My ROPES project was a Challenge Choice Practical Skill that I really enjoyed working on! The goal of my project was to learn how to save and invest my money for college. There are many different ways to invest money. I chose two different ways: investing my money in a bank savings account and investing my money in the stock market. I wanted to figure out which investment would make more money.

To compare investments, I decided I would pretend to put $1,000 in the bank and $1,000 in the stock market and track them for one month exactly. At the end of the month, I compared the total earnings from the bank account and the total earnings from my stocks to figure out which investment made more money. I understand that this was an artificial experiment since I was only investing for four weeks. When you invest money in the stock market or the bank you usually invest for a long period of time.

When I began I didn’t know what to choose for a project. But then one day when I was brainstorming ideas, I heard my Dad talking about the stock market. I became interested and wanted to learn more about it. I am saving money for college and I thought this might be another way to make money for my education. Plus, I thought the stock market sounded exciting. But just learning about the stock market didn’t seem like enough so I decided to compare money in the stock market to money in the bank. I made my idea fit all the requirements for ROPES and then I was off to work!

This project ended up teaching me many things. 1) I learned what investing is and that you can earn a lot of money and lose a lot of money, depending on your investment. This made me understand I must be careful with both my money and other people’s money in the future. 2) I learned how the stock market and banks work. I also found out that there is risk involved in the stock market because prices constantly go up and down. But banks are safe since you are guaranteed to make at least a little bit of money because the bank pays interest to borrow your money. 3) I learned it is a good idea to put your money in different investments, like both the bank and the stock market, because then you have one risky investment and one safe investment. If you lose your money in the risky investment you won’t lose everything. It’s good to spread your money around. 4) I found out that it is important to think about your life before making an investment. Before doing anything with your money you should ask yourself three questions: How much do I want to invest? ; How long do I want to invest for? ; How much risk am I willing to take? 5) And finally, I learned lots of new words (e.g. ticker symbol, shares, compound interest), new math skills (percentages , decimals), and new computer skills (how to make graphs, read stock charts, make spreadsheet). I know all of these things will help me manage my money better in the future.

There were many steps to doing this project. First, I had to learn a few key words and what they meant, such as the actual word investing, as well as interest rates and stock shares. Once I understood these I started researching interest rates for bank savings accounts. At first I didn’t understand simple interest so my Dad taught me all about percentages and decimals. After he taught me the math he put me to the test and taught me how to figure out future value. Future value is the total money you get back from the bank. It includes the money you originally put in the bank, plus the interest the bank gives you for being allowed to borrow your money. My Dad made a lot of worksheets for me to work on that were filled with math problems and questions that I had to answer to make sure I understood what I had learned. I also discovered one more kind of interest, compound interest. Compound interest is putting making interest on top of interest.

I decided to invest my pretend $1,000 in a Bank of America savings account that had a 2.2% annual interest rate. On the computer I created a chart to track the daily interest earned and the total value of my investment. When I began tracking my bank investment I figured out that after one month I would earn $1.75 in interest. I had a daily interest rate of .18% so I was making 6 cents a day!

After researching my bank account I moved on to the stock market. I wanted to choose four companies to invest in. Learning about the stock market was much harder than learning about the bank because there was a lot more research involved and there were so many companies to choose from. I decided to choose companies that I really use in life. I also wanted four companies that were in different industries in case something bad happened in one area of business. But before I could choose the final four companies, I had to find out when it is good or bad to buy a stock.

From reading books and the internet, I learned it is important to find out information on a company’s earnings, especially the price-earnings ratio. The P/E ratio is earnings divided by the current price of the stock. (P=price and E=earnings.) The P/E ratio shows how much other investors are willing to pay for a stock. You want to buy a stock when the P/E is low because that means it’s cheap. You want to sell stock when the P/E is high. Using the information I learned I chose my four companies. All of them were companies I really use, all were in different industries and all had a low P/E ratio. My final choices were: Walt Disney Company, Electronic Arts Inc., Wendy’s International Inc, and Home Depot Inc. In the back of this report is a little information on each of these companies.

After researching my companies, I had to decide how many shares I wanted to buy in each. A share is like a piece of company. The price of a share of a company goes up and down every day, depending on how much people are willing to pay for it. Using my pretend $1,000, I bought 7 shares of Disney, 7 shares of Electronic Arts, 7 shares of Wendy’s and 5 shares of Home Depot. I did not spend all my money. I had $4.36 left over because the share prices didn’t divide equally into $1,000. After buying my stocks it was time to sit back and watch my investments for a month.

Over the next four weeks I tracked my stocks by checking their daily price on America Online. I recorded the prices on a spreadsheet on Microsoft Excel. (The spreadsheet is at the back of this report.) I then typed in a formula on the spreadsheet that multiplied the price of the company that day times the number of shares I had bought from that company. I had to find out how much money I had earned or lost that day for each company, as well as in the stock market overall. I repeated this process for the 31 days of March. I also tracked the stock information on a line graph that I made. Some days I was very worried because all the stocks were down and it looked like I would lose a lot of money. (See graph at the end of report.)

After four long weeks I was done tracking my stocks and bank account. All the information was in. I compared my stock investment to my bank investment by looking at the total value of each investment after one month. I had earned $27.10 with my stock investment, and $1.75 with my bank investment. That means I earned $25.35 more by investing in the stock market than in the bank.

But even though I earned a lot more money in the stock market that doesn’t mean I don’t want to invest in the bank. I learned that you should only invest in the stock market if you are willing to leave your money in the market for at least five years. Older people or people who need their money soon should not invest in the stock market since they might lose the money just when they need to use it. If you decide you want to buy stock you should plan to leave your money in the stock market for at least five years. When people buy stocks and hold them for five years or more they usually make money because the company grows and becomes more valuable. If you want to invest for less than five years then put your money in a bank savings account since you will be sure to earn at least a little money. Even if you like taking risks, it is a good idea to put some money in a safe investment, like the bank, and some money in a risky investment, like the stock market, so that some of your money is safe.

While the stock market is risky and the bank is safe, there is no right or wrong answer on where to invest your money. Just remember to ask yourself three things before investing: 1) How much money do I want to invest? 2) How long until I need to use my money? 3) How much risk am I comfortable taking?

I learned a lot during this project and had fun. I found out that investing and making money is very complicated. I thank everyone who helped me learn about investing. I appreciate it. I think this project will benefit me in my future life and will help me be more careful with both my money and other people’s money. Now I can’t wait to invest real money soon!

The Walt Disney Company is an international entertainment company. It produces movies, it operates resorts in the USA, Japan and France, it owns television and radio networks, and it licenses the Disney characters.

Wendy’s International Inc. mostly focuses on operating quick-service restaurants. The company has more than 6,000 Wendy’s restaurants in the USA and 21 other countries. Wendy’s International Inc. also operates fast-casual restaurants in the USA and Canada, such as Tim Hortons and Baja Fresh.

Electronic Arts Inc. develops and distributes interactive software games that can be played on Gameboys, personal computers and home video game machines, such as PlayStation and Game Cube.

The Home Depot Inc. runs Home Depot stores. They carry 50,000 different kinds of building materials for home and garden improvement. The company also operates Expo Design Center stores in the USA.

"All About Money.", Time for Kids Almanac 2004, Time Publisher, 2004

America Online – Stock Reports

"Young Investor" Ask Jeeves.com March 2004

Berg, Adrienne G. and Berg Bochner, Arthur. The Totally Awesome Money Book for Kids. New York, Newsmarket Press, 2002

"Bulls and Bears." The World Almanac For Kids 2002, World Almanac Books, 2002"

Harris, Greg. "Discussions/Interviews re investing, math, computer skills," February and March 2004

Otfinoski, Steve. The Kid’s Guide to Money. New York, Scholastic Inc. 1996

Feb. 20 – Got book on investing for kids. Started reading and learning about banks and the stock market.

Feb. 25 – I learned about interest rates from Dad I learned what an interest rate is and we did sample/practice exercises. 40 minutes.

Feb. 27- I started putting together a long list of possible companies that I might want to invest in. Researched bank accounts and interest rates being paid. 30 minutes.

Feb. 28 – Continued to put together my list of companies and checked out banks. Chose Bank of America savings account with 2.2% annual interest 35 minutes

Feb. 29 – Researched companies that are my top choice. 40 minutes

March 1– Finished researching companies. Narrowed down my company list to four choices and pretended to buy shares in each. I Invested $1,000 in stock market and $1,000 in bank

March 3 – Checked my stocks and entered stock information into computer spreadsheet Microsoft Excel. I also read books about investing. Took notes. 1 hour

March 5 – I check progress on my stocks again and researched at the library. 2 hours

March 9 - All but one of my stocks went down. Wendy’s went up. I think it was because of the "Cheeseburger Bill" that House of Representatives in Washington just passed. I also worked on learning decimals and percentages so I can figure out interest rates better. 1 hour

March 11 – All my stocks went up, except Home Depot. I don’t know why. I worked on math skills again. 20 minutes.

March 12 – Recorded my daily stock and bank status. 5 minutes

March 15 - Checked my stocks and all went down because of the bombing in Spain. I started working on a three-page worksheet Dad made about decimals and percentages. 1 hour 10 minutes

March 16 – All my stocks went up. 5 minutes

March 17 – Again all my stocks went up. But I am still below my original $1,000. I wonder why all my stocks keep going up now. 10 minutes

March 18 – Worked on my decimal practice sheet. Stocks up again! 25 minutes

March 22 – I checked my stocks. They went down a lot! I think they went down because people are scared of terrorist attacks. 15 minutes

March 23 – I played stock market games on the computer. I took a quiz and learned a lot. I worked on an outline for my report and I checked stocks and bank status. 50 minutes

March 24 – I did 30 minutes of another stock market worksheet dad made up. I checked my stocks . Everything was down for the day. 35 minutes

March 25 – I checked my stocks and surprisingly they all went up by a lot! The whole market went up after a two-week slump. Maybe because a new survey showed larger companies are planning to hire more people in the next few months. I also read more of my investment book and the Almanacs. 1 hour

March 26 – Stocks went up again. I am now $11 over my original $1,000. I wrote a list of word definitions for my report. 30 minutes

March 27 – I finished my stock worksheet for my dad. We practiced computing interest rates again and I now understand compound interest. 1 hour 30 minutes.

March 29 – Stocks went up again, especially Electronic Arts. The last few days tech companies have been doing well. I thought my stocks would go down this week since they went up so much last week but I guess I was wrong. 5 minutes.

March 30 – Checked stocks and recorded on spread sheet again. 15 minutes

March 31 – Today was my last day of recording my stock and bank investment. My stocks ended up earning $27.10! I worked on learning to make graphs on the computer. I finished my last worksheet to practice percentages.

April 1 – I wrote note cards for written report. 30 minutes

April 3 – I worked on more research. 30 minutes

April 5 – I made 3 stock market/bank games for my written report. 1 hour

April 6 – I wrote a paragraph on each of the companies that I invested in. I also made a final outline for my written report. 1 hour 10 minutes.

April 7 – I started writing my report. 2 hours, 10 minutes

April 8 – I finished writing the rough draft for my report. 3 hours/

April 9 – I wrote an outline for my oral presentation. 1 hour

April 12 – I learned how to organize an oral presentation. I also started to edit and revise my written report. 1 hour

April 13 – I wrote the rough draft of my oral presentation. 2 hours

April 14 – I revised my oral presentation and worked on making note cards to use.

April 15 – Took photos of my companies’ signs to use as visuals in my oral presentation. I also worked on making the flip chart which will be my visual aid for oral report. 1 hour 30 minutes

April 16 – I made rough draft note cards for oral report. I practiced in front of mom and dad.

April 17 – I finished making visual aids and practiced my oral report. 40 minutes

April 18 – I finished editing my written report and worked on final report. I practiced my oral presentation. I made final note cards for presentation 1 hour 40 minutes

April 19 – Added visuals to my written report and completely finished written report. Practiced oral presentation. 2 hours 30 minutes

April 20 – Presentation

INVESTMENT QUIZ

1) WHAT IS A TICKER SYMBOL?

A. Clock

B. An abbreviation for a company’s name on the stock market

C. Mutual Fund

2) WHAT DOES "PV" STAND FOR WHEN FIGURING OUT INTEREST RATES?

A. Pile of vegetables

B. Product Value

C. Present Value

3) WHAT IS A "SHARE" ON THE STOCK MARKET?

A. A piece of a company

B. What you bring in for show and tell

C. A group of companies

4) WHAT IS "INTEREST"?
A. Something interesting at the bank

B. Money you earn from lending your money to others

C. A stock broker’s suit.

5) WHAT IS INVESTING FOR GROWTH?

A. You buy something that will become more valuable

B. You buy something to make you taller

C. You invest in the stock market so you’ll get a better job.

Answers: 1-B, 2-C, 3-A, 4-B, 5-A

Circle eight things you should do before investing in the stock market.

A) Throw darts at the business section of the newspaper.

B) Figure out how much money you want to invest.

C) Go to a baseball practice.

D) Find out the P/E ratio for all the companies you’re interested in.

E) Go to New York.

F) Make a list of companies you might want to invest in.

G) Figure out how long until you need your money.

H) Read a book about bears.

I) Figure out how much risk you are willing to take.

J) Play computer games/

K) Research companies on the internet.

L) Jump rope with friends.

M) Choose stocks in different industries.

N) Read books about investing.

Answer: B, D, F, G, I, K, M, N