Stock Market Lotto

For my Business Finance class this semester, the professor is having us play a little game. We each have $100,000 in virtual cash to invest in the stock market. We have to put together a portfolio of five stocks and track their progress for the next nine weeks. Each week we'll turn in a spreadsheet showing how our stocks are doing compared to their starting prices. We'll also compare the gains or losses of our portfolio to the S&P 500 index. Then, at the end of the semester, we'll turn in a report on how our stocks did overall and what we learned from the process.

I tend to be pretty conservative where my money is concerned. I'm not a big risk-taker in general, and I typically think of gambling as a tax on people who are bad at math. So in choosing my stocks, I looked for a couple of things. First, I stayed away from companies in high-risk industries: airlines, pharmaceuticals, and so on; i.e., no Pfizers. Second, I looked for established companies, those that have been here a while and whose history suggests they're here to stay; i.e., no Enrons. Third, in looking at these stocks, I looked at the year-to-date performance ratings listed in the Wall Street Journal for each. Finally, I made it a point not to choose stocks in any company for which I had previously been employed. There are emotional connections there that might cloud my rationality.

When all was said and done, I ended up with the following:

250 shares of Aetna (AET) @ $79.75/share
525 shares of Barnes & Noble (BKS) @ $38.19/share
1125 shares of Motorola (MOT) @ $17.74/share
880 shares of Safeway (SWY) @ $22.52/share
311 shares of Lockheed Martin (LMT) @ $65.06/share

My total portfolio value, on opening day, stands at $99,996.01.

One interesting part of this first week of the assignment was to look up volatility ratings, called Beta Values, for each stock. The higher the Beta, the more volatile the stock is, which means that you stand to lose more than average if the market tanks. Beta for the whole market is defined as 1.00. The Betas for my stocks were 0.95, 0.50, 1.30., 0.90, and 0.70, respectively. I ended up with a weighted average Beta score of 0.87. This (ideally) predicts slow, steady growth that is relatively safe from market fluctuations. This also reaffirms what I said earlier: I tend to be pretty conservative where my money is concerned.

I'll post weekly updates to let those who are interested (if any) see how I'm doing. Wish me luck!