Stock Market n n Basics of Trading Investing

Stock Market n n Basics of Trading & Investing (2/3) Stock Market Basics https: //www. youtube. com/watch? v =CN 1 dh 6 w 54 B 8

Basic terms: buying Stock Corporations can raise money by issuing stock, which represents ownership in the corporation. n n n Stock is a portion of ownership in a company Stocks are also called equities. A single unit of stock is called a share. Stock split: when the price of a stock becomes too high, the price is split in half and the amount of shares double.

n Before the Stock Split DIS 100 shares $50/share Total Value: $5000 n After the stock split DIS 200 Shares $25/share Total Value: $5000 Why split the stock? As the price decreases, the quantity demanded increases

n n n Portfolio - a collection of all of your financial assets, including stocks & bonds Diversification - spreading out investments to reduce risk Speculation - making high risk investments with borrowed money n n led to the Stock Market Crash aka: Buying on Margin

Purchasing stock n n n Stockbroker – person who links buyers & sellers of stock Brokerage firms – businesses that specialize in trading stock Day trader – use computer programs to try and predict minute-by-minute price changes in hopes of earning a profit… profit causes a lot of volatility. unstable

Measuring Stock Performance n Bull market: When the stock market rises steadily over time.

Measuring Stock Performance n Bear market: when the stock market falls over a period of time.

INDEX n n The Dow Jones Industrial Average (The Dow): Average of 30 Blue Chip Stocks (safer stocks) used as an indicator S&P 500: Avg. of 500 stocks

Exchanges n n NYSE-> New York Stock Exchange: Exchange larger most established companies NASDAQ: specializes in high tech. + energy stocks

REGULATION n SEC - Securities & Exchange Commission n n regulates the Stock Market Insider Trading: making stock trades with information that has not been made available to the public n Martha Stewart: “white collar crime”

Want to join the Stock market? A company must first develop a: n Prospectus: collection/report of a businesses’ financial info. n IPO – Initial Public Offering: Introductory price

Types of Stocks may be classified either by whether or not they pay dividends or whether or not the stockholder has a say in the corporation’s affairs.

Buying Stocks = Gambling

HOW DO YOU MAKE MONEY? Stockowners can earn a profit in two ways: 1. Dividends: portions of a corporation’s profits, are paid out to stockholders of many corporations. The higher the corporate profit, the higher the dividend. 2. Capital gain: when a stockholder sells stock for more than he or she paid for it. (A stockholder that sells stock at a lower price, than the purchase price suffers a capital loss. )

Futures n Futures are contracts to buy or sell at a specific date in the future at a price specified today.

Stock Options n Options: contracts that give investors the option to buy or sell stock and other financial assets. There are two types of options: 1. Call options give buyers the option to buy shares of stock at a specified time in the future. 2. Put options give buyers the option to sell shares of stock at a specified time in the future.

Ticker Company Name MMM 3 M Corporation AA Alcoa MO Altria (was Philip Morris) AXP American Express AIG American Int'l Group SBC AT&T Inc. (was SBC) BA Boeing CAT Caterpillar C HD Home Depot HON Honeywell INTC Intel Corp. IBM Inter. Business Machines JNJ Johnson & Johnson JPM JP Morgan Chase MCD Mc. Donalds MRK Merck Citi. Group MSF T Microsoft KO Coca Cola PFE Pfizer DD E. I. Du. Pont de Nemours PG Procter and Gamble XOM Exxon Mobil UTX United Technologies GE General Electric VZ Verizon Communications GM General Motors WMT Wal-Mart Stores HPQ Hewlett-Packard DIS Walt Disney Co.

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The Great Crash The collapse of the stock market in 1929 is called the Great Crash. Causes of the Crash n n Many ordinary Americans were struggling financially: many purchased new consumer goods by borrowing money. Speculation, or the practice of making high-risk investments with borrowed money in hopes of getting a big return, was common.

Effects of the Great Crash n n The Crash contributed to a much wider, long-term crisis — the Great Depression during which many people lost their jobs, homes, and farms. Americans also became wary (fearful) of buying stock. As recently as the early 1980 s, only about 25% of households in the United States owned stock.

40 Images From The Great Depression That Inspire Gratitude http: //slaplaughter. danoah. com/40 -images-from -the-great-depression-that-inspire-gratitude/ Documentary 10 min https: //youtu. be/RJp. LMvg. UXe 8

Stock Market Review 1. A share of stock represents (a) debt that the government or a corporation must repay to an investor. (b) a portion of ownership in a corporation. (c) a system that allows the transfer of funds between savers and borrowers. (d) a collection of financial assets. 2. Which of the following represents a way to profit from buying stock? (a) capital gains (b) portfolios (c) speculation (d) capital losses