There are three parts due in the stock market investment project. (1) Stock Market Update #1 is valued at 20 points. (2) Stock Market Update #2 is valued at 15 points. (3) The Final Stock Market Report is valued at 40 points. Part 1 - Building your own portfolio. Select five companies for the purpose of tracking the stock market, conducting research on the companies, and preparing company reports. You will be investing in common stocks only, but you will be able to select from two national stock exchanges, the New York Stock Exchange (NYSE), the American Stock Exchange (AMEX) and the NASDAQ. On your starting date, make a simulated $50,000 purchase in the common stock of your five selected companies (Approximately $10,000 each; you have to buy whole shares and not a fraction of a share). To determine purchase price, check one of the business websites suggested above or in the External Links section of Blackboard. The Money section of USA Today or the Business section of The Washington Post is a good source for tracking stock market quotes. Please provide the following information in your stock market update: 1. Name of company. 2. Stock/Trading symbol. 3. Date and last price on the date of purchase. 4. Number of shares purchased. 5. Total purchase (in dollars) 6. A brief description of the company including its size, products and services. 7. Reasons for your selection (for example, you can back up your personal opinions with financial facts such as unique products or services, strong competitive advantage, high earning growth rate, strong buy rating from analysts etc.). You will make your purchases according to the following rules: a. Your brokerage fees will be $10 every time you buy or sell one company's stock. b. You will ignore all taxes and dividends, if any. c. From Week 2 to Week 10, you can change your mind and sell shares in one or two companies at most. In this case, you have to sell all shares and reinvest your proceeds in one or two new companies. In other words, you will always have five companies in your portfolio. Part 2 - Investing in an Index Fund (S&P 500) and shorting (QQQQ). Simulate a $50,000 purchase of SPIDERS (Trading symbol SPY). SPIDERS stands for shares of an Exchange Traded Fund traded in the AMEX. SPIDERS mimics the Standard & Poor 500 Index, a broad market index. In other words, if you buy a share of SPIDERS, you buy shares in all 500 companies which make up the index. A share of SPIDERS is usually 1/10th of the S&P 500 Index. If the S&P 500 Index is 825, then a share of SPIDERS is usually traded at $82.50 a share. To find the share price of SPIDERS, go to the Business section of The Washington Post or other financial newspapers and look up Exchange Traded Funds. You can also go to any financial website to check the price of SPIDERS. For example, go tohttp://www.bigcharts.com, type SPY in the blank box, then click Quick Chart. This strategy will work well during the "bull" market. When the stock market goes up, you gain the average of the market return. This strategy worked well during the long bull market from 1983 to around March 2000. On Friday of the twelfth week from your starting date, sell all shares of SPIDERS. Short-sellers are investors who borrow stock from a broker and sell it in the market, betting that the stock price will fall so they can buy it back at a lower price. This strategy works well during the bear market. The bear market started in March 2000. For a period of slightly more than 2= years, all major market indexes lost considerable ground. The Dow Jones Industrial Average dropped from 11,500 to around 7,800, the S&P 500 dropped from more than 1,500 to around 800, and the NASDAQ Composite Index dropped from more than 5,000 to around 1,200. On the second week of your starting date, deposit a simulated $50,000 in a broker's account. Borrow stock from the broker and short-sell the "Q." Q stands for QQQQ, the trading symbol of shares of an Exchange Traded Fund traded in the AMEX. QQQQ mimics shares in the NASDAQ 100 Index. On the tenth week from your starting date, buy back all shares of QQQQ. If the price of QQQQ goes down, you make a profit by selling high and buying low. During less than 10 months in the year 2002, some ultra short mutual funds employed this strategy successfully. For example, ProFunds: Ultra Short OTC investment fund gained 136%. However, shorting can be a risky investing strategy because unlike buying stock, where you cannot lose more money than you put in, short-selling losses can be unlimited if the borrowed stock keeps rising. Leo Guzman, president of Guzman & Company, a brokerage firm, warns shorting should be left for the professional investors. He says retail investors have to remember that professionals have dedicated personnel to borrow securities from, but retail investors do not have that luxury. "The stock can be called at any time, especially if it is not very liquid." When the stock is called, you have to buy back the borrowed shares. You can check the price of QQQQ the same way you check the price of SPIDERS. In the newspapers such as The Washington Post, the QQQQ is reported as Nasd100Tr. Record the dates of buying and selling, number of shares, price per share, total purchases and sales. For the purpose of computing gain or loss, use $10 total for the broker's commissions and the fund's management fee. One deliverable only- Final stock market report. The report must briefly include each company's name, trading symbol, location, mission, product/service line, their competitors, revenues and earnings information, stock exchange traded on, and any current activities that you think may make your selected companies a good or bad investment in the future. In your opinion, which of the five to seven companies you selected are good investments for the short-term and for the long-term. Your report should also include share price when you start tracking the stock, number of shares purchased, value of investment on date sold, and profit or loss on the investment. You should prepare a summary report using the form below: Purchase Price Number of Shares Total Selling Price Total Dividends Net Company Symbol Per Share Purchased Purchase amt Per Share Selling Amt Commission Collected Gain/Loss