Introduction to the Stock Market The Basics of Stock Investing

Types of Investments (4-Asset Classes) Stocks Real Estate Bonds Cash Accounts Checking account, CD’s, money markets

Why Companies Issue Stock To raise financial capital to expand & run business Companies can also issue bonds to raise financial capital Investment Banks help companies issue stock & bonds

Holding Period The longer the holding period----the more risk you should take Stocks are a long term investment minimum 5-year holding period A diversified portfolio should own at least 15 different stocks often stock indices are the best way to accomplish this

You can invest in indices Key Stock Indices S&P 500 Index Largest 500 companies by $ value Dow Jones 30 very large American companies Nasdaq primarily technology stocks indices track the performance of a large # of stocks You can invest in indices through index funds and ETF’s

BULL or BEAR MARKET? . .

Sectors of Stock Market Industry Type Sectors of Stock Market Technology Transportation Retail Financials Energy Health Care Defense New Industries (looking to the future…)

What is company worth? Company A Company B

2 Goals of a Company 1) Maximize Profits (each year) 2) Grow Profits (over time) Companies that grow PROFITS the fastest have the best stock performance

Growth Rates P.E. ratios reflect GROWTH rate expectations The HIGHER the P.E. => the FASTER the market expects Profits to Grow Below 10 P.E. => considered low Called a “value” stock Above 35 P.E. => considered high Called a “growth stock”

Today’s Stock market PE = 15 SP500 Average PE 1900-2009 is 15

Yahoo for analysis