Purpose or Problem
The purpose is to serve as an introduction to stock market investing, and to develop an enthusiasm for saving and investing.
Every time you buy something, whether it is a can of soda, a pack of gum, or a pair of sneakers, you are helping a company grow and increase its earnings. Many big companies are publicly traded, that is, individual investors can buy stock in that company and actually own a small piece of it. When a company does well, the stockholders may benefit from the company's prosperity by receiving a dividend (a cash payment) or by the value of their stock increasing.
There is a lot to learn about investing in the stock market, but it is something all of us should do during our lifetime. A portion of our hard-earned money should be at work in the stock market, earning us even more money. We must learn ways to get the money we earn to grow. Putting money in a passbook savings account or a bank certificate of deposit (CD) is a common way to invest. Although these forms of investments are very safe (there is little chance you will lose your principal), they generally do not give a very high return on your investment, perhaps paying only 2 percent to 6 percent annually. The stock market has always been a place where an individual can get a much higher return on the money invested. The catch is this: although the stock market has always performed well over time, it can suffer temporary drops, and investors can lose the money they have invested. For that reason, many people invest in a mutual fund, where a professional money manager studies companies and their stocks, and makes buying and selling decisions for you and many other people who have their money in the mutual fund.
However, there is a thrill of picking a stock yourself and watching it on a daily basis. While you should have a portion of your money invested long term (10 to 20 years) in the stock market, it can be exciting and often profitable by "playing" the market for the short term. To do this will require a little time every day studying the financial newspapers and watching the financial news on television, and using the Internet to find company news and track your stocks.
Two developments took place in the last three years of the 1990s that enabled the average person to easily and cheaply get into the stock market. The first was the explosive growth of the Internet and computers, enabling almost every home to be able to afford a computer and be connected to the Internet. The second development was the appearance of high-discount Internet brokers. Previously, an investor might have to pay $100 or more in commission fees to buy stock. Using the Internet, a transaction can cost as little as $8, making it very affordable to the masses.
In this project, you gain valuable experience learning about the stock market. You will do paper trades (pretend trades as opposed to trading with real money). We hope this will give you a better understanding and insight into the stock market, and make you excited about saving and investing!