11/17/2009

 Corporations sell a share of stocks to raise $ to fund their operations Just like bonds Loan  When you purchase a share you are purchasing ownership in that company If you buy 1 share of a 100 share company  People buy stock to make money  Why would a company rather borrow from you rather then the bank?

 Share – Piece of stock  Portfolio – list of all stocks you own  Every stock has a symbol F WMT GOOG YUM

 PROFIT Ways to make profit  Dividends – a portion of profits paid to stock holders  Done quarterly (4x a year)  No profits, no dividends  Capital Gains – Sell for more then you bought it for  Capital Loss – lose money when sold  Taxes

 Types of stock Income Stock - Pay out their profits  Dividends Growth Stock – Keep Profits  Capital Gains  Grow faster  Riskier

 Stock Splits – the division of a single share into more than one Number of stocks doubles, price is cut in half. Occurs when $ of a stock is getting too high Dicks Sporting Goods 400 Shares $50 $2000 Total Dicks Sporting Goods 200 Shares $100 $2000 Total

 Risks of Stock Firms may earn little to no profit which would cause stock prices to fall  Company goes bankrupt  You lose all the stock’s value  Capital Loss – sell at less than you bought it for

 Stock Size Micro Cap – less than $500 M Small Cap - $500 M - $2 B Mid Cap - $2 B - $10 B. Large cap - $10 B. - $100 B. Mega Cap - $100 B or more  Large stocks are more stable, but have less potential for growth.  Small companies are more likely to grow, but are less stable.

 Diversify Sectors Communication – VZ, T Capital Goods – Cat, DE, BA Consumer Staples – JNJ, KFT Healthcare – Pfizer, Merck Technology – Dell, IBM Transportation – F

 What makes price change? Rumor Speculation Good News High Profits Bad News Low Profits Mergers Corruption/Scandal Recalls Luck

 Contact a stockbroker Stockbroker – a person who links buyers and sellers of stock – experts  Charge commission  Stock is bought/sold at a stock exchange Stock exchange – markets for buying/selling stock The major stock exchanges are NYSE and NASDAQ

 NYSE – New York Stock Exchange. 9:30 am – 4pm Located on Wall Street in New York City, NY Largest and most established companies Blue Chip companies are the largest and best known companies – safe and steady investments 1-3 letter symbols

 NASDAQ – (National Association of Securities Dealers Automated Quotations) 4 letter symbols Technology Co’s No trading floors Prices are broadcast over TV/Computers Usually riskier

 Bu Market - market rises Investors expect GREATER profits and BUY stock  Bear(Bare) Market – Market drops Investors expect LOWER profits and SELL stock

 Dow Jones Industrial Average (DJIA) – an average of 30 companies on NYSE Oct 12, 2007