stock exchange assignment pdf

LESSONS LEARNED:

DIRECTIONS:

This lesson plan may be used by anyone, without any prior stock market or investing knowledge.  In addition, we are available to answer any questions you may have either when beginning this lesson, or questions you may have during this exercise.

The time involved will vary greatly depending on how much time you wish to spend on this material, as well as the age level of your students.  This may vary from 1 week to an entire school year.  We recommend continuing this exercise throughout an entire school year, since this will continue to make students interested in current events while they learn important skills.

Typical stock market simulations try to make the simulation a "contest" with the winner the one who has the largest portfolio and the end of the exercise.  This is unfortunate since it encourages poor investment decisions such as rapid trading and taking large risks.  Unlike typical stock market simulations, the goal here is to learn and understand basic investing principles, current events, the basics of how the economy works, money management skills, basic math and reading comprehension, writing skills, etc.

Here are the steps for your own stock market simulation:

LESSON 1:  Introductory Information

Students will learn what is a stock, and be able to look up basic stock market information.

WHAT IS THE STOCK MARKET VIDEO LESSON

Have students watch the video lesson "What is the Stock Market?" Discuss with them what the stock market is and why it is important to the economy, companies, and investors.

What is the Stock Market?

A video lesson introducing students to the Stock market. The stock market and Wall Street are two terms used in the United States to refer to all aspects of securities trading including stock exchanges that list shares of public companies, or stocks, and other markets that trade securities.

WHAT ARE STOCKS VIDEO LESSON

Have students watch the video lesson "What are Stocks?" Discuss with them why companies issue stock and why people buy stocks. What are the benefits of owning stock?

What are Stocks?

A video lesson introducing students to the basics of stocks. How do they work, and why do investors purchase stock shares? Learn about why companies issue stocks, stock certificates, the benefits and risks of being a stock shareholder, and the stock market. Investment, capital appreciation, dividends, voting rights, and limited liability of stocks.

Stocks and the Stock Market

Reading a Stock Market Table

LESSON 2:  Introducing the simulation:

Here is our suggested guidelines.  This simulation may either be done in groups or individually. Feel free to adjust and improvise as you may feel appropriate:

Each group (or individual) begins with $10,000.  For younger students, use $1000.  With this money, the group (or individual) must spend at least $9,500 ($900 for younger students) on stocks (including commissions).  The remainder may be kept in the individuals checking account.

Each group must invest in 5 stocks.  Or you may set a minimum of 3 stocks, and a maximum of 6 stocks.  If you are working with a younger group, you may want to set the number to 3 stocks for each group.

A 3% commission is to be paid for every stock transaction (buying or selling a stock).  For younger students, either use a 1% commission, or no commission.

Each group should keep a journal of their activities and thoughts, and a transaction history of all buys and sells.  In addition, the group is responsible for keeping track of the current portfolio's market value (plus the cash in the checking account).

The time line for this activity may be from 1 week, to multiple weeks depending on how much time you wish to spend on this subject.  We suggest continuing this activity throughout the ENTIRE school year, since it will help reinforce longer-term investment skills.  In addition, this will keep students interested in current economic events while reinforcing fundamental skills.

On the last day (as determined by the instructor) students will sell their stocks and report on their portfolio's value and what they learned during the activity.

LESSON 3: LESSON CHOOSING COMPANIES TO INVEST IN

If this is a group activity, the students should get together in their groups.

For choosing stocks, we recommend that students choose companies with products or services they are familiar with.  This may include companies that their families or friends work for, or are familiar with.  This will help make the learning process more interesting and understandable.  In addition, some basic "Fundamental analysis" may be performed.  You may start this lesson by asking students the question what companies are they familiar with, and writing the answers on the board.  Then students may choose from those companies or other companies they think of. 

For younger students, you may want to suggest companies and let the students choose.  For older students, you may require additional fundamental analysis, such as PE analysis, or making sure they create a diversified portfolio.  In addition, students should write their reasoning and analysis in their journal.

Pick some of the stocks chosen by the students to create an example "portfolio".  Choose 3-5 stocks and list their name and stock ticker on the board (use a newspaper or computer to get the stock information).  List the closing price as well.  Then ask the students how much of each stock they should purchase.  Total the amounts and see how close it comes to the $10000 budgeted.  Then ask what should be done to get over $9500 but under $10000.   Then either have them complete this exercise individually, or do it as a group.

The following links will be of assistance.  Note that simply choosing companies that they are familiar with is most appropriate for younger students.  Older students may also work on some of the following activities.  Optionally, you may also include some of these lessons later so students can analyze their investments.

Choosing which company's stock to invest in.

LESSON 4: PURCHASING STOCKS

Students should fill in their own stock portfolio transaction form, including calculating the transactions.

Buying shares of stock.

LESSON 5: MONITORING THE PORTFOLIO

Weekly, students should track their investments.

Monitoring and reporting stock portfolio

worksheet to track prices.

Do weekly reporting.  Stock price and portfolio performance.  News items related to the stock.  Economic items related to the portfolio and the stock market.  Any correlation between the news and the stock or portfolio?  Record this in the journal and create weekly performance sheets.

LESSON 6: SELLING STOCKS

Selling shares of stock

CONTINUATION OF LESSONS

Lessons 3-6 continue till the end of the simulation.  Once the simulation is complete, students should sell all stocks in their portfolio.  A class presentation should be made at this time regarding what each group learned, and the results of their investments.

OTHER OPTIONAL LESSONS:

Basic Finance and Economics

Once you have learned about stocks, now go on to learn basic finance and economics.

Basic finance and economics provide the foundation for understanding stocks, business, and the economy.  Use these lessons to teach basic finance and economic principles.

ASK A QUESTION

Are you new to stocks and investing?  We are here to help you with any question you may have.  If you are just learning about stocks, we are happy to help you along the way to teaching and learning about stocks.

OTHER SUGGESTED IDEAS:

Have a investment advisor visit the class for question and answers.

Take a trip to an investment advisor office, brokerage firm, or stock market.

Have students do a research report on some aspect of the stock market.  For example, on the stock market crash of the 1920s, history of the New York Stock exchange, etc.

Have you used this lesson in your classroom?  Then we would appreciate your feedback and any suggestions you may have.  Simply click on the suggestions link on the top of the page. Your input helps us to continue to build new lessons, lesson plans, and worksheets.  Thank you.

• Stock Exchange

Have you heard of the Bombay Stock Exchange (BSE)? Or perhaps the NSE? Do you closely follow the Sensex? But how much do we actually understand about the stock exchange and its functioning? Let us take a closer look at the meaning, functioning and the importance of the Stock Exchange.

Suggested Videos

The secondary tier of the capital market is what we call the stock market or the stock exchange. The stock exchange is a virtual market where buyers and sellers trade in existing securities. It is a market hosted by an institute or any such government body where shares, stocks , debentures , bonds, futures, options, etc are traded.

A stock exchange is a meeting place for buyers and sellers. These can be brokers, agents, individuals. The price of the commodity is decided by the rules of demand and supply. In India, the most prominent stock exchange is the Bombay Stock Exchange . There are a total of twenty-one stock exchanges in India.

Functions of the Stock Exchange

• Liquidity and Marketability : One of the main drawing factors of the stock exchange is that it enables high liquidity . The securities can be sold at a moment’s notice and be converted to cash. It is a continuous market and the investors can divest and reinvest with ease as per their wishes.
• Price Determination : In a secondary market, the only way to determine the price of securities in via the rules of supply and demand. A stock exchange enables this process via constant valuation of all the securities. Such prices of shares of various companies can be tracked via the index we call the Sensex.
• Safety : The government strictly governs and regulates the stock exchanges. In the case of the BSE, the Securities Board of India is the governing body. All transactions occur within the legal framework. This provides the investor with assurances and a safe place to transact in securities.
• Contribution to the Economy : As we know the stock exchange deals in already-issued securities. But these securities are continuously sold and resold and so on. This allows the funds to be mobilized and channelized instead of sitting idle. This boosts the economy .
• Spreading of Equity : The stock exchange ensures wider ownership of securities. It actually educates the public about the safety and the benefits of investing in the stock market. It ensures a better quality of transactions and smooth functioning. The idea is to get more public investors and spread the ownership of securities for the benefit of everyone.
• Speculation : One often hears that the stock exchange is a speculative market. And while this is true, the speculation is kept within the legal framework. For the stake of liquidity and price determination , a healthy dose of speculative trading is necessary, and the stock exchange provides us with such a platform.

Trading and Settlement Procedure

1] selecting a broker or sub-broker.

When a person wishes to trade in the stock market, it cannot do so in his/her individual capacity. The transactions can only occur through a broker or a sub-broker. So according to one’s requirement, a broker must be appointed.

Now such a broker can be an individual or a partnership or a company or a financial institution (like banks). They must be registered under SEBI. Once such a broker is appointed you can buy/sell shares on the stock exchange.

2] Opening a Demat Account

Since the reforms, all securities are now in electronic format. There are no issues of physical shares/securities anymore. So an investor must open a dematerialized account, i.e. a Demat account to hold and trade in such electronic securities.

So you or your broker will open a Demat account with the depository participant. Currently, in India, there are two depository participants, namely Central Depository Services Ltd. (CDSL) and National Depository Services Ltd. (NDSL).

3] Placing Orders

And then the investor will actually place an order to buy or sell shares. The order will be placed with his broker, or the individual can transact online if the broker provides such services. One thing of essential importance is that the order /instructions should be very clear. Example: Buy 100 shares of XYZ Co. for a price of Rs. 140/- or less.

Then the broker will act according to your transactions and place an order for the shares at the price mentioned or an even better price if available. The broker will issue an order confirmation slip to the investor.

4] Execution of the Order

Once the broker receives the order from the investor, he executes it. Within 24 hours of this, the broker must issue a Contract Note. This document contains all the information about the transactions, like the number of shares transacted, the price, date and time of the transaction, brokerage amount, etc.

Contract Note is an important document. In the case of a legal dispute, it is evidence of the transaction. It also contains the Unique Order Code assigned to it by the stock exchange.

5] Settlement

Here the actual securities are transferred from the buyer to the seller. And the funds will also be transferred. Here too the broker will deal with the transfer. There are two types of settlements,

• On the Spot settlement: Here we exchange the funds immediately and the settlement follows the T+2 pattern. So a transaction occurring on Monday will be settled by Wednesday (by the second working day)
• Forward Settlement: Simply means both parties have decided the settlement will take place on some future date. It can be T+% or T+9 etc.

Know more about Money Market

Solved Question for You

Q: Which of the following was Asia’s first stock exchange?

• Bombay Stock Exchange
• National Stock Exchange
• Shanghai Stock Exchange
• None of the above

Ans: The correct option is A. Bombay Stock Exchange was established in 1875. It is India’s premier stock exchange and even has a global presence in the world economy. Around more than 5000 national and international companies are listed on the BSE.

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