|
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 | 
