Tuesday, March 21, 2017 Objective: Students will be able to assess ways to be a wise investor in the stock market and in other personal investment options. Purpose: Making investments can be risky, so it is important to know how to identify risks when making an investment.

Stocks Stock: a portion of ownership of a company People who own stocks are called shareholders By selling shares, corporations raise money to start, run, and expand their businesses.

Stocks Stock prices are based on the supply and demand for shares of ownership in a company A company may seek to split a stock when the price of stock becomes so high that it discourages potential investors from buying it Shareholders like splits, however, because splits usually demonstrate that the company is doing well, and the lower stock price tends to attract more investors

A stock split doubles the amount of shares that a stockholder owns A stock split doubles the amount of shares that a stockholder owns. Why does the value of the stock not also double?

Benefits of Stocks Dividends: the profits by the corporation that are paid to the stockholders The size of the dividend depends on the amount of profit that the corporation made. Capital Gains: the difference between a higher selling price and a lower purchasing price You could also have a capital loss

Risks of Stocks Buying stock is a risky business because stockholders may lose a lot of money. The more money that an investor pays for stock, the greater the risk of losing money.

Stock Exchanges Stock Exchange: market for buying and selling stock Most American stock exchanges are in New York Most newspapers publish the results of daily activity on the floor of major stock exchanges.

Buying Stocks Most people buy and sell stocks through brokers Brokers buy and sell stocks for others in exchange for a small fee Others will buy and sell stocks on the floor of a stock exchange Some even buy and sell stocks online, although it is not as secure

Both types of options have a “safety valve,” a way of ensuring that the investor does not lose money—other than the fee paid for the option. How does this “safety valve” work?

New York Stock Exchange Largest stock exchange in the world Two indices The Dow (The Dow Jones Industrial Average) They take the 30 most representative companies in each industry and calculate the average values in each industry S&P 500: Looks at 500 different companies as a measure of the overall stock market performance.

New York Stock Exchange NASDAQ: stock index of technological companies Stock indices tell us: How well the economy is performing How the economy will perform in the future Stock prices change due to the performance of a company

Stock Market Performance Bull Market: a steady rise in the stock market over a period of time Examples: most of the 1920s, 1990s, 2010 to the present Bear Market: a steady decline in the stock market over a period of time Examples: Early 1990s, Dot-com bubble, 2007-2009 stock declines

Trends in the Stock Market Great Crash of 1929 Few companies and families held majority of the wealth in country. Investor debt was pilling up Speculation was popular – making high-risk investments with borrowed money in hopes of getting a big return

Trends in the Stock Market Buying on Margin this was done to attract less-wealthy investors. You paid a portion of the stock price when you bought it. You would borrow the rest from the brokerage firm and pay the difference when you sold. Brokers demanded repayment for the borrowed money people had borrowed for the sale of their stock. After the crash, many people saw the stock market as too risky of an investment.

Recent Trends 1990s: strong bull market due to consistent economic growth, dotcom bubble in the late 90s 2007-2008: stock market suffers significant declines due to subprime mortgage crisis 2009 to present: mainly in bull market, value of the Dow doubles

Types of Companies to Invest in Energy companies (NRG, Exelon) Technology companies (Apple, Samsung, Sony) Healthcare companies Why? They all consistently make a high profit.

Pick a Stock Choose a company and find the following information: Current stock price Highest stock price and the lowest stock price within the last 52 weeks Stock performance over the last year. Also, explain why the stock has gone up/gone down during this time