Virtual Stock Exchange
My first attempt at playing the Virtual Stock Exchange game was a small blunder.
Instead of signing up for a competition slot, I accidentally signed up for an individual
slot. For almost one week, I let the stock take its course without realizing that I had made
this mistake. When I first bought those stocks on October 11, 2002, I had decided to buy
ten shares from Merck & Co., at $47.31 each. I bought fifteen shares, at $55.50, from
Ebay. I bought twenty shares from Diamonds, each worth a whopping $77.95, as
compared to the thirty shares from Imation, whose cost was only $35.11 per share. I also
bought ten shares from Nike, at a price of $41.40 each. Each of the twenty shares from
IBM cost me $61.54 and fifteen shares from Microsoft, at $48.25 per share. I chose to
buy such small quantities because I wanted to test out the stocks before investing a large
sum of money on these companies.
I had chosen these companies for several reasons. I had chosen Merck & Co.
because it had been assigned to me for the Financial Statement assignment. After reading
from the Virtual Stock Exchange website, to see how each of the companies did that day
and overall in that week, I took a chance and bought some stocks from them. By
comparing the graphs and numbers from each of the companies, compared to other
possible competitors in that industry, I tried to pick what I thought were the best choices.
I wanted to include a variety of prices, with the purpose of seeing if there would be a
greater profit from buying from a company that was doing well that day, or a company
that was not doing as well, yet had the possibility of increasing over the four-week
On October 15th, I went back to check on my stocks, and I decided to buy more
stocks from Diamonds and from IBM because those were doing the best out of the
companies I had previously chosen. I bought another twenty shares from Diamonds,
which cost $81.61 each. I bought another hundred shares of IBM stock, each worth
$66.60. Each transaction cost $29.95, so I decided that buying or selling a small number
of times might benefit me more than what I had been doing. It was wasting cash that was
Later that day, I discovered that I had been entered in the game at the wrong
place. Instead of being in the class competition, I was in an individual account. I then
had to go back and buy shares from those stocks in a competition account. When trying
to decide which stocks to buy for the Virtual Stock Exchange game, I watched CNN for
the daily recap of the stock market statistics for the day. Ebay, Imation, and IBM were
still doing well, so I chose those three. I also had to buy some shares from Merck
because it was my company for the Financial Statement assignment.
By that day, of course, the prices had changed for each of the stocks. I bought
100 shares from IBM, at $66.60 each. Imation shares cost $36.68 each. I also bought
100 shares of Merck stock. Each of those shares cost $50.95. I bought 200 shares of
Ebay stock, each worth $58.65. Originally, it had cost me $55.50 per share. From this
experience, I realized that because I chose to buy stocks that were on the rise, I was
paying extra money because the value had increased. It might have been more profitable
to follow the unwritten law of “buy low, sell high.” Having faith in my companies, I
decided to let the economy take its course. I did not sell any stocks after buying those
shares. Everyday I would check to see the progress of the stocks on the website.
Within the next fifteen days of the game, several things occurred. On October
16th, the return on my stocks was a drop in value, overall. It had dropped 0.06%, so my
total equity was $499,699.67, when I had started out with $500,000. The return
recovered itself and continued to increase until the 22nd of October. It dropped from
0.39% to 0.32% return. It corrected itself the next day. The return was then 0.45%. It
continued to increase until the last day, November 5th. At this time, the % return stopped
at 0.86%. On November 5th, the total equity of my stocks was $504,290.10. I had made a
profit of $ 4,290.10 within fifteen business days. I had $475,397.50 in cash.
Out of curiosity, I went back to check on the stocks that I had bought in the
beginning, as an individual account. I discovered that my total equity would have been
$504,453.87. My profit would have been $4,453.87. I would have had $486,082.50 in
cash. Had I not made the mistake of entering the individual portfolio, I would have had a
better turn-out. If I had bought the same stocks and the same number of shares in the
competition, I would have earned this much profit. By the end of the competition, I
realized the mistakes I had made.
Next time I play this game, or if I decide to buy real stocks in the future, I will
know a few things to do and a few things to avoid. Now I know that because there is a
transaction fee of $29.95, I should try not to make as many transactions, if it is possible to
buy a large quantity at once, and sell if necessary. I also discovered that buying low and
selling high is one of the keys. This way, I will not spend such great amounts of money
and then lose that money once the stock’s value has dropped. Instead, after making my
mistake of not joining the competition, I had to re-buy some of those same stocks. By
that time, the value had increased. While normally, this would have been a beneficial
thing, but in this situation, it was in fact a negative thing because I then had to spend
more money to buy these shares the second time. In the case of IBM and Diamonds
shares, I spent more money in the third time as well.
Another thing to consider the next time I buy stocks, whether fake or real, is to
sell some stocks that either are high, to get a slight profit, or that are starting to drop, to
avoid losing a lot if it were to drop immensely. I should also consider buying a larger
variety of stocks, from a variety of industries. In addition, knowing which industries are
doing well, and which are not doing well, is very important. I also bought very few
quantities of shares this time. With $500,000 cash to spend, I could have been more free-
spending with it, but I was very hesitant this time. I had never tried buying stocks before
and had low expectations of the outcome. Had I bought more shares, I would have made
a much larger profit.
The problem with the stock market is that it is very difficult to predict what will
happen with the American economy within a year, month, week, or even one day.
Because of this risk, people are sometimes hesitant to buy stocks and with good reason.
Throwing all of one’s money into one company is very risky. At the same time, there are
also risks in spreading out the money too much, but generally speaking, it is wise to
spread out money. Having too much cash is not beneficial and does not generate much
interest. This is why putting money into stock is an advisable thing to do. By studying
trends and keeping up to date with the current economy, I could help myself make wiser
decisions in the future about finances, specifically, investing in the stock market.