market after the “dot.com” bubble).
   
   
4. Review the definitions learned in the previous lesson about rates of return, risk, liquidity, and diversification. Then ask if anyone can remember the definition of stocks. (Answer: Stocks are investments that represent ownership in a company.)
   
   
5. Introduce two new concepts that are important when thinking about stocks: capital gains and dividends. Ask if anyone knows the definition of these terms. Then write them on the board:
   
   
• Capital gain – the difference between the purchase price of the stock and the selling price the investor gets when selling it. Hopefully the selling price is higher than the purchase price and this earning is called a capital gain.
  
  
• Dividends – a portion of a company’s profits paid out to shareholders.
  
  
• When you own stock in a company and the company does well and earns money, it will share some of its earnings with the people who own company stock (these people are called shareholders). A shareholder can keep earning dividends for as long as she holds the stock and the company is paying out dividends. A capital gain occurs just one time – when the shareholder sells the stock, and the selling price is higher than the person paid when she first bought the stock.
  
  
6. Now pass out the copies of the financial pages of the newspaper and have everyone turn to the stock tables.
   
   
7. Ask the students what they already know about how to read the stock tables. (Some may be familiar with the idea of stock symbols or be able to explain what the numbers in the change column mean.)
   
   
8. Write the following definitions down on the board:

• Stock: The name of the stock is listed here. If the stock has a long name, it will be abbreviated to fit into the column.
  
  
• Last: Stock prices can rise and fall during any time when shares are traded. This column shows the final stock price of the day.
  
  
• Change: This column shows how much the stock’s price changed from the previous day’s closing price.
  

1. Explain to the students that every company that sells stock has a unique symbol.
   
   
2. Point out some of the symbols in stock tables and tell the students the companies that they represent. For example, find “AAPL” and tell the students that it stands for Apple Inc. Ask them if they know which stocks other stock symbols represent. (Some common ones are SBUX for Starbucks and XRX for Xerox.)
   
   
3. Tell the students that they can find the symbols for any company on the Economis website and that you will be showing how to do that at the end of this lesson. 
   
   
4. In the stock table handouts, have the students identify the “last” and “change” columns. Ask students about the final stock prices of different companies. When they tell you the answer, ask them what it means (that the final stock price at the closing of yesterday was [blank]).
   
   
5. Ask the students how much different companies’ stocks changed. When they answer, ask them what it means (that the stock’s price changed [blank] amount from the previous day’s closing).
   

1. Take the students into the computer lab and have them log into their Economis accounts.
   
   
2. Tell them that with Economis, they can build a virtual stock portfolio. They can purchase shares of stock and if those stocks go up in value, they will realize a profit. (Of course, if their stocks go down in value, they will experience a loss!) Also, they can put stocks on a “watch list.” This means that they won’t own the stock, but they can monitor its performance for a while and then decide whether or not to buy it. Under the Online Finances menu, have them choose Manage Your Finances. Then have them click My Stock Portfolio at the top of the page. On the right side of the screen, click “Click here to find a company’s symbol.” On the following page, the students may enter the name of any company and find the symbol. Have them all type in HOG (for Harley Davidson). Then explain that the information they see on the screen is the real-world, real-time information from Wall Street.
   
   
3. Using Economis, have each of the students find the symbol, last, and change for three companies. (You may want to come prepared with a listing of several popular companies and their stock symbols. Walk around the room to assist and answer questions.)
   
   
4. When all the students have identified three stocks and had a chance to purchase some stock (if they wished) or put stocks on their “watch list,” re-gather everyone to play the Loss or Gain? Investment Game. Click here for the Game Overview.