|
LESSON: STOCK MARKET PIE . . . . GRANDMA HELPS EMILY MAKE A MILLION
Lesson Summary:
As Grandma makes an apple pie with her granddaughter, Emily, she explains all the ins and outs of stocks and the stock market. This cleverly illustrated and highly informative book is perfect for helping students to learn about a complicated subject in an amusing and motivating way. At the end, Emily learns about the “magic” of compounding – how the value of an investment of just $5 a week (assuming a 7.5% rate of growth) will earn $39,503 in 30 years! This is a powerful way to show students the power of saving regularly.
Concept: Market (Stock Market)
Definition: an organized marketplace where shares of stock are bought and sold. An example is the New York Stock Exchange.
Comprehension Questions:
The are dozens of questions that you could ask your students after reading this book. Below are some examples:
What is a stock?
Stock represents ownership in a company. Stock is issued in shares. (This is different from a bond, which is a security representing money loaned to a company. A bond is essentially an IOU.)
Why do companies issue stock?
Companies issue shares of stock to raise money (financial capital) for starting or expanding business operations.
In the story, what did the different kinds of “pies” represent?
Different kinds of companies
How do “pies” grow – that is, how do companies become more valuable and earn money for shareholders?
Through
1. distribution of dividends (company profits that are distributed to shareholders) and
2. the value of the shares increasing because the company is growing and earning more profits
In the United States, what are the three main stock markets?
New York Stock Exchange, American Stock Exchange, NASDAQ (National Association of Securities Dealers Automated Quotations)
Since 1920, how much have investments in stocks earned, on average?
10%
Does this mean that you are guaranteed to earn 10% if you invest in stocks?
NO! You could invest in a company that goes bankrupt and lose all your money! Or, you could invest in a future “Microsoft” and make much more than 10%. The best way to ensure a good long term return on your investment is to invest for the long run, and to diversify your stock holdings, which can be done most easily by investing in mutual funds.
What is the Dow Jones Industrial Average?
Measuring only 30 leading companies, it is the most famous and longest-running stock index. Another well know index is the Standard & Poor’s 500.
What is a Bull Market? A Bear Market?
A Bull Market is a nickname for a market where stocks rise consistently over a period of time. A Bear Market is when stocks fall consistently over a period of time.
How much money would Emily earn if she invested only $5 per week for 30 years, at 7.5% rate of return?
$39,503!
What lesson can we learn from Emily’s investment example above?
Invest regularly over a long period of time.
What is the Rule of 72?
Divide 72 by the rate of return on your investment, and the answer is how long it will take your investment to double!
Other Concepts: Investing, Saving
|
