Stocks and Investment Advice What is a stock? Mutual fund? ETF? How do you pick the right stocks and investments?

What is a stock? Owning a stock is being a partial owner of a company! Get a vote (and possibly a share of profits/dividends) per share – Mainly – an investment

Finance.yahoo.com

Stocks and Funds – Risk/Return Funds – Mutual Funds – Exchange Traded Funds (ETFs) Stocks – Large cap – Small cap

Riskiest stocks – Small Caps Smaller companies – total market capitalization (worth of all shares) less than $2 billion More “churn” – huge growth opportunity, but also higher possibility of bankrupcy/failure IPG Photonics

Potentially less risky stocks – Large Caps Large Caps – bigger companies, better known names. Over $2 billion market capitalization “Blue-chips”- nationally recognized, high- quality, well recognized

Reading Stock Tables (or websites) Pull up “how to read a stock table” in the Farrand Folder

Earnings Per Share (EPS) Higher is better - that means the company made more profits for each share of stock.

Price Earning Ratio (P/E) the most common measure of how expensive a stock is. Usually lower is better - that means the price of the stock has not risen out of pace with company earnings.

Dividend and Yield Higher is better - this means that the company is doing well enough to pay out part of its profits - to you, the share holder!

The company’s track record Look at a company’s history, reports, and news stories about it. – Well managed? – New markets/opportunities for growth? – Remember: obvious things are already “priced in” Don’t buy candy companies before Halloween – unless you know they will have an exceptionally good year (for reasons that not everybody already knows)

Strategies/Rules of Investing Buy Low and Sell High Do Your Research Check for Expert Advice Diversify Your Portfolio Be Lucky (remember it is gambling)

Strategies/Rules of Investing #1 – Buy Low and Sell High – Buy when stocks are relatively cheap/undervalue – Sell them when they are worth more/overvalued. – Don’t panic and sell too cheaply or get suckered into buying when too precious

Strategies/Rules of Investing #2 -Do Your Research – Finance.yahoo.com – Millions of other sites – Read the news

Strategies/Rules of Investing #3 - Check for “expert” advice (but always read with a grain of salt) – Ample commentary out there on the stock market that could point out things you didn’t know – But remember! They could be biased – and making money off of fooling you Thousands or millions may be reading the same advice – making it irrelevant.

Strategies/Rules of Investing #4 – Diversify Your Portfolio – The market is a gamble: reduce your risk and “get a piece” of many potential growth opportunities August 2000May 2013% growth Apple only$9000$151, % Enron only$9000$0-100% Apple and Enron $9000$75,500839% SPY (exchange traded fund) $9000$10,00011%

Strategies/Rules of Investing #5 - Remember - Investing on the stock market is gambling – You (and even your broker and mutual fund managers) don’t really know what you are doing. – Don’t ever invest money that you can’t afford to lose in individual stocks – Diversify to be safe – There is no “sure thing”

Best ways to diversify Mutual Funds and Index Funds – Huge “basket” of stocks and/or bonds – often tens or hundreds – Actively managed and rebalanced – High fees/annual costs (~1.5% average) ETFs (Exchange Traded Funds) – Huge “basket” of stocks and/or bonds – passively/rarely managed or rebalanced – Low annual fees (~0.5% average; as low as 0.09%)

Work on 30a - Stock and Investment Picking Activity When done: makeup work or start 30b – “Wall Street Survivor”