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It's tough to beat a 5th grader with investment smarts

By Dian Vujovich

If you ever watched the TV program ” Are You Smarter than a 5th Grader?” you probably noticed that nearly all of the program’s contestants were not. So, given that April is Financial Literacy Month, I’d like to share some words of wisdom written by a 5th grade girl who was one of the winners in the most recent InvestWrite contest sponsored by the SIFMA. But first, some details.

Twice a year the Securities Industry and Financial Markets Association (SIFMA) Foundation conducts an essay writing contest that’s open to all students in all of the schools around the nation who participate in The Stock Market Game. Like the InvestWrite contest, The Stock Market Game is also available to students in all schools and is the first of SIFMAs teach-kids-about-investing tools.

There are three levels of competition in the InvestWrite program— one for elementary students, another for those in middle school and the third for high schoolers. Students in each level are asked to write an essay answering the one question asked specifically of those in their level.

“The Stock Market Game program is a team event that usually has three to five students working together. The InvestWrite competition is individual,” says Nancy Kahn, director of development and events at the SIMFA Foundation. “Since we started that program in 2004 we’ve received over 120,000 essays written by students.”

That’s impressive. But, nothing like the wise words of the kids in the know.

Here’s the winning text of 5th grader Juliette LaMontagne from Morristown, NJ, Thomas Jefferson School. Her essay is titled “Winning the Battle of the Stock Market”. Read it and learn:

“Choosing a stock is like developing a war plan to win a battle. You make a plan and hope it works. Just like the general who organizes the winning strategy in a war, an investor has to put forth a good plan to find an excellent stock and hope it is successful. Every investor prefers a way to choose an investment to win this huge battle. For example some investors simply just type in their personal initials in the stock quote box to see if it is a publicly traded company. If it is, they buy blindly and without any true knowledge of the company. Others get advice from a trusted friend, but there are better ways to choose a winning stock.

“Using market capitalization, Beta indicators, and studying technical analysis, these recession-proof strategies make finding a winning stock a little easier. After careful consideration, Starbucks is a great investment.

“Every investor or warrior is different. Some are older and conservative, while others are young and more of a risk taker. For others, they fall right in the middle making them a blend of both. Using the company’s market capitalization value can help to decide if the stock is right for you. Starbucks has a market cap of 33.03 billon dollars. This is a good sign for the more conservative investor because lower market capitalization companies tend to be riskier. Lower market caps might be good for aggressive investors with more time to regain their losses. Beta is a number that measures the amount of risk. They compare the stock to the 500 biggest companies. Starbucks’ Beta is 1.35; this means it is not that risky. It also means that the battle ahead is not too bad. For these reasons, Starbucks is a great stock for me to own.

“What happens when the 50, 100 and 200 moving day averages are layered like soldiers in a battle field with reinforcements waiting on the sidelines? It means that it is an excellent time to buy! Currently, Starbucks 50, 100, and 200 moving day averages remind me of an invincible army with many layers of warriors. With the 50 on top, the 100 in the middle, and finally the 200 layered perfectly on the bottom, it screams “charge” to the experienced investor. Starbucks’ current price is bouncing off of the 50 day average like the soldiers on the front line. This shows a great time to win the battle and invest in Starbucks.

“In hard economic times, during recessions, some industries/companies are recession-proof, which means people still demand their products. After all, the soldiers still need their coffee to stay awake in the battle. It is one of those things they cannot sacrifice in the heat of the battle. This makes Starbucks recession-proof or bullet proof. Knowing this information provides investors an added weapon to use to their advantage. They now know that Starbucks stock and business is not going to fall in the war of the stock market. That early morning coffee or night time hot chocolate is what makes the day warm and happy for consumers.

“In conclusion, applying market capitalization figures, studying Beta volatility numbers, analyzing technical analysis, and using recession-proof strategies reveal that Starbucks is a great buy. Their market capitalization values and Beta are showing greatness. The 50, 100 and 200 moving day averages are excelling, and they continue to demonstrate that they can flourish even in hard economic times. Using this information can enable any investor to win the battle of choosing stocks. My mom might say I am too young for coffee, but that is not going to stop me from buying Starbucks’ amazing stock! I will win the battle and get rich along the way.”

To learn more about InvestWrite visit http://www.InvestWrite.info.

To read more articles, please visit the column archive.

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