Stock-Trak Investment Simulation (–Account has been created and paid, and I will provide a sample report.

In order to apply concepts learned in class and gain practical experience, each student will create and manage a virtual investment portfolio. To do this, you will use Stock-Trak, a nationwide portfolio simulation broker and a virtual portfolio with a starting balance of $1,000,000. Stock-Trak allows you to formulate trading strategies, conduct research, select securities, execute trades, and track the performance of your account. Stock-Trak helps you learn about the ‘real-life’ market mechanism, including the terms and terminology of trade execution, the characteristics and various asset classes (stocks, bonds, options, etc.), and the general market environment. Concentrate on the differences between assets (e.g., risk/return characteristics, trading rules, capital requirements) and take advantage of the opportunity to learn about order submission, transaction costs, margin requirements, etc., while managing the money as it would be your own. To register your broker account, please use the link provided in my email. The registration cost is about $46. Trading starts on August 29, 2016. Trading ends on May 8, 2017. Your portfolio must be ‘active’ at the end of the second week of trading. In order to be considered active, you must establish your initial portfolio of 5 securities or funds. Tasks Develop a consensus investment strategy. Your initial portfolio must have at least 5 securities and should cover at least 5% of your budget. Trading requirements StockTrak will allow you to complete up to 400 transactions. You may trade stocks, options, futures, bonds, mutual funds, and international stocks– however, substantial in advance reading should be done before trading. Do not trade derivatives before you understand how they work. During the Fall semester, at the minimum, you are required to a. Perform at least 20 transactions; b. Execute at least 2 short sale; c. Enter into at least 3 options and 3 futures. Commissions per transaction are set at $10.00 for most transactions. 8 Margin Requirement: the margin requirement for stock purchases and short sales is 50%. This means that for stock purchases, you can borrow up to 50% of the total cost. For short sales, you must deposit an amount equal to 50% of the current market value of your short positions. Starting with $1,000,000, Stock-Trak may loan you another $1,000,000.

Report Your report must include:

1. Traders’ log: Each student will keep a log of each transaction executed for the active portfolio (keep it continuously throughout the Fall semester!). The log should contain a brief analysis that describes: • The exact transactions you made. • The transaction costs you incurred. • Select 5 of your best and 5 of your worst transactions. Very briefly describe what motivated the transaction. Were your expectations correct? Describe what you learned about the assets you bought or sold. • A list of significant events during the week that affected your portfolio. • The performance of the overall stock market (S&P 500/Nasdaq), as a potential benchmark.

2. A performance assessment (discuss your performance both in terms of risk and return!). • A performance summary of your portfolio. • A comparison of your portfolio and the overall market (use S&P 500). • Reasons for differences in performance.

3. A critique of your active portfolio. • What worked, what didn’t work, why? • Were transaction costs important? • Since the semester is so short, most investment objectives do not fit into this period. Include a discussion of how the portfolio should be managed in the future.




The emphasis for the project is on your education and not on portfolio return. I discourage students from taking excessive risks, and measure your performance on a risk adjusted basis. The points described above should serve as guidelines. Unexpected or interesting events could occur during the trading period. Your analysis of the impact of such events on your portfolio performance will make your report more informative.  Keep in mind that it is the quality and not the quantity that matters.



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