Markets

Teach the complete lesson. Emphasize primary and secondary markets, IPOs, investment banks, brokers, and the role of exchanges in facilitating trades. Trace how shares move from issuance through secondary-market trading and how investor orders reach the market.

Following LEI Lesson 7, use slides 17 and 24 from Building Wealth Lesson 6 to explain bid and ask prices and how buyers and sellers interact in a market. Introduce the bid-ask spread as the difference between the ask and bid prices. Then use the Market Order, Limit Order, and Stop Order sections of the SEC’s Understanding Order Types bulletin to compare how orders are executed. Emphasize the trade-off between execution and price certainty, including the possibility of partial execution or an unfilled order.

Review the introduction to stock indexes in LEI Lesson 7. Then use slides 32–35 from Building Wealth Lesson 6 to introduce index funds and compare indexes by geography, sector, and company size. Emphasize that indexes represent different groups of securities and therefore may produce different performance results.
Supplement this instruction with an explanation of how a market index can serve as a benchmark for evaluating investment performance, the distinction between market-cap-weighted and price-weighted indexes, and how investors select an appropriate benchmark for a portfolio.

Following Essential Lesson 2, use the “The Basics of Non-Traditional Indexes” and “A Closer Look at Non-Traditional Index Funds” sections of the FINRA article to extend students’ understanding of how indexes are constructed. Emphasize that indexes use rules to determine which securities are included and how they are weighted. Compare traditional market-capitalization weighting with alternative approaches, such as equal weighting or weighting based on other factors. Reinforce that different construction and weighting methods can cause indexes to represent different market exposures and produce different performance results.

• Note: This resource does not explain price-weighted indexes. Briefly explain that in a price-weighted index, stocks with higher share prices have a greater influence on the index than stocks with lower share prices. The Dow Jones Industrial Average is a commonly cited example.

Teach the complete lesson. Emphasize fundamental analysis and how investors use company size, revenue, earnings, EPS, market capitalization, P/E ratios, and other information to compare companies and make investment decisions. Reinforce that individual measures should be interpreted in context rather than used alone.

Following LEI Lesson 11, use the Key Valuation Ratios section of FINRA’s Evaluating Stocks to reinforce how investors use financial ratios to compare companies. Review EPS and P/E, emphasizing that the P/E ratio indicates how much investors are paying for each dollar of a company’s earnings. Briefly introduce P/S and D/E as additional measures investors may use. Emphasize that ratios should not be interpreted in isolation; comparisons with similar companies, the company’s industry, and the broader market provide important context

Use the Reading Stock Charts: Technical Analysis and Price Behavior lesson to introduce students to technical analysis and how investors use historical price and trading information to examine market behavior. Students compare fundamental and technical analysis, learn to read common stock charts, and interpret trends, support and resistance, moving averages, and trading volume. Through the accompanying visuals and student handout, students apply these concepts to hypothetical stock-price data and consider the limitations of using historical patterns to evaluate future price movements.

• Emphasize that technical indicators can help investors identify and describe historical patterns and trends but cannot predict future stock prices with certainty. Technical analysis should be considered alongside fundamental information and other investment research.