The Stock Market Game Week in Review: Nov. 26-30

Tenacious Ohio State football coach, Woody Hayes, once said, "Nothing cleanses the soul more than getting the heck kicked out of you." After weeks of getting similar treatment, mortgage lenders got off the ground on Friday, Nov. 30, rallying on the news that the Treasury Department and banks, such as Citigroup (C), Wells Fargo (WFC), Washington Mutual (WM), and Countrywide Financial (CFC) were near an agreement on freezing the rates on sub-prime loans that are in danger of foreclosure .

This and hints from the Federal Reserve that another rate cut might be in the offing buoyed the Dow after an early week thrashing (the Dow Diamonds ETF (DIA) tracks the performance of the 30 stocks in the Dow).

You and your students might be hearing a lot about a "flight to safety" in the financial news these days. What these means is that investors spooked by the sub-prime mortgage fallout are parking their money in government bonds . Bonds are essentially I.O.U.s that are issued by governments and corporations. The bond investor loans the government or corporation money at a set rate of interest for a certain period of time, usually in $1000 increments. Like stocks , bonds vary in quality, but U.S. Treasuries which are backed by the full faith and credit of the U.S. government, are considered the safest investment on the Street.

Unlike stocks, bonds are very stable financial instruments that pay predictable interest and see only minor price fluctuations. This makes them less lucrative than stocks, but perfect for investors who prefer a good night's sleep over the ups and downs of Google (GOOG) shares .

What does this have to do with the Stock Market Game (SMG)? Good question.

Given the nature of the market this fall, losses on student portfolios may be the norm. This is an opportunity to educate them about the Rule of 72 and compound interest , as well as safer investments other than stocks, such as bonds and mutual funds . It is also an opportunity to discuss risk tolerance .

Some of the biggest investment losses in the classroom were likely the result of overly aggressive stock picks in a portfolio that was not diversified . Some of the biggest gains may have occurred the same way, but few investors have the stomach for that kind of risk when it's real money - their money - on the line.

For classroom resources to discuss these concepts, visit the Teacher Support Center where you can download lessons such as "How Investments Grow Over Time (which covers the Rule of 72), Mutual Funds, and What is a Bond?"

Not interested in talking about compound interest? Take a look at the PNC Christmas Index. It's a fun way to teach students about the cost of goods and inflation .

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