Opportunity Costs

According to Investopedia, opportunity cost is, "The cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action."

The difference in return between a chosen investment and one that is necessarily passed up. Say you invest in a stock and it returns a paltry 2% over the year. In placing your money in the stock, you gave up the opportunity of another investment - say, a risk-free government bond yielding 6%. In this situation, your opportunity costs are 4% (6%-2%). For example if you get a college degree, while you are getting the degree you are giving up the next alternative which for example would be work. So you would say, the opportunity cost of going to college is not working. Another example would be the choice between buying a car and going on vacation. The opportunity cost of buying my car is that I am not going on vacation.

"Compound Interest and the Rule of 72"

One of the most well known rules of interest rates, or any rate is the “Rule of 72.” The Rule of 72 is that you take the interest rate and divide it into 72 and that’s roughly how many years it will take to double your principal. For example, if you have $10,000 in a savings account at a bank, earning you 3.0%, divide 3.0% into 72. It will take 24 years to double your money.

3% rate - 72/3 = 24 years
6% rate - 72/6 = 12 years
12% rate = 72/12 = 6 years

TASK: What is it about compound interest that inspired Albert Einstein to say "The most powerful force in the universe is compound interest"?

Einstein once said, "If people understood the Rule of 72 they would never put their money in banks!” He was inspired by the thought of doubling the amount of his intial investment over time.

Click the "Compound Interest Calculator" above, and follow the link for directions, and use of the actual calculator.**

"My Recession Spending"

Throughout any recession people's lives and spending are drastically alter
do to the vulnerable economy. Now in today's "recession" I can't really say I see a change within us Americans consuming. We still go out and buy the little unnecessary shit such as "Aqua Globes", and "Mighty Putty". Stupid products that further the laziness of us Americans.

During this recession, honestly I haven't change the way I spend my money. Like I still spend about 10 bucks a day on food from eating out, when I could just catch dinner at home because my mom cooks daily. I also waste money on Abercrombie and Fitch ! -__- But, I feel "you pay for what you get" and the quality of Abercrombie's clothing is definitely worth it.

My Investment Strategy

My investment strategy is pretty obvious. I'm either going to do two things. I might just go after a small demanding company on the rise, such as solar energy corporations, or basically anything that has to do with the whole "going green" market. Going green is definitely an investment on the rise because everyone is trying to become conservative.
I may also decide to invest in things that we would need forever, such as toilet paper, toothpaste, soap, necessities of the average joe's everyday life. But, I've notice that most items are just all under one stock, except I did find Colgate. Its actually doing pretty good, probably going to invest in there. I can't completely plan out a full strategy being that this game is going to get carried all the way up until June. And the stock market is so unstabble right now, anything can drop tomorrow or jump off the charts.

Introduction To The Stock Market.

1. What exactly is a stock and why do companies sell stock in the first place?

In the financial market, stock refers to a supply of money that a company has raised. This supply comes from people who have given the company money in the hope that the company will make their money grow. By issuing stock, a company can raise money without going into debt.

2.What is the difference between a public and a private company?

The different between a public and a private company is that a public company's stock is traded by the public and listed on an exchange such as the New York Stock Exchange or NASDAQ. A private company's stock is generally held by one shareholder or a small group of shareholders.

3.What is the Dow Jones Industrial Average?

To be chosen for inclusion in the index, a stock must be a leader in its industry and must be widely held by both individual and institutional investors. Together, the 30 stocks in the average represent about 20% of the market value of all U.S. stocks, so although the DJIA is not the whole stock market, it is certainly representative of the stock market as a whole. The industries represented include financial, food, technology, retail, heavy equipment, oil, chemical, pharmaceutical, consumer goods, and entertainment.

4.What is a blue chip stock?

A common stock issued by a major company that has financial strength, stability against fluctuations, and a good record of dividend payments. Basically a low risk investment.

5.What is the New York Stock Exchange and the NASDAQ?

NYSE is a stock exchange in New York City. It happens to be the largest exchange in the world. It provides a means for buyers and sellers to trade shares of stock in companies registered for public trading. NASDAQ. National Association of Securities Dealers Automated Quotations is American stock exchange. t is the largest electronic screen-based trading market in the United States. It has about 3,200 companies and more trading volume per hour than any other stock exchange in the world.

6.What is a mutual fund and how do they operate?

Is an investment company or trust that has a very fluid capital stock. It is unique in that at any time it can sell or redeem any of its outstanding shares at net asset value. A mutual fund, also called an open-end investment company, owns the securities of several corporations and receives dividends on the shares that it holds.

7.What are some of the biggest companies on the stock market, what is the total value of their stock?

GOOGLE: $420.50
SEABOARD CP: $1,309.00

8.What is the PE ratio of a stock?

The PE of a stock is the Price to Earnings ratio. This is a ratio of the price paid for a stock to the amount earned.

9.What is a stock dividend?

A form of dividend collected by a stockholder in extra shares of the corporation's stock rather than in cash.

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