 How Do I Know Which Stocks to Buy?  There is no exact science to buying stocks  Some buy stocks recommended by stock brokers, friends, or financial experts reporting for television networks, magazines or newspapers  Some buy stocks from companies they are familiar with or have heard of before

 How Do I Know Which Stocks to Buy Continued…  Other people buy stocks based on rumors that the price will rise/fall sharply soon  Some will use “market indicators," which are numbers or graphs which may help indicate whether a stock will rise, fall, or stay the same

 Charts and Graphs  Show stock price movement over specified periods of time 1 Day, 3 Month, 6 Month, 1 Year, 5 Year  This can give you an idea about whether or not the stock at its current price is a good deal in comparison to its value over previous time periods

 P.E. Ratio (Price to Earnings Ratio)  The P/E looks at the relationship between the stock price and the company’s earnings  The P/E is the most popular metric of stock analysis  You calculate the P/E by taking the share price and dividing it by the company’s earnings per share  P/E = Stock Price / Earnings Per Share For example, a company with a share price of $40 and an EPS of 8 would have a P/E of 5 ($40 / 8 = 5).

 PE Ratio Continued…  What can the P/E tell you?  The higher the P/E the more the market is willing to pay for the company’s earnings  Some investors read a high P/E as an overpriced stock and that may be the case, however it can also indicate the market has high hopes for this stock’s future and has bid up the price.  Conversely, a low P/E may indicate a “vote of no confidence” by the market or it could mean this is a sleeper that the market has overlooked.

 P.E. Ratio - 0–10  May indicate a “vote of no confidence” by the market or it could mean this is a sleeper that the market has overlooked  P.E. Ratio - 10–17  For many companies a P/E ratio in this range may be considered fair value  P.E. Ratio - 17–25+  Either the stock is overvalued or investors have high hopes for the future earnings of this company

 Financial News Reports  S & P 500  The S&P 500 is a stock index published by Standard & Poor's  It measures 500 U.S. stocks that are supposed to be representative of the strength of the overall stock market  Dow Jones Industrial Averages (The Dow)  Is an averaged number representing the values of 30 U.S. “Blue-Chip" stocks  The DJIA is the most well-known market indicator in the world

Stock Quote  Walt Disney Co (NYSE:DIS)  Last Trade Size 0  $ Change % Change 0.00%  Volume 0 Previous Close  EPS P/E Ratio  Day High Day Low  52 Week High  52 Week Low

 Chance to Make Millions Handout 1

 Efficient Markets Theory  States that all stock prices accurately reflect all historical and current information, which makes finding any undervalued stock virtually impossible  The reasoning behind this is that if the stock you chose to buy was truly undervalued, investors would have already been buying the stock and thus pushing the stock price up until it was considered accurately valued

 Efficient Markets Theory Continued…  In support of this theory, many studies have shown that picking stocks by throwing darts at the stock table is just as likely to earn you profits as listening to the “market experts”  This theory does not state that you cannot make money in the stock market, but it does state that outperforming the stock market or trying to time the market is extremely difficult

 Chance to Make Millions Handout 2

 Factors That Can Determine Stock Price  1.) Investors' perceptions of what the stock is worth (Supply/Demand)  2.) Company earnings  3.) Recent company news  4.) The state of the U.S. and world economies  5.) World events

 Bull Market  A bull market occurs when stock prices are rising faster than their historical averages  Bear Market  A bear market occurs when stock prices are falling faster than their historical averages

 New York Stock Exchange  Located on Wall Street in New York City, the NYSE is the world’s largest stock exchange and it is often referred as the “Big Board”  It provides a place for buyers and sellers to trade shares of stock in companies registered for public trading  The NYSE is open for trading Monday through Friday between 9:30am – 4:00pm

 Insider Trading  Insider trading occurs (1) when an insider to a company, such as an officer or someone who owns a large percentage of the company, trades the company's stock  This is legal and acceptable, as long as that person is not trading based upon non-public company information  Insider trading also occurs (2) when anyone, including employees, trades using non-public company information  This is considered illegal

 Looking for video clip involving any of the following and their investment stories:  Martha Stewart  Lenny Dystra  Warren Buffet  Mark Cuban  n

 Day Trading  Day trading is the process of buying and selling the same stock during one day  It can be very profitable - you can make thousands of dollars in a very short amount of time  On the other hand, you can lose that money just as quickly  One of the main challenges for a day trader is that stock prices usually change very little throughout the day  In order to make a sizeable profit, you must put large amounts of money into the stock  Most stocks only fluctuate 1-2 percent a day

 Short Selling  The short seller hopes to profit from a decline in the price of the stock  This is an advanced technique that has strict requirements and higher risks

 Initial Public Offering (IPO)  When a company issues stock to the general public for the first time, it is called an Initial Public Offering  The SEC has strict guidelines on how this is carried out  The company can issue more stock in the future, which is called a Secondary IPO

 Blue Chip Stocks  A blue chip stock is the stock of a well- established company having stable earnings and no extensive liabilities  Examples: Coca Cola, Wal-Mart, Exxon- Mobile  The term is derived from casinos, where blue chips represent the greatest value among the many colors of chips

 Penny Stocks  Less than $1 (or $5 in some cases) per share.  Trading penny stocks is very popular among traders looking to make large gains quickly  Here is an example Invest $1,000 in a penny stock - a 15% gain in one day is $150. Invest $1,000 in a blue chip stock - a 2% gain in one week is only $20.  Keep in mind, you can just as easily lose a large percentage of your investment in one day, so be very careful

 SEC  The Securities and Exchange Commission (SEC) is the government agency responsible for protecting investors by monitoring and regulating brokers, dealers, and the stock and bond markets in the U.S.  They also make sure publicly-traded companies disclose the required business details to the public