The Stock Market

What are stocks? A stock represents a share of ownership in a publically traded company. Shares are also known as securities because they secure cash value for ease of investment.

What is a stock market? A stock market is a physical or digital marketplace for the sale of shares in companies. Stock brokers are professionals who purchase and sell shares.

Where are stocks sold? The New York Stock Exchange, located on the corner of Wall St. and Broad St., is the oldest, largest, and most famous stock market. The NASDAQ is the second largest stock market in the world and is a digital, computerized market.

How do most people invest in stock markets? 54% of Americans are invested in stock markets through retirement plans like 401(k)’s for private companies, or 403(b)’s for public employees. These retirement plans take a portion of a worker’s pay and invest it in stocks for retirement at the age of 59 ½ . Private employers may match the employees donation to their 401k.

What are 401-k or 403-b plans made of? Private employee 401(k) plans or public employee 403(b) plans are made up of a variety of investment products such as company stocks or mutual funds. A mutual fund is a professionally managed investment that pools money from many people to purchase a variety of stocks. They are packaged together like baskets of eggs, and offer both low risk and high risk options.

What kind of stocks are out there? The most valuable and stable stocks are called “blue chips”. (30 Dow Jones Components) Mid caps, small caps and penny stocks are riskier investments and less valuable companies. All company stocks have a ticker symbol, like Walmart is WMT, Facebook is FB and Coca Cola is K.

How are stock market performances measured? The Dow Jones Industrials Average (DOW) is an index that measures the performance of 30 major U.S. stocks like McDonalds, Walmart, Microsoft and Verizon. 20, 981.33 The NASDAQ index measures the performance of technology heavy stocks in the NASDAQ market The S&P 500 (Standard and Poors), is an index based on 500 leading companies in the U.S.

Combining stocks and mutual funds! ETF’s Exchange Traded Funds are investments that can be traded like a stock, but have the diversity of mutual funds. They also have ticker symbols. Mr. Bertrand’s favorite ETF’s to invest in are the DIA, QQQ and SPY. They just follow the market and don’t take crazy risks.

DIA: SPDR Dow Jones Industrials Average ETF

SPY : SPDR S&P 500 ETF

QQQ: PowerShares Nasdaq ETF

Online Investment Sites

When are stocks/securities offered for sale? Stocks and bonds are first offered on primary markets during an IPO (initial public offering) to a select group of investors. After the IPO, they are sold on secondary markets (NYSE, NASDAQ) to the public for different prices.

What else can be securities? Bonds are also securities because they hold cash value as an IOU from banks, businesses or governments, paid back with interest. The U.S. government sells Treasury Bonds, Notes and Bills of decreasing values.

Are there any more securities? A future is an obligation to buy or sell a specified quantity of a commodity at a specified price on a specified date. Buy 100 pounds of coffee in December at $1.30 per pound an option is the right (but not the obligation) to buy or sell a specified quantity of a commodity at a particular price over a specified time period. Spend $5 to purchase the right to buy 100 pounds of coffee for $1.30 per pound by the last day in December.

What are Currency Markets? Some people invest in different types of currency around the world by trading one form of money for another. Today you buy a Euro for $1.06 in US money You bet your Euro will grow stronger against the U.S. dollar You trade your Euro back for dollars when its worth $1.26 You profit .20¢

Where else are stocks traded? Stocks are traded internationally on exchanges throughout the world and measured on indexes such as the FTSE in the U.K. and the Frankfurt Exchange’s DAX in Germany. Major Asian stock exchanges have recently become prominent such as the NIKKEI in Japan, the Shenzhen in Shanghai, and Hang Seng of China.