Category: Competitions

Welcome to week two of the Husky Investment Tournament!

Have you been paying attention to the financial news? This past month has seen a large amount of coverage given to normal everyday people. The stock market has felt the impact of retail traders banding together over social media to increase share prices. 

Retail traders are people like you and me that do not hold large amounts of financial resources. In the past, this group was never given a second thought, but when they came together, Wall Street took notice. Gamestop stock saw its price rally from $15 to $350 at the peak. Many hedge funds who sold the stock short lost a significant amount of money.

It got to the point where well-known trading apps such as Robinhood had to restrict the trading of the selected stocks. This led to even more interest in the story, and even more people investing in the selected stocks. Congress recently decided to get involved and it will be interesting to follow along and see how this all plays out.

It is important to note that for all the retail traders that made money, an even larger amount lost money when the stock fell back down to its true fundamental value. Trevor Salata, a current Michigan Tech student, goes over what happened in this week’s video. 

Welcome to week one of the Husky Investment Tournament! Teams from India, Georgia, California, Virginia, Maryland, and Michigan are joining the experience. Ready to get started?

Let’s start by comparing two people and their investing habits, assuming a seven-percent annual return on the stock market:

Beth starts investing at the age of 18 and contributes $2,000 a year until she reaches age 40. Beth’s friend Jo waits to start investing until age 40 and contributes $5,000 each year until reaching age 60.

Who do you think will end up with more money at age 70?

Beth would have contributed $44,000 of her own money and by the time she reached age 70, there would be $531,950.70 sitting in her investment account. On the other hand, her friend Jo would have contributed $100,000 and there would be only $403,221.69 sitting in an investment account. 

This example illustrates the power of time and compound interest. If you were to start at age 18 to achieve millionaire status by age 60 you would need to invest $4,335.91 a year. This number equates to $361 a month or roughly $90 a week!

As Albert Einstein once said, “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.” 

The College of Business at Michigan Technological University wants you to understand the basics of stock investing now, while you’re young. People naturally avoid things they don’t understand. We want you to understand that investing isn’t as complex as it may appear. In the Husky Investment Tournament, only one team will finish in first place, but all of you can win in the retirement tournament.

This week’s video is from Dean Johnson, dean of the MTU College of Business. He provides an introduction to stocks and investing to help get you started, as well as an explanation of rules and trading restrictions.

Good luck, and have fun!

The Husky Investment Tournament hosted this fall by the College of Business (COB) at Michigan Technological University drew more than 130 high school business students from as far away as Maryland and Florida to compete for a cash prize and scholarships toward a Michigan Tech education. 

The competition utilized a virtual stock-trading tool and College faculty-led video modules to help high school educators lead engaging conversations and lessons of their own. Teams of three to four students received $1,000,000 in virtual US dollars to build a portfolio. The group with the highest-valued portfolio earned $1,000 in prize money and all students who actively participated were awarded a scholarship to attend Michigan Tech.

“With how high schools have shifted curriculum due to COVID-19, teachers and students alike tell us that the Husky Investment Tournament has been a welcome enhancement to their virtual education,” said Dean Johnson, dean of the Michigan Tech College of Business.

Students from Houghton High School in Houghton, Michigan, came in first place at the conclusion of trading on November 16. Despite the stock market only returning five percent during the competition, the team of Milo Schaefer, Kazimir McCloskey, Matthew Ryynanen, and Trent Bukovich earned a positive 11-percent return. The winners were surprised at the outcome, with one student saying, “Going into it, we never thought we’d have a chance, but we made a few investments that really took off.”

Their teacher, Jennifer Rubin, added, “I love the opportunity that the Husky Investment Tournament provides for my personal finance students. It helps them dive into investing and really see how stocks fluctuate over a period of time—with no consequences.”

Prior to the competition, most students were unfamiliar with stock basics. 

The Husky Investment Tournament is embedded in high school economics, business, and personal finance classes. Since its launch in September 2019, 830 students across Michigan, Wisconsin, Minnesota, Maryland, Florida, and Illinois have participated. High school educators or administrators wishing to sign teams up for the spring 2021 competition, which begins March 1, should visit mtu.edu/business-tournament.

Thank you for participating in the Husky Investment Tournament! This week is your final week for trading, which will close at 11:59 p.m. on Friday, November 13. The winning team will be determined by their final portfolio value at the time of the completion of the tournament. We will announce the winning team on Monday, November 16. 

We hope you have enjoyed learning and interacting with us as much as we have with you.

Once the competition is over it would make sense to calculate your portfolio return. The portfolio return is calculated by taking the ending portfolio value divided by the beginning value and converted into a percentage to yield the total portfolio return. Annually, the market has returned between 6-8 percent. How do you compare? Was your stock picking better than what the market would have returned? Our competition was only seven weeks long (35 days) compared to the 250 trading days there are in a year. Doing some math we can convert the 7 percent return to our time period of 35 days. 

7% return over 250 days = 0.028% per day
0.028% * 35 days in competition = 0.98% return

If we take the $1 million we started with and use the simple interest formula for the 0.98% return we find that it calculates out to $1,009,800.

FV = $1,000,000 * (1.0098) ^1 = $1,009,800

So all of the teams that finish above that amount “beat the market.” 

However, the portfolio return formula fails to take a very important factor into account—risk. 

We have encouraged teams to pursue risk in order to win the competition—here is the reason why. As you can see, the total portfolio return does not take the amount of risk that you pursued into account while calculating your percentage return. Because of this, teams may have found it lucrative to pursue a higher level of risk in order to achieve a higher potential return.

While this strategy works well in a trading competition, where there is nothing to lose and everything to gain from pursuing risk, we would not want you to leave the Husky Investment Tournament thinking this is the best strategy for investing for retirement, or that this is how portfolio returns are measured in industry. In the real world, portfolio returns are risk-adjusted or adjusted to show how much extra return you generated per unit of risk. This comparison shifts the question from “how much money did you make me?” to “how much did you risk to make me this money?”

In this week’s video, Dean Johnson, dean of the MTU College of Business, introduces risk-adjusted return metrics and how investors use them to measure their investment results. 

Politics are a major factor in financial markets. With the upcoming election, news in politics is constantly impacting the market. The market has been all over the place in the past week. Although the influence of politics on the market is difficult to predict, there are several trends that have been noticeable.

Presidential candidates are often gauged as “pro” or “anti” business, and the stock market reacts accordingly. When candidates generally are seen as pro-business are leading in the polls, the market tends to go up. When candidates that aren’t seen as pro-business are in the lead, the market tends to head in the opposite direction.

Historically, it has been found that following an election year the bond market will outperform while the stock market will slightly underperform. It has also been discovered that although the party affiliation matters slightly, it does not have a huge impact on trends. The bigger question of how the market reacts is whether the incumbent party wins the presidency or not.

If the incumbent party retains the presidency, the stock market averages around six-and-a-half percent a year, while if there is a change in the party it has returned slightly lower at five percent. 

Going one step further, certain sectors and companies can be impacted to a greater extent depending on the platform of the politicians. For example, a “hawkish” politician would be good for the defensive industry versus a “dovish” politician. That being said, the effect on the stock market is a wildcard. At this point in the election process, investors will see politics playing a heavy role in the market, which will likely increase the volatility of stocks.

It is important to note that this is only historical data, and the outcome of the election could hold vastly different results for the market. “Time in the market defeats timing the market.” It is better to just be in the market longterm, rather than try to predict how the market will react to an event like an election.

Watch this week’s video to learn more about supply chain management, and how investors can use this information when making decisions.