Building a Financial Future UNDERSTANDING OUR FREE ENTERPRISE SYSTEM

Fundamentals of the Stock Market ❖ What You Should Know ❖ Q&A - 10 Important Questions

What You Should Know Source: Stock Market Investing for Beginners, 2013 –Chapter 2 ❏ There will be a lot of new and unfamiliar financial terms to learn ❏ Do not become discouraged if you do not understand a word of phrase you encounter ❏ Use the Wall Street Journal or watch CNBC to enlighten your financial vocabulary

What You Should Know ❏ Important exchanges ❏ American Stock Exchange (AMEX) ❏ Chicago Board Options Exchange (CBOE) ❏ Chicago Mercantile Exchange (CME) ❏ Nasdaq Stock Market (NASDAQ) ❏ New York Stock Exchange (NYSE) Source: Stock Market Investing for Beginners, 2013 –Chapter 2

Q&A - 10 Important Questions Question #1: How do I start investing in stocks? Answer: Open an investment account with a broker. “A brokerage account will give you access to thousands of stocks...mutual funds and other investments.” Source: Stock Market Investing for Beginners, 2013 –Chapter 2 Pg. 12

Q&A - 10 Important Questions Question #2: How much money do I need to start investing in stocks? Answer: $100,000 would be an ideal amount so you can invest in a multitude of companies to diversify your portfolio. However, if you only have $50.00 or $1,000 to invest, then that’s okay too! It’s completely up to the investor and how much money you are willing to put in the market. Source: Stock Market Investing for Beginners, 2013 –Chapter 2 Pg

Q&A - 10 Important Questions Question #3: I want to buy Apple, but the stock costs several hundred dollars per share, and I don’t have enough money to buy 100 shares. Should I stick to cheaper stocks? Answer: Buying shares at a quantity of 100 shares is what is known as a round lot. Round lots used to be common, but are now outdated. Buying in an even amount of shares should not be the investor’s primary concern. “Professionals value stocks relative to earnings, cash flows, or sales, and so should you.” Source: Stock Market Investing for Beginners, 2013 –Chapter 1 Pg. 14

Q&A - 10 Important Questions Question #4: Which should I buy, stocks or bonds? Answer: Stocks can present a higher growth potential during the market’s successful periods. Bonds are likely to have a higher income and a more steady overall return. It is wise to invest in both stocks and bonds. “The industry rule of thumb: Subtract your age from 110, and you have a good baseline for stock exposure.” Ex: If you are 20 years old, you should invest in 90% stocks and 10% bonds. Source: Stock Market Investing for Beginners, 2013 –Chapter 2 Pg

Q&A - 10 Important Questions Question #5: How do I know which stocks to buy? Answer: Judge the purchase of stocks by the following themes: ❏ Value ❏ Growth ❏ Profitability ❏ News ❏ Comfort level Source: Stock Market Investing for Beginners, 2013 –Chapter 2

“No investment, even a profitable one, makes sense for an investor who can’t buy into the idea as well as the stock.” Source: Stock Market Investing for Beginners, 2013 –Chapter 2 Pg. 16

Q&A - 10 Important Questions Question #6: How do I know when to sell a stock? Answer: Consider selling your stock if: ❏ The reason you bought the stock no longer applies ❏ The company has fundamentally changed ❏ The business has fundamentally changed ❏ You need the money Source: Stock Market Investing for Beginners, 2013 –Chapter 2

Q&A - 10 Important Questions Question #7: My stock has declined, but I can’t find any news on it. What caused the dip? Answer: Some reasons for a decline in stock price are: ❏ Other investors could have sold their stock to record profits ❏ Bad news concerning another company in the industry may have been released ❏ If a close competitor in the industry has taken a substantial loss, the company you have invested in may sell off their stocks in sympathy Source: Stock Market Investing for Beginners, 2013 –Chapter 2

Q&A - 10 Important Questions Question #8: How do I track my portfolio? Answer: If you invested through a discount broker your portfolio details should be available with ease through their website. Other sources that define company and stock status are; Yahoo! Finance, Google Finance, and MSN Money. To search for your company’s financial information, type your stock's’ ticker symbol, the abbreviation used to uniquely define each publicly traded company Source: Stock Market Investing for Beginners, 2013 –Chapter 2

Q&A - 10 Important Questions Question #9: Should I subscribe to a newsletter or go to a broker for help picking stocks? Or am I better off making my own investment decisions and not paying for advice? Answer: It depends on how much time you are willing to spend analyzing your stocks, and how comfortable you are calculating numbers. Source: Stock Market Investing for Beginners, 2013 –Chapter 2

Q&A - 10 Important Questions Question #10: The stock market is falling, but I like the looks of Acme Widget. Should I buy the shares now or wait until the price dips further? Answer: “Draw conclusions about where it will go based on where it has been.” You should consider the stock and company’s previous record in the market to judge the potential growth or decline of the stock. Source: Stock Market Investing for Beginners, 2013 –Chapter 2 Pg. 21

“Don’t kick yourself for acting too soon if the market declines, and don’t pay yourself on the back because you bought right before an upturn.” Source: Stock Market Investing for Beginners, 2013 –Chapter 2 Pg. 22