Schools

Sharemarket Game news 

Digging into the mining sector

With a portfolio valued at $71,733.02, Charlie from Albury High School is the winner of the second Schools Sharemarket Game for 2024 – a title he was keen to earn after participating in the previous game.

From the outset, Charlie was eyeing the leaderboard and the prospect of winning one of the game’s cash prizes. He invested most of his initial $50,000 into mining stocks, which were then at the lower end of their typical trading range.

“With the money I had left over I decided to invest in a luxury online clothing company that showed promise, and its price also rose in the 10-week period. I watched the mining shares every day. I sold the non-performing shares and reinvested in other stocks I already owned,” he said. 

The high concentration of mining stocks within the portfolio exposed Charlie to significant risks. 

Even so, Charlie opted for this high risk/high reward strategy because it aligned with his overall investing goal of maximising potential returns within the game’s relatively short 10-week window.

Although it worked out this time, Charlie was quick to note that his experiences also showed “how fast risky shares can grow and fall in just a very short amount of time”. 

Chasing volatility: a popular move

Second place went to Toolooa State High School student Meeniy, who ended with a portfolio value of $71,319.98 after adopting a similar strategy to Charlie.

“At the beginning of the game, I realised that you either ‘go big or go home’. You either get top 3 (and win the cash) or you win nothing,” he said.

“Therefore, the usual stock market strategy of ‘low return but consistent earners’ would not work for the 10 week fast-paced Sharemarket Game.”

Meeniy made two initial investments into mining stocks, before expanding his portfolio to consumer goods and biotech companies too. 

As the game progressed, Meeniy sold off companies that weren’t performing and reinvested the proceeds back into the companies that were doing well.

A New Zealand first 

Rounding out the top three this year was JAKE Inc, a team of three from King’s College in New Zealand, who wrapped up the 10-week game with a portfolio value of $70,506.13.

JAKE Inc’s strategy was almost the opposite of Meeniy’s. The team initially focused on lower risk shares with consistent returns and generated respectable returns of $4,000 in the first month alone.

However, seeing other Sharemarket Game participants had already surpassed $60,000, the team opted to sell out of their stable portfolio and reinvest in higher risk companies for the final push.

“We did this because we knew this was our only chance at placing highly. Investing in high-risk shares paid off but we could have easily lost most of our money,” one of the team members said. 

Their success has encouraged some of JAKE Inc’s participants to consider opening their own investment portfolio and try some of their ideas out on the market. 

In this newsletter, we review the basics to help them place their first trade.

To be able to complete this Game challenge, it is vital that your students take note of all these Game essentials:
 

Access and eligibility

Student login portal: Share this link with your students

Problems logging in: Please read ‘How to login’

Prize eligibility: To be eligible, they need to have purchased shares, within the Game, in four different companies over the Game Period. One buy transaction must have been completed by 26 September.

Brokerage

In the Game your students will be paying brokerage. Brokerage is the fee a stockbroker charges when shares are bought or sold. Just like the real market, in the Game, every time you buy or sell you will be charged brokerage. Be aware of your brokerage costs if you trade regularly. In the Game, brokerage is $20 for trades up to $10,000 and for each trade over $10,000, brokerage is charged at the rate of 0.2% of the trade value.

Diversification rule 

In the Game your students cannot put all their money into buying just one company.

They can do this in real life if you wish; however, there is a belief that this is not the best thing to do as it is very high risk. 

In the Game they can only invest 25% (of their total portfolio value) in any one given company (this is called the diversification rule). When you go to place an order to buy shares in a company, the system will tell you the maximum of shares you can purchase based on the current market price and your portfolio value. You don’t have to buy that number - you can buy less but you can’t buy more. 

To diversify simply means to invest in different companies and/or different industry sectors that don’t tend to move in the same direction at the same time.

This will help reduce the risk of losing money. Let’s say you invested all of your $50,000 in one company and the shares in this company dropped by 30%. This would mean that your $50,000 investment is now worth only $35,000 – that’s a loss of $15,000. Whereas, if you invested in 4 companies (in different sectors with approximately $12,500 invested in each) and the other 3 companies are doing OK, that 30% loss is now only $3,750 – quite a difference.

This example shows how investing across a range of sectors or companies helps reduce your risk. However, also be careful of over diversifying (having just a few shares in a lot of different companies), because you will end up paying a lot of brokerage and if some companies do really well you want to own enough of them to make some good profits.

Dividends

In Australia, the end of the financial year (EOFY) is June 30. So most publicly listed Australian companies report their full-year earnings results in August and their half-year results in February. 

By law, companies listed on ASX must report their earnings, results, and forecasts to shareholders during each reporting season. 

Dividends are usually announced during reporting season so in the Game, one of your strategies might be to invest in those companies that have a dividend coming up, in order to take advantage of the additional cash.

Before doing this, it is important to understand what dividends are and how they work.

Have you decided when to take your profits?

If your shares rise by a certain percentage above your purchase price…

• Will you continue to hold them? 
  
• Or will you sell and take your profit so that you can invest in something else? If yes, at what point will you take your profit, e.g. % increase?

If the stock falls or is not performing as you would like, do you have a plan of when to sell? 

Have you or your team made any decisions regarding how low you are prepared for a share to go, before getting out? 

For example, you might set a certain percentage below your purchase price as the lowest you are prepared to let the share price fall before you sell your shares.

Also, if you decide to sell, what factors or indicators will you use to help you make the decision to step back in?

After answering these questions, and in light of the current market volatility (the price of a share moves significantly up or down), your students will be more prepared, less inclined to panic, and able to make the necessary decisions to stick to their plan. 
 

Avoiding simple mistakes

Here you have a  list of the most common mistakes we find syndicates making while participating in the Game. Let your students know this is worth a read, as it may help them avoid making some of these mistakes:

Purchasing small lots in multiple companies. 

And this is not just $20 when you buy, it is also $20 when you sell, so you need to consider this.

Not checking your order before submitting

It is important to set up the habit of always checking your order before you submit. Make yourself stop and read the preview order – review the number of shares you want, check it is the correct company, it is a market or limit order, at the price you want, and of course whether it is a BUY order or a SELL order. 

Get into the habit of checking each of these things because once your trade is submitted, it can be very difficult to get it back.

Placing your orders too far away

Often we get emails from students wondering why their order isn’t going through. Often what has happened is they have set their buy or sell price too far away from the market, for example, if the share price of a company is at $2.00 and you set a limit to buy your shares at $1.50 - you are going to have to wait until the price gets to or falls below $1.50 before your order is processed, which could be a very long time, if at all. 

If your limit order to sell is set at $3.00 – again, you will be waiting until the market hits this price or above before your order is processed. 

Placing an order at 4.00 pm for the next day.

Take note that although the market closes at 4 pm there is a clearing period between 4 pm and 4.12 pm where orders will still be processed. If you are wanting to place an order for the next day, make sure it is after 4.12 pm.

Buying just to get the dividend.

So if you buy a company based on the dividend, remember, on the ex-date, the price of the share is likely to fall by the amount of the dividend. 

Buying to get the dividend and then selling on the ex-date, will mean you have lost any benefit the dividend gave you as the stock fell by that amount. 

It helps to do your research and be sure you are happy with a company and not just base your buying decision only on the dividend.

Other ideas

You can create your own sharemarket vocabulary games and tasks using the ASX glossary.