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Playing The Tech Stocks?
Tenshanhan
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Registered User new member
Alright, in my economics class, we're starting this 4 week long game where we essentially form our own company, get a loan of $75,000, on top of $25,000 that we bring to the table, and then we play the stock market. During this time, we have to pay off our loan, pay our rent, etc. Anyway, my friend and I are about to run our company (we start tomorrow), and we were considering investing strongly in technology. Our theory was that we could more easily predict the rise and fall of those kinds of stocks, based on what is happening in the tech world today. Say Microsoft is going to drop Halo 3 two weeks from now. Their stock is going to go up at that point, right? So we buy now, wait for the stock to go up, and then sell it off. Does this seem like a good strategy?
If it does... Well, you guys are probably more up on this stuff than I am. We're running this game over the course of 4 weeks, where every 3 days is a month (rent is due, loan payments are due, etc.) What kinds of things are coming out in the next 4 weeks that would be good to invest in? Games? Gadgets? Anything?
If it does... Well, you guys are probably more up on this stuff than I am. We're running this game over the course of 4 weeks, where every 3 days is a month (rent is due, loan payments are due, etc.) What kinds of things are coming out in the next 4 weeks that would be good to invest in? Games? Gadgets? Anything?
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In other words - I don't think it's a very good strategy for your game.
With so little time to do this, I'd probably just randomly select a number of companies in a number of sectors. Honestly, doing well or doing poorly in a game structured in such a way will have little to do with skill and everything to do with luck.
So, good luck.
You've got to be a bit more predictive then just looking at release dates to see how the market will change. For example, when Nvidia was just starting out and had a stock price of around 60 cents, I suggested to my stock broker that I might want to buy it. She said it was a bad idea and I listened to her. Now the stock is around 30 bucks or something.... The moral of the story is that I saw that nvidia was pushing out these video cards which computers were quickly beginning to rely upon for games. You need to look for things in the same way. What brand new thing that nobody has really noticed all that much yet is really fucking cool and is gonna get big in the near future.
For example, if you bought 100 MSFT at $28.00 you could buy the May 27.50 puts for about $0.55 and if the stock dropped you could still bail out of it at $27.50 which is a max lost of $105 (.50+.55) instead of $2800... which is a good way to manage you're risk.
Or if you think MSFT which is trading at $28.00 is going to $32.00 when Halo is released you could buy a fuckton of the May 27.5 and 30 calls for mega profit.
btw, MSFT isn't really a good "fast trading" stock... the dam thing has been in the 25-30 range for the last two years. The thing doesn't move.
Secondly the release of Vista and Xbox 360 didn't really bump the stock much - so doubt Halo 3 would have much of an impact... hell, I doubt that would even make news on the street, it would probably just be over looked.
Thrid, the profits (or loses) from Halo won't show up at release time, it won't show up till earnings reports (only 4 times a year)... so unless you know how many Halos MSFT sold AND their PNL for ALL other MSFT products (which is a LOT by the way, MSFT has their fingers in EVERYTHING) it won't mean much... for example if Halo pulled in 25 Million, but Vista lost half a billion then the stock would plummet.
If you have cheap/low fees you could just making a shit ton of markets, get hit on both sides and turn profit.
For example, find the most vol-ed out stock you can:
If its trading at $50.00 post 100 up at 49 bid and 100 up on offer at 51
The thing swings around, crosses your orders and *BAM* that's an easy $200.00 cash minus fees
Do that a few thousand times per day and you got a good PNL running.
Keep in mind that the stock market is about 90% voodoo, and if you don't have the kind of time to read the Wall Street Journal from cover to cover for about 3 months before the game starts, most of what you're going to be doing is guessing.
Having part of investments be in stuff that's not going anywhere is a part of, well, investing as opposed to simply trading. Staples like McDonalds and Coco-cola aren't going anywhere short of cows or sugar plants going extinct. MS is probably in that category now too, its wild growth days were about a decade ago.
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Don't ever focus on one sector. Don't time the market (i.e., shift your asset allocation based on the release of information).
Don't bail on an investment just because the firm drops a little. Don't go for an investment just because the firm is jumping onto something huge.
The first thing I learned in my Finance courses back in university was that you could throw darts at the stocks section of the newspaper, invest in whatever those darts hit, and be no better or worse off than an investor that who does all the "don't"s I just mentioned.
Go long-term and go stable. Research each sector and focus more on building a solid base rather than snagging only the big wins. Avoid, at all costs, the bandwagon.
Diversify. Cover your bases so that if things go to shit in one sector or one firm, it's counterbalanced by the fact that the rest of your portfolio remains relatively unharmed. Cast a wide net.
Yes, it is true that the "bigger" companies can sometimes take less of a hit even when negative industry-wide news breaks that affects an entire sector or more (regulation changes, climate patterns, political atmosphere, etc), but do not only focus on the big companies. Just as you should be diversifying across sectors, you should diversify across scales as well.
Your strategy, as mentioned in the OP, is a very dangerous one. Tech is a very, very volatile and unpredictable sector. That doesn't mean you should NOT invest in tech, because when it wins it generally wins big, but do not go in there without a security blanket (i.e., a well-diversified portfolio). Tech stock is generally categorized as being "high risk."
You can never, ever expect "big" returns without a "big" risk of a "big" loss. It depends primarily on just how risky you want your portfolio to be, and I'm willing to bet that most of your class would be willing to take big risks because it's not "real" money.
That is so DotBomb think. MSFT, CSCO, ORCL... all these, fairly stable. MSFT moves less then a turtle and pays Huge dividends. Just putting in MSFT and collect the dividends. The only time MSFT is going to move is when Bill officially steps down.
GOOG can be a volatile girl, MSFT is not. You can't lump all stocks in one sector as the same risk and same volatility...
Dude... where are you getting this stuff from? You sound like my grandpa.
Just hedge the shit out of your investments and/or just use options as leverage. This is basic 101 risk management. You should know this stuff before you start pumping money in the market:
Hedge: http://www.investopedia.com/terms/h/hedge.asp
More: http://www.investopedia.com/search/results.aspx?q=hedge&submit=Go
Leverage: http://www.investopedia.com/terms/l/leverage.asp
The name of the game is to minimize risk and increase profits. Just cause you have a potential upside of infinite doesn't mean you should take on infinite risk. When your starting, on every trade you do - manually, by hand - draw up a P&L chart on graph paper so you can visually see both you're up and down sides. After awhile you'll be able to just see these in your head.
Depending on what website you're using (i'm assuming you're using a website to keep track of all this for your teacher) The website might not have the proper stock market closing times down correctly. When I played, I was given $100k fake money, and just went to Yahoo and looked at their top 10 fastest growing stocks or something, and picked one (it was some oil company, made +30% profit). This isn't what I'm getting at though, betting all your money is retardly stupid. I heard of people in my class that found a loophole on the website. I apologize again for not knowing every detail, as I wasn't in on this, and never bothered to ask. They would research which foreign stocks from the day before did REALLY well or bad, then they would invest all their money in that one stock. When the website opened, the website made the proper changes to the foreign stock.
tl;dr You MIGHT be able to cheat the website by buying stocks using yesterday's information before the website updates.
Many years back, I threw about $5000 into the market to "day trade" (I was young and stupid), and in my infinite wisdom, I lost it all by a constant stream of "buying on the upswing" and panicking and selling low. I pulled out, and paid the effects for a while (taxes hit me hard).
I learned from this, however, and Vivixenne has it absolutely correct: Diversify, and hold on to your damn stocks. Don't panic and sell just because the stock drops a bit. Let it ride. ESPECIALLY with blue-chip and low-risk stocks, because they are not going to fold on you.
Also, diversify not only between sectors, but between market caps. Buy a certain number of high-risk, medium-risk and low-risk stocks, to allow you the possibility of high return with a low probability of losing tremendously.
Yeah, I don't think a single person made a profit.
I'm not Alex Keaton, or anything, but when I buy stocks, I think about what is doing well, and what is going to continue to do well.
People like food, right? Especially restaurant & fast food. So I bought some stock in a company that makes cups, napkins, etc. for restaurants. Also have a clothing store, a grocery store, and an India mutual fund.
If the goal is having the highest chance of winning possible, the best strategy might be to make very risky investments. If they pan out you have a good chance of winning if they don't then, well, you lose. But if you do something sensible like invest in index based mutual funds, you might do fairly well almost all the time but it's likely someone else will get lucky and you will lose.
(Please do not gift. My game bank is already full.)
Is your goal to make the most, or merely to make enough to survive on? How much money do you have, and how much are your costs going to be?