STOCK MARKET

INVESTMENT  Definition- act of redirecting resources from being consumed today so they may create benefits in the future.

RISK AND RETURN  All investments involve risk and returns  Risk- investments may be lost  Return- money above the original amount of investment  Because of risk investors are encouraged to diversify- make investments in many different companies or funds.  The higher the risk the greater the possible return.

SELLING BONDS  Bonds or loans that represent a debt that the government or a corporation must repay an investor.  Participants: 1.Seller (corporation of gov’t) = Issuer 2.Buyer or Investor = Holder

WHY ARE BONDS SOLD?  Corporations or governments need money  Allows corporations to build capital Uses of funds:  Corporations- new research, expansion  Government- defense costs, public works - Most funds for government spending come from taxes but sometimes the government must borrow money– known as the deficit.

 Place where stocks and bonds are bought and sold  Stocks and bonds are sold to increase capital (funds) for a firm or government. Note– governments only sell bonds.  Bond- loans or IOU’s that represent a debt a firm or government must repay to the investor BASICS

 Investments into companies  Can also be referred to as shares  Buying a piece of the company (share)  Share entitles the owner to a piece of the assets (what the company owns) and earnings (profit) of a company  Stocks can only be sold by corporations – publically owned company STOCKS

 Bull Market –stocks rise steadily over time. Generally a sign of economic growth. The expectation of growth leads to an increase in the buying of stock.  Bear Market- stock prices decrease over a period of time. Generally a sign of shrinking economic activity. Leads to a selling of stock. MARKET CHANGES

 Stock is purchased with the hope of making a profit  If profits are made, dividends (share of a company’s income after taxes) are paid to share holders  Share holders choose to be paid in cash for dividends or reinvest them by purchasing more shares  If stock prices rise this is known as capital gain  If stock prices decrease this is known as capital loss

 Stockbroker- person who links buyers and sellers of stock. Works on commission and fees– you pay a fee to use this broker.  Brokerage Firm- businesses that specialize in the buying and selling of stocks ex: Charles Schwab  Stock Exchange -New York Stock Exchange (NYSE)- only trades for the largest and most established companies. Known as blue chip- have a long history of doing business ex: Coca-Cola, Gap, JCPenney -NASDAQ- companies not traded on the NYSE- known as over the counter stocks or the OTC market TRADING (BUYING AND SELLING OF STOCK)

 Dow Jones Industrial Average – tracks how 30 large companies across industries (entertainment, food, technology, clothing) have traded daily. Dow Jones is an average of these stock prices in points.  S & P 500 (Standard and Poor’s 500)- tracks price changes for 500 different stocks daily. S & P 500 is an average of these stock prices in points. INFORMATION ON THE STOCK MARKET