Week 3 Stock Journal: This Is The First Of Three Stock Journ

Week 3 Stock Journalthis Is The First Of Three Stock Journal Assignmen

Imagine that you have $25,000 to invest in U.S. companies by purchasing existing stock from public companies. Your goal is to select three U.S. companies, diversify your investments appropriately, and allocate your funds across these companies based on your judgment. For each company, you will determine how much money to invest, select a reason for choosing that company, calculate how many shares to buy given the current stock price, and record this information. You will prepare two documents: an Excel template with the stock purchase details and a Word document with your rationales.

Paper For Above instruction

The stock market is an essential component of the U.S. financial system, enabling companies to raise capital and investors to potentially earn returns through dividends and appreciation in share value. For this assignment, the participant has a hypothetical investment fund of $25,000 to be allocated among three U.S. publicly traded companies. The emphasis is on diversification—spreading investments across different industries to mitigate risk. By selecting different sectors, an investor can protect against downturns in specific industries, aligning with principles illustrated by Jim Cramer's "Am I Diversified" segment on CNBC (Cramer, 2020).

The first step involves choosing three companies. The participant should leverage publicly available sources such as the New York Stock Exchange, NASDAQ, Yahoo Finance, or Google Finance to identify viable candidates. The selected companies should be recognized entities traded on major exchanges and should represent distinct sectors—such as technology, healthcare, and consumer goods—to ensure diversification. For example, one might choose Apple (technology), Johnson & Johnson (healthcare), and Coca-Cola (consumer staples). The rationale for picking each company should be based on personal knowledge, observed market performance, or perceived resilience and growth potential. Strategic diversification minimizes exposure by avoiding overconcentration in one industry.

Next, the participant must decide the amount of money to allocate to each company. For simplicity, an equal split of $8,333 each could be used; however, the participant may choose different distributions like $10,000, $10,000, and $5,000 based on confidence levels or industry outlooks. Once the amounts are decided, the current stock prices are obtained from the selected sources. Using the formula: number of shares = amount allocated / stock price, the participant rounds down to the nearest whole share, since fractional shares cannot be purchased. For example, if the stock price of Apple (AAPL) is $150 and $8,333 is allocated, then the number of shares to buy is 55 (since 8,333 / 150 = 55.55, rounded down).

The process involves documenting each purchase: the company name, the amount invested, the stock price at purchase, and the number of shares bought. The closest approximate total expenditure should be calculated to ensure funds are nearly fully allocated, acknowledging that fractional shares are not purchasable. This practical step reflects real-world trading constraints and emphasizes careful planning when investing with a fixed budget.

For completeness, the participant prepares a rationale paragraph for each chosen company, explaining the reasoning behind the selection. Examples might include company stability, recent performance trends, sector resilience, or personal familiarity. These explanations aim to demonstrate an understanding of strategic investment choices and diversification benefits.

The completed Excel template records all numerical details—company names, share prices, investment amounts, and shares purchased—while the Word document communicates the investor's rationale. Both should be submitted as part of the assignment. Proper academic referencing, utilizing credible sources such as financial news outlets, official company reports, or industry analyses, is essential. Two such references should be incorporated to support the investment choices and provide context for the decisions made (Fama & French, 1993; Damodaran, 2017).

This exercise models a practical investment decision process, blending theoretical diversification principles with actual stock purchase calculations. It enhances understanding of financial markets, investment risk management, and asset allocation strategies relevant to personal investing and portfolio management (Bodie, Kane & Marcus, 2014). Effective preparation of these documents demonstrates the ability to analyze investment opportunities, budget allocations, and industry diversification risks over time.

References

• Bodie, Z., Kane, A., & Marcus, A. J. (2014). Investments (10th ed.). McGraw-Hill Education.
• Damodaran, A. (2017). Investment valuation: Tools and techniques for determining the value of any asset. John Wiley & Sons.
• Cramer, J. (2020). Am I Diversified? CNBC Video. Retrieved from https://www.cnbc.com/video
• Fama, E. F., & French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33(1), 3-56.
• Yahoo Finance. (2024). Stock Market Data. Retrieved from https://finance.yahoo.com
• Google Finance. (2024). Stock Market Data. Retrieved from https://www.google.com/finance
• NASDAQ. (2024). Investor Resources. Retrieved from https://www.nasdaq.com
• New York Stock Exchange. (2024). Market Data & Information. Retrieved from https://www.nyse.com
• Sullivan, R. (2018). Diversification strategies for the modern investor. Journal of Financial Planning, 31(4), 52-59.
• Investopedia. (2023). How to Invest in Stocks: A Beginner’s Guide. Retrieved from https://www.investopedia.com/terms/s/stocks.asp