Date: January 31, 2011 Topic: The Stock Market Aim: How does the stock market function? Do Now: What do you like to buy in the market?

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Presentation transcript:

Date: January 31, 2011 Topic: The Stock Market Aim: How does the stock market function? Do Now: What do you like to buy in the market?

Buying Stock  Issued in portions known as shares.  Represent ownership in the corporation.  Corporations raise money to start, run, or expand business.  Stocks are also known as equities – claims of ownership in a corporation.

Benefits – Making Money!!  Dividends  profits that are paid to stockholders usually 4 times a year.  Capital Gains  selling the stock for more than you paid for it (opposite capital loss).

Types of Stock  Income Stock  Pays dividends at regular times during the year.  Growth Stock  pays few or no dividends. The issuing company will reinvest its dividends in the company.  Common Stock  owners are voting owners of the company.  Preferred Stock  nonvoting owners of the company. If the company goes out of business preferred stockholders get their money back before common stockholders.

STOCK EXCHANGES  WHERE STOCKS ARE BOUGHT AND SOLD. Ex: New York Stock Exchange and NASDAQ (National Association of Securities Dealers Automated Quotations).

The OTC Market – Over the Counter  Many stocks are bought and sold electronically – over the counter

How Stocks Are Traded?  Stockbroker  links buyers and sellers of stock  Brokerage firms  businesses that specialize in trading stocks  Earn a profit by charging a commission

Bull and Bear Markets  Bull Market  when the stock market rises steadily over a period of time  Bear Market  falls for a period of time

The Dow Jones  Represents 30 large companies in different industries.

 3M Company  Alcoa Incorporated  American Express  AT&T  Bank of America  Caterpillar Incorporated  Chevron Group  Cisco Systems  DuPont  Exxon Mobil Corporation  General Electric Company  Hewlett-Packard Company  Intel Corp.  International Business Machines Corporation  J.P. Morgan Chase and Company  Johnson & Johnson  Kraft Foods  McDonald’s Corporation  Merck & Company, Inc.  Microsoft Corporation  Pfizer Incorporated  Procter & Gamble Company  The Boeing Company  The Coca-Cola Company  The Home Depot Inc.  Travelers Group  United Technologies Inc.  Verizon Communications, Inc.  Wal-Mart Stores Incorporated  Walt Disney Company

S&P 500  Tracks performance of 500 different stocks and bonds.

STOCK SPLIT  MEANS THAT A SINGLE SHARE OF STOCK SPLITS INTO MORE THAN ONE SHARE. Why?  a company may initiate a stock split when the price of a stock becomes so high that it discourages potential investors from buying it.

HOMEWORK  Test Tomorrow!!