Stock Market Ch 11 O The Stock Market

Stock Market Ch. 11 O The Stock Market - What do you own if you own stock? (shares) ownership in a company - What is the reason a company sells shares of stock? Provide $ for expansion or modernizing

Stock Market Public Company vs. Private Company O Public – company that offers its stock for sale. Partially owned by investors who buy stock through a stock exchange O Private – owned by a person, family, or small group of investors who do not offer stock to the general public.

Stock Market Where does stock come from? * Investment bankers and company agree on a stock offering (IPO) * Investment bankers buy shares at a set price – this is the primary market * Investment bankers sell stock to the public to make a profit – this is the secondary market.

Stock Market Types of Stock *Common stock - ownership entitles owner a vote in Board of Directors matters. - Does not guarantee a dividend - More volatile – price changes more *Preferred Stock – No voting rights - Dividend is guaranteed if there is one offered - Not as volatile as common stock - If company fails, you get repaid 1 st

Stock Market Stock Exchanges Market for buying and selling stock *NYSE (major exchange) - largest most established companies - blue chip stocks - sound finances and proven record - 1 to 3 letter in stock symbol

Stock Market Stock Exchanges *AMEX – Lesser established companies - As many as 5 letters in ticker symbol *NASDAQ - Newer, smaller companies in technology - As many as 5 letters in ticker symbol *Internet

Stock Table

Stock Market Mutual Funds - Funds consist of many different stocks or bonds (could be 100 or more) - Managed by professionals so you don’t have to - Manager pools $ of investors - Easy way to diversify (not putting all eggs in one basket) (less risky than stock) - Ticker symbols usually 5 letters ending in “X”

Stock Market Bonds - Like an I. O. U. for loan you have made to an institution - In return, the issuer promises to pay you interest + repay the face value when the bond matures - Corporate – backed by corporation - Municipal – issued by state and local govt. - Treasuries – Bonds & Bills – backed by U. S. Govt.

Stock Market Dividends Corporate profits paid to shareholders. - Paid every quarter or once a year - Good indicator of wealth (higher profit = higher dividend)

Stock Market Gains & Losses - Capital Gain - sell stock for more than you bought it. - Capital Loss - sell stock for less than you bought it. (gain + dividends = total return) Day Trader ?

Stock Market O Stocksplits - happens when value of stock gets too high. - each share splits into more than one - why do this?

Stock Market O Buy on Margin - buy stock on credit - can only buy certain percentage. Never more than 50 %. - 100 shares @ $100 / share = $10, 000 - you only have $5, 000 - borrow other $5, 000

Stock Market O Short sell – Borrow Stock from Brokerage firm (unsold inventory or from another investor). Must return it in the future. - Borrow - hope market goes down – Short cover (buy back) at lower price - pocket difference. - sell 200 @ $50 / share = $10, 000 - buy 200 @ $40 / share = $8, 000

Stock Market Risky Business High Risk = High Reward - Stock Broker - person bringing together buyers and sellers of stock. - Brokerage firm - business specializing in trading stocks. - They will charge broker’s fees

Stock Market O Measurements - Bull Market - Bear Market - Dow Jones Industrial Avg. (The Dow) 30 large companies in various industry. Represents market as a whole.

Stock Market - S & P 500 - (standard & Poors) - more broad picture of market. - overall performance of stock market.

Stock Market O Stock market crash - 1929 (Bull Market) - Wealth in hands of few - interest rates low - people going into debt - speculation popular

Stock Market - high demand for stock - prices higher than real value - Oct 29, 1929 - Black Tuesday - Americans cautious until 80’s & 90’s - 47 % households in market in 90’s

Stock Market Places to research freestockcharts. com nyse. com CBS marketwatch nasdaq. com MSN Moneycentral Yahoo Finance Morningstar. com money. cnn. com Pathtoinvesting. org Investinginbonds. com

Money & Finance Ch. 10 - Ch. 11 O Money -Currency - coins & bills greenbacks, benjamins, cabbage, c-note -cattle, salt, stones, rice, wheat,

Money & Finance (10. 1) O How do you define money? - Money (medium of exchange) something used to determine value - Barter Takes a lot of effort - need double coincidence of wants.

Money & Finance (10. 1) - Money (unit of account) - compare value of goods and services - in U. S. value measured in dollars and cents - gives ability to determine value - other units of account?

Money & Finance - Money (Store of Value) - Something that holds its value - Money will hold value for future. - but, hard to predict future value.

Money & Finance 1. 6 characteristics of money Durability 2. Portability 3. Divisibility - Only pay what you have to. Different nominations O

Money & Finance 4. Uniformity - 4 quarters = $1 no dispute on value of money 5. Limited Supply 6. Acceptability

Money & Finance O What gives money its value? (types of money) - Commodity Money - objects with value in themselves and are used as money

Money & Finance - Representative Money - something that can be exchanged for money - I. O. U - Silver Certificates - Gold Standard

Money & Finance - Fiat Money - something that has value because govt. says it does. - Money is ordered to be acceptable for payment of debts