O EQUITY=OWNERSHIP OF PART OF CORPORATION o STOCKHOLDER=PERSON WHO BUYS STOCK o PRICE OF STOCK =DETERMINED BY HOW MUCH INVESTORS WANT TO PAY VIDEO: WHAT.

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Presentation transcript:

o EQUITY=OWNERSHIP OF PART OF CORPORATION o STOCKHOLDER=PERSON WHO BUYS STOCK o PRICE OF STOCK =DETERMINED BY HOW MUCH INVESTORS WANT TO PAY VIDEO: WHAT IS PURPOSE OF THE STOCK MARKET What is stock?

Common & Preferred Stock COMMON STOCK  If price increases  sell shares at a profit  If price decreases  shares lose value  Earn dividends if corporation pays them PREFERRED STOCK  Dividend payment has priority  Dividends do not increase if company prospers  If company fails, shareholders more likely to get $$$$ back Schoolhouse RockSchoolhouse Rock BASIC DEFINITIONS

Blue Chip Stocks

LARGE CAP = $1B value Market cap = # of shares multiplied by price of shares Why invest in Blue Chips?  Reliable returns  Well established  Dividends Examples of Blue Chips Heinz, Coca Cola, Gilette, Exxon, General Mills, Kellogg, IBM, Nestle, McDonalds Origin of “Blue Chip

Major Exchanges in U.S. New York Stock Exchange (NYSE) History of the New York Stock Exchange NASDAQ NASDAQ—What is it? American Stock Exchange

Talking about stocks….

Indexes In the case of financial markets, an index is an imaginary portfolio of securities representing a particular market or a portion of it. Each index has its own calculation methodology. Thus, the percentage change is more important than the actual numeric value. Stock and bond market indexes are used to construct index mutual funds and exchange-traded funds (ETFs) whose portfolios mirror the components of the index. most well known: S & P 500 (index includes 500 leading companies in leading industries of the U.S. economy, capturing 75% coverage of U.S. equities, mostly blue chips)

Examples of Index Funds S & P 500 (index includes 500 leading companies in leading industries of the U.S. economy, capturing 75% coverage of U.S. equities, mostly blue chips) S & P 500 Dow Jones Industrial Average (represent sectors) Dow Jones Industrial Average NASDAQ 100 (many hi-tech companies) NASDAQ 100 DJ Wilshire 5000 MSCI EAFE (foreign stocks in Europe, Australasia, Far East)

RESEARCH ON COMPANIES Finance Yahoo Additional Resources: Class Website with LinksClass Website with Links

Bear Market

Meanings of “Public” and “Private”