Tag Archives: stocks

Jan 15 2022

Environmental, Social and Governance (ESG) Investing

An increasing number of investors are seeking a more ethical portfolio with an emphasis on socially responsible and sustainable investing. An emerging trend is environmental, social and governance (ESG) investing, with these factors used to evaluate the financial return and overall impact. 

The ESG score measures how investments and companies perform in these categories:

  • Environmental – carbon emissions, air and water pollution, deforestation, green energy initiatives, waste management, water usage
  • Social – employee gender and diversity, data security, customer satisfaction, company sexual harassment policies, human rights at home and around the world, fair labor practices
  • Governance – diversity of board members, political contributions, executive pay, large-scale lawsuits, internal corruption, lobbying

Many view “sustainable” investing as very vague. The ESG criteria hopes to provide a grading of investments that clarifies what sustainable involves. ESG scores are calculated using different methods. Some ratings are created by using data collected from company disclosures and government, academic and NGO databases. Other scores are developed with self-reported data from participating companies.

Recent benefits of ESG investing include higher returns and a lower downside risk than traditional funds and conventional investments.  To start investing, you can search on your own to identify an ESG fund or an individual stock with a high ESG score that fits your investment beliefs and goals.  Investors can also use a robo-advisor to guide their ESG investment choices.

For additional information on ESG investing, click on the following links:

Article #1

Article #2

Article #3

Teaching Suggestions

  • Have students search online to identify ESG funds or companies they might consider for their investment portfolio.
  • Have students talk with others to obtain the level of interest for ESG investing among potential investors of various ages.

Discussion Questions 

  1. What aspects of ESG investing do you find attractive?  What are your concerns?
  2. What concerns might be associated with methods used to create ESG scores?
Jan 7 2017

5 Things You Need to Know About Dow 20,000

“The Dow’s ongoing flirtation with the 20,000 market milestone is the talk of Wall Street.”

The 120-year-old Dow Jones Industrial Average consists of 30-blue chip stocks that make up arguably the world’s best-known stock index.  At the time of this article and this blog post, the average is trading at near record levels and threatening the break the 20,000 mark.  So how important is breaking the 20,000 barrier?  Consider the following five questions.

  1. Why, with the Dow so Close to 20,000, can’t it get over the hump?
  2. Is Dow 20,000 a big deal?
  3. Does a new milestone mark a new stage of the bull run we’ve seen?
  4. Will Dow 20,000 improve the mood of investors?
  5. Is Dow 20,000 a reason to buy?

Adam Shell, in this USA Today article, provides some answers to the above 5 questions that can help investors keep a more balanced perspective on what a Dow 20,000 really means for both individual investors and the economy.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • With so much in the news about the stock market, record high values, a possible correction or pullback in market values, the Federal Reserve’s interest rate changes, and other economic factors, you may want to use this article and this blog post to explain why the Dow Jones Industrial Average is just one of many factors that affect investors, the market, and the economy.

Discussion Questions

  1. Since the Dow Jones Industrial Average is in record territory, is this a good time to invest in the stock market? Explain your answer.
  2. At the time you answer this question, what is the current Dow Jones Industrial Average? Has it gone up or down in the last six months, and what affect has the change had on the stock market and the economy?
Feb 13 2016

Robo Investment Advice

Automated investment services are expanding.  Many financial service companies are offering “robo advice,” in which investors complete an online questionnaire and a computer program generates and monitors a portfolio of funds.  Robo-advisers are also designed to automatically rebalance a portfolio based on changes in the market as well as any changes in the amounts allocated to certain investments.

With many investors already making their own trades online, investment companies believe that robo advisors have these additional benefits:

  • lower costs for obtaining advice and conducting transactions.
  • an ability to adjust the portfolio for tax purposes by selling shares that have declined to offset gains.
  • an easier investment approach for younger clients with less-complicated financial lives.

 

Some will be concerned about automated portfolio management.  Human advisors will still be available to address issues about mortgages, insurance, estate planning, retirement income, and other topics that robo-advisers are not yet equipped to answer.

For additional information on robo advice, click on the following articles:

Article #1
Article #2
Article #3

Teaching Suggestions

  • Have students ask people to describe the process they use to select investments.
  • Have students create a framework to analyze when using robo advice might be appropriate for an investor.

Discussion Questions 

  1. What are benefits and drawbacks of robo advice?
  2. What factors might be considered when using robo advice for investment decisions?

 

Nov 21 2015

Investors Face Quagmire of Falling Earnings, Higher Rates

“Investors may wade into unknown territory next month as the Federal Reserve readies the first rate hike in nearly a decade amid a corporate earnings recession.”

In this Reuters article, Rodrigo Campos explores the following factors that can be used to predict what could happen in the financial markets in the near future.  Consider the following

  1. The Federal Reserve may raise interest rates in December–the first increase in nearly a decade.
  2. Earnings for the third quarter of 2015 for 90 percent of the corporations listed in the Standard & Poor 500 are lower than expected.
  3. The decline in corporate revenues has been steeper than the drop in earnings.

As pointed out in this article, rising interest rates are always a negative factor for stocks.  Since 2013, every time the Fed has indicated a rate hike is on the horizon, the stock market throws a tantrum, and the Fed decides not to raise rates.  At the time of this blog, it is impossible to know if the Fed will raise interest rates in December–especially with corporate earnings on the decline.  Even the experts are not sure what will happen between now and the end of the year.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Discuss the relationship between corporate revenues, earnings, and stock prices.
  • Explain the affect an increase in interest rates could have on the financial markets and consumers.
  • Explore possible investments for a down market and a market on the upswing.

Discussion Questions

  1. What is the relationship between corporate revenues, corporate earnings, and stock prices?
  2. What affect would a Fed decision to raise or lower interest rates have on the financial markets? On consumers?
  3. Assume you have $375,000 invested in a diversified retirement portfolio. Corporate stocks in your portfolio include utilities, technology, energy, and consumer stables–some of which have reported lower earnings for the last two quarters.  You also assume the Fed will raise interest rates in December.  Would you sell some or all of your holdings?  If you decide to sell, how would you determine which securities to sell?  Explain your answer.
Sep 5 2015

A Sick Market Is Set to Be Tested Further

“Even after bouncing hard off last week’s lows, the stock market has appeared unwell.”

Based on current information from August 2015, Michael Santoli, the author of this article, explains some of the “big” problems that are affecting the stock market and the nation’s economy.  He cites the following major factors that account for the current downward spiral of the U.S. financial markets.

  • Economic slowdown in China
  • More realistic expectations for future economic growth
  • Lower forecasts for corporate earnings growth
  • Uncertainty about the Federal Reserve’s decisions that could impact interest rates
  • The political climate leading up to the 2016 presidential election

One final point:  The month of September is typically the worst month of the year for stocks.  September 2015 should be an interesting month to say the least–get ready and hang on for what promises to be a rough ride.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Point out that economic growth and the financial markets can go up or go down depending on factors like those described in this article. If you sell, what would you do with your money?
  • Stress that a long-term investment program that can even out the ups and downs in the market.

Discussion Questions

Although the stock market has been on the upswing for the last few years, the summer of 2015 has been a rough “ride” for most investors.

  1. If you are an investor and expect that it is time for a correction or downturn in the market, what would you sell some or all of your investments? If you sell, what would you do with the money?
  2. Some financial experts argue that a correction can be a buying opportunity to purchase quality stocks at lower prices. Do you agree?  Explain your answer.
Oct 18 2014

The Perils of Penny Stocks

“The best way to avoid penny stock scams is to do independent research.” 

This article underscores the importance of researching penny stocks before investing.  Too often, the lure of “big” profits encourages people to invest without researching penny stocks.  Simply put, they don’t do their homework.

According to this article, a good place to obtain research information about penny stocks is the Security and Exchange Commission website (www.sec.gov).  By examining a company’s 10-K annual report, 10-Q quarterly report, and Form 8-K filings, in which companies report material events.

The article also warns investors about email promotions about penny stocks that are more hype than reality.  For example, Paul Allen, a 65-year old retiree from Boston,  received a flood of emails about a company called Vapor Hub International suggesting that shares of the e-cigarette company were about to take off.  He invested and quickly lost 80 percent of his investment.  And there are many more examples where investors–especially investors with limited funds and little experience buying and selling stock–often lose all or a large portion of their investment.

For more information go to http://www.kiplinger.com/article/investing/T052-C008-S002-the-perils-of-penny-stocks.html

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Remind students that there is no substitute for research when picking any stock–especially penny stocks issued by small companies without a proven track record.
  • Tell students to remember the old adage “if it sounds too good to be true, it probably isn’t true.”

Discussion Questions

  1. Most investors know the risks involved when they invest in penny stocks. Still, they invest their money.  Why do you think they choose penny stocks?
  2. Assume that you are considering an investment in Vapor Hub International. What information could be used to evaluate this penny stock?  Where would you get this information?
Jun 14 2014

Apple and Google Show that Stock Splits Are Cool Again

Now that Apple and Google split their stock, expect the thin pool of high-priced stocks to follow suit.

Can a stock’s price be “too high?” Good question. When Google split its stock in 2014, the share price had broken through the $1,000 ceiling. After a 2-for-1 stock split, Google’s price per share dropped and left only four stocks trading for more than $1,000 a share.

Most companies split their stock to lower the share price which will “hopefully” make their stock more attractive to investors. In reality, many investors prefer to buy 100 shares of a $20 stock rather than buy 20 shares of a $100 stock. These same investors believe a stock has more potential for a dollar increase if the share price is lower rather than higher.

This article also points out a basic reason why investors don’t profit from the actual stock split. If an investor, for example, owned 100 shares of Apple stock priced at $630 on the day before the recent 7-for-1 split, the investor would own 700 shares of stock after the split, but the price drops to $90 per share. A $63,000 investment before the split is still worth $63,000 after the split.

For more information go to

http://www.dailyfinance.com/2014/04/29/apple-google-stock-splits-cool-again/

Teaching Suggestions

You may want to use the information in this blog post and the original article to:

  • Discuss why companies split their stock.
  • Explain the effect of a stock split on a company’s market capitalization. (Market capitalization = a company’s share price x the number of shares outstanding.)

Discussion Questions

1. Why do corporations split their stock?

2. Once a company’s stock does split, the price may increase or decrease in value. After the 7-for-1 stock split, what happened to the share price of Apple stock?

3. Besides “possible” increase in value caused by a stock split, what other factors account for an increase or decrease in a company’s stock price?

Apr 20 2014

Stock Investing at Lower Risk: A Guide for Beginners

Here’s a simple breakdown of key points for investing in stocks

For the beginner, stock investing can seem like an uncharted mine field because of terms, regulations, and fear. This article provides five important pieces of information that can help students understand stocks and become better investors. Here goes:

  1. Owning stock is owning a company. As an owner, you have rights and responsibilities.
  2. Stocks grow two ways because they can increase in value and they pay dividends.
  3. Stocks rise and fall in value. Keep in mind what goes up can come down.
  4. You will pay taxes unless your stocks are held inside some type of tax deferred retirement account.
  5. Stocks can be volatile. Volatility is different than the typical rise and fall in price described above because volatility occurs when an investment has major price swings in a short period of time.

For more information go to

http://www.forbes.com/sites/mitchelltuchman/2013/08/09/stock-investing-at-lower-risk-a-guide-for-beginners/

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Provide basic information to students who are studying stock for the first time.
  • Help students understand the process of stock investing.
  • Compare stocks with savings accounts, certificates of deposit, bonds, mutual funds, and other investment alternatives.

Discussion Questions

  1. How can you profit from a stock investment?
  2. What are the risks associated with stock investments?
  3. How can you avoid paying taxes on stock and other investment alternatives?