Chapter 11 Section 3 Investing in Equities and Options

Stocks and Markets Equities Shares of common stock that represent ownership of corporations Stock Broker Person whom buys or sells shares of stock Stock Market Efficiency Efficient Market Hypothesis Stocks are priced correctly and bargains are hard to find because the are followed so closely

Diversify Portfolio Diversification Holding a large number of different stocks in hopes that they will offset each other Mutual Funds, Diverse Sells stock in itself to individual investors along with the stocks of other companies Value is referred to as the NAV, Net Asset Value, net value of the fund divided by the shares

401 K Tax Deferred investment and savings plan that acts as a pension plan Often involve matched funds, by the employee and employer

Securities Exchange Place where buyers and sellers exchange shares of stock Types: OTC, Over The Counter, stocks not traded on an organized exchange like NYSE NASDAQ is the most important OTC Market, largest electronic market NYSE and AMEX, organized exchnages

Performance Measures DJIA Dow Jones Industrial Averages Most popular measure of stock performance Other that mark performance Standard and Poor 500 Bull Market Strong Market where prices are moving up for several months or years Bear Market Weak Market where prices are moving down

Futures Futures Contract Agreement to buy or sell at a specific date at a pre determined price Option Special future giving buyer the option to cancle contract Call Option The right to buy at a specific future price Put Option Right to sell at a specific future price