6BEO - Take stock of the stock market

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6BEO - Take stock of the stock market

• Take a look at each image and explain how it is related to the stock market.
• What else do you know about the stock market?
• Do you know anyone who invests in it? What do you think the biggest risks are?
• Would you ever invest in shares? Why (not)?

GameStop’s craze has caught the eye of a new set of investors

Watch trailer & read article p.30-32

Explain briefly what the article is about.

Read the article again + answer Q's (p.30-33)

Why was there such a sudden interest in GameStop stock by children and teenagers in 2021?

• Back in 2021 there was a rush on GameStop stock and it got a lot of attention on social media. Children and teenagers were confronted with it and saw it as a way to instant riches. Because of this, a lot of children and teenagers started taking an interest in the stock market.

GameStop stock was an example of a “meme stock”. What are meme stocks? Look up the term online if you don’t know.

• Normally, stock prices go up because of a company’s positive performance. A meme stock gets their popularity from a hype that is created by amateur investors on social media and online platforms such as Reddit.

What is a custodial account?

• A custodial account is an investment account opened in a minor’s name by a parent or guardian. The children can participate in the decisions, but the guardian is ultimately responsible for any trades.

What happens to the money in such an account?

• The underaged children or teenagers receive the money in a custodial account as soon as they turn 18, or in some US states 21. 

Read the article again + answer Q's (p.30-33)

What is Early? What is so special about it?

• Early is a product that was launched by Acorns and which was specifically aimed at parents and guardians who could set up custodial accounts for their children. It has a kid-friendly design but their accounts can’t be invested in individual stocks and are UGMA and UTMA accounts, which means they can be used for expenses such as higher education. They are also turned over to the minors when they reach an appropriate age.

The article mentions ‘a short squeeze’. Go online and look up the concept.

• What happened to GameStop stocks was a short squeeze, which is an unusual condition that triggers rapidly rising prices in a stock. It occurs when there is a significant amount of short sellers, meaning that lots of investors are betting on the price of the stock falling. This actually causes the price of the stock to suddenly go up.

What is simulated training?

• Simulated training can be done manually or with a virtual stock market app and you simulate buying and selling stocks on the stock market. It eliminates the risk and reward of using real money and it is a good way to practise before starting to use real money.

UGMA or UTMA?

UTMA (Uniform Transfers to Minors Act) and UGMA (Uniform Gifts to Minors Act) are both types of custodial accounts used to transfer assets to minors, but they have some key differences:

Types of assets:

UGMA accounts can hold financial assets like cash, stocks, bonds, and mutual funds.

UTMA accounts can hold everything UGMA allows plus additional assets like real estate, fine art, and even patents.

State Differences:

UGMA is available in all states.

UTMA is also available in most states but with some variations in rules.

Age of Termination:

With UGMA, the minor gains full control of the assets at 18 (or 21 in some states).

With UTMA, the transfer age is typically 21 (or even up to 25 in some states, depending on local laws).

Use of funds:

In both cases, the funds must be used for the minor’s benefit, but there are no restrictions like a 529 Plan (which is strictly for education).

Once the minor reaches the required age, they can use the money however they want.

Which one should you choose?

If you just want to transfer stocks or cash, a UGMA might be enough.

If you want more flexibility to include property, cars, or other assets, UTMA is the better choice.

Match word & definition

1. h
2. d
3. l
4. b
5. i
6. g
7. j
8. k
9. a
10. e
11. c
12. f

Read the texts and translate the words in brackets (35)

1. a stockbroker
2. investors
3. invest
4. blue-chip companies
5. portfolios
6. a shareholder
7. shares
8. venture capital
9. stock market
10. rig the market
11. investment
12. brokerage account
    

• Do you recognise the event that is shown in the photographs?
  
• When in the first half of the 20th century did this event take place?
  
• Briefly described what happened then. Two effects this event had on the economy?

How the stock market works...

Watch the video and answer the questions. 

Who unknowingly invented the world’s first stock market? Explain what happened in your own words.

• In the 1600s the Dutch E.I.C. traded goods around the globe. To fund their trips, the company turned to private citizens who invested money in the ships in return for a share of the profits. This allowed the company to expand their trade and make even more money.

What does IPO stand for? How does a company obtain it?

• When a new company is created, they speak to investors who will get the first chance of investing. Their money is then used to sponsor the company’s IPO or Initial Public Offering, which launches the company on the official public market.

What happens afterwards?

• As soon as the company is launched, any person or company who believes the launched company could be profitable might buy a stock.

What is the money of these new shareholders used for?

• Their investment is used to make the company grow and become more successful.

What happens if demand for a company’s stock increases?

• If demands for stock increases, so does their price. This increases the cost for prospective buyers but also raises the value of the stocks of the company the people already own.

What happens if demand for a company’s stock increases?

• If demands for stock increase, so does their price. This increases the cost for prospective buyers but also raises the value of the stocks of the company.

What about the other way around? What happens if a company seems less profitable.

• If a company seems less profitable, people will start selling their stocks to cut their losses. The price of the stocks will go down and investors might lose a lot of money.

What factors influence the seesaw of supply and demand?

• Companies are always under the influence of unavoidable market forces. Investors might also be worried about changes in leadership, bad publicity or new laws and trade policies. Sometimes investors are also willing to sell profitable stock.

How has the internet changed things?

• Buying and selling stocks used to be reserved for the rich and powerful. Thanks to the internet, everyone can decide to do some research and invest in companies on the stock market.

The New York Stock Exchange

Watch the video and use the appropriate information to write a reply to Tyler’s Instagram post.

Investopedia

• Go to https://www.investopedia.com/ and create a free account. Take a look at the environment and spend some time at home trying out the simulated stock market. Give it a week. Don’t spend hours on end, but rather spend a small amount of time each day buying and selling stock.
• Write down some of your findings. Is the environment user-friendly? What are your thoughts on the stock market? Which stock did you invest in? Were you successful or did you lose a huge amount of money?
• Work in groups of three and talk to your classmates about your experience on the website. Use the questions above as guidelines, but feel free to discuss any aspect of the virtual stock market you deem fit.

www.investopedia.com