Stock as an Investment

 Capital Appreciation: stock may become more valuable and the holder can buy low and sell high  Dividend: investor gets a share of the profits returned in cash in proportion to his or her ownership

 Income Stock : Associated with profitable companies that offer steady dividends  Growth Stock : People plan to keep the stock for a long time and expect a large capital appreciation

 Preferred Stock: Gives the investor a fixed share of the profits before common shares

 Stockbroker: Buys and sells stock for a living  Usually they work for a brokerage house that is a member of several stock exchanges  They have a “seat” on the exchange so the company can conduct transactions through that market

 For every transaction made, the investor is charged a percentage (called a commission)  Usually from 1-5% of each transaction or trade

 If you decide to buy 1,000 shares of IBM, you will conduct a transaction on the New York Stock Exchange  You will be buying stock that has usually been issued and held by several other investors

 Transactions take place on a secondary market because they have previously been issued

 Markets like NYSE have companies offer stock for the first time- known as the Initial Public Offering (IPO)

 Investment bankers decide how much a company’s stock should sell for and how many shares should be offered  Initial offerings are sold to larger investment firms on a primary market

 Once you own a piece of a company (stock), you should keep an eye on how the company is performing  They will send you a copy of their annual report  This report will have details about the profits, costs, and debts

 52 Week High- The highest price paid for the stock in the last year (the last 52 weeks)  52 Week Low- The lowest price paid for the stock in the last year (the last 52 weeks)  Ticker Symbol- the letters that stand for the company on the exchange  Helpful hint: four letters is for the NASDAQ, fewer than four letters is for the NYSE

 Yield- The percentage return on the investment. Divide the annual dividend by the current price of the stock.  Price/Earnings Ratio- the current stock price divided by the company’s earnings per share. The lower the number, the better the value.  Volume- the amount of shares that traded hands that day

 High- The highest price for stock that day  Low- The lowest price for stock that day  Last- The last price offered per share that day  Change- the net change from the previous day’s closing price (you will see a + or -, or maybe an arrow that points up or down beside the number)

 New York Stock Exchange (NYSE)  Most important market in the U.S.  More traditional companies list their stock here

 American Stock Exchange (AMEX)  Caters to smaller, industrial companies  Merged with NASDAQ but are still two separate markets

 National Association of Securities Dealers Automated Quotation System (NASDAQ)  Smaller, unproven companies that want their stock offered nationally will often go to this market  Also brings in newer, high-tech firms (Intel and Microsoft)