Stock Market Help Please?

Question

In my civics class we have to invest "imaginary" money in the stock market. We get 10,000 dollars and a maximum of 5 companies to invest in. My questions are: 1) what companies do you think would be the best to invest in? 2) how do i put extra monet in a passbook savings account?

Answer 1

Buy one stock with all of your $10,000.00 invested in this one stock.  You do not have enough "play money" to invest in more than one stock.   I would consider Monolithic Power Systems (symbol MPWR). While your classmates and teacher may question a lack of diversification in your holdings,  you can defend your choice by observing that diversifcation is a "hedge against ignorance."   This company,  Monolithic, has a return on equity of 22 percent and no debt.   It is a chipmaker.  I am putting money there in the morning because U.S. tech stocks are ready to grow.    

Answer 2

Depends on how long your investment horizon is. If it's for a class I would assume it's pretty short timeframe. If you are looking at 4 months or so, I would choose something like USB as a financial rebound. If you looking at a timeframe a lot shorter than that, well.... throw darts.

BTW, dellptn (below) recommended 5 good ones. I agree with those also.

Answer 3

if you want to really surprise your teacher (and probably get either an A or F depending on how nice s/he is):

consider options (for FAKE trading, options are great - they're not so great for real money, tho).

buy LCC (US Air) stock, and sell January 2009 $10 calls - you'll have a profit if LCC ends up anywhere above $6.34.  Best case scenario here would be a 58% gain if LCC is above $10.00 (it's at $9.39 right now).

I would buy 1000 shares of LCC stock (for $9,390), and sell 1000 January 2009 $10 calls (for $3,050).  This would cost you $6,340.  You would stand to make a best-case scenario profit of 57.73%, or $3,660.  Again, you would only lose money if LCC fell below $6.34 per share (in other words, LCC would have to drop more than 32% for you to lose money).

With the rest of the money, I'd say to buy 720 shares of MBI (for $6,062.40) and sell January 2010 $10 calls (for $2,448) at a total cost of $3,614.40.  Best-case scenario here would be a total gain of $3,585.60, or about 99%.  Here you would make money if MBI stays above $5.02 (meaning that it would have to drop about 40% for you to lose money here).

Especially if this is a contest, you should hopefully win by quite a large margin, and score an A+ in the process.

Answer 4

5 trades: long(buy) AMZN, short(bet against) USO(United States Oil ETF), long AAPL, long FTO, long MSFT.