 Private Corporations – shares of stock are NOT openly traded in stock markets  Public Corporations – sells shares openly where anyone can buy them to fund their business activities

Companies who issue Common Stock  Form of equity and they don’t have to repay stockholders  Dividends are NOT mandatory  Required by law to hold yearly meeting where stockholders can vote on company business Why do investors purchase Common Stock?  Income from dividends  Dollar appreciation of stock value  Possibility of increased value from stock splits

Preferred Stock –  Attract more conservative investors because  receive voting rights, dividends, and might get money if they company is in financial trouble  may be entitled to dividends before common stock and may have the right to be paid first a certain amount of money before the common stock on a liquidation or merger of the company into another company

 Blue-Chip Stocks – stock issued by the strongest and most respected companies: Wal-mart, AT&T, McDonalds – very safe  Income Stock – Income stocks' prices do not tend to fluctuate a great deal but pay dividends that are higher than average: gas and electric companies

 Growth Stock – tendency to grow faster than the market, these companies generally reinvest all earnings into infrastructure in order to maintain rapid growth, rather than directly paying out their earnings to investors: technology stocks  Cyclical Stock – intensely follow the business cycles of the economy, are always the first stocks to reflect a recession or an expansion: airline or car manufacturer company  Non-cyclical Stock - These are companies that provide us with essentials, such as healthcare and food.

 Defensive Stock – remains stable during declines in the economy: utility industry  Large Cap and Small Cap Stocks – corporation that has issued a large number of shares of stock and has a large amount of capitalization. Small cap stocks are considered to be a higher investment risk.  Penny Stocks – shares that trade for less than $1

 Newspaper  Internet  Stock Advisory Services  Corporate news

 Bull Market – investors are optimistic about the economy and buy stocks  Bear Market – investors are pessimistic about the economy and sell stocks

 Current Yield – A financial ratio that shows how much a company pays out in dividends each year relative to its share price  Annual Dividend Current Market Value  Total Return – includes the annual dividend as well as any increase or decrease in the original purchase price of the investment  Current Return + Capital Gain = Total Return

 Earning per share – measures the amount of corporate profit that can be assigned to each share of common stock  Net Earnings__________ Outstanding Common Stock  Price Earning (PE) Ratio – price of one share of stock divided by the corporation’s earnings per share of stock outstanding over the last 12 months.  Market Price Per Share Earnings Per Share

 Primary market – investor purchases securities from a corporation through an investment bank or other representative of the corp.  Initial Public Offering (IPO) – when a company sells stock to the general public for the first time

 Securities Exchanges – marketplace where brokers who represent investors meet to buy and sell securities  New York Stock Exchange - NYSE  NASDAQ  AMEX (acquired by NYSE in 2008)

 Over-the-Counter Market – network of dealers who buy and sell the stocks of corporations that are not listed on a securities exchange  Account Executives – stockbrokers who buys or sells securities for clients  Brokerage Firms – trade stocks for you; full- service, discount, and online

 Market Order – request to buy or sell a stock at the current market value  Limit Order – request to buy or sell a stock at a specified price  Computerized transactions – you do the research and analysis, but a full service and discount firms will allow you to trade through a software package or website  Commission Charges – brokerage firms charge commission on each transaction or a percentage of the value

 Long Term  Buy and hold technique  Dollar cost averaging – put in a certain amount every year. Some years you buy a lot of shares and other you buy fewer shares  Direct investment and dividend reinvestment plans – companies sell directly to investors and they reinvest their dividends in the company to buy more shares of that stock

 Short Term  Investments traded less than 1 year  Buying stock on margin – investor borrows part of the money needed to purchase a stock through a brokerage firm

 A stock market index is a method of measuring a section of the market  A 'world' or 'global' stock market index includes (typically large) companies without regard for where they are domiciled or traded. Ex: S&P Global 100.  A 'national' index represents the performance of the stock market of a given nation— The most regularly quoted market indices are national indices composed of the stocks of large companies listed on a nation's largest stock exchanges, such as the American S&P 500, Japanese Nikkei 225, and the British FTSE 100

 A stock market index is a method of measuring a section of the market  More specialized indices track the performance of specific sectors of the market. Ex: Wilshire US REIT which tracks more than 80 American real estate investment trusts  The Dow Jones Industrial Average is an index of 30 "blue chip" stocks of U.S. "industrial" companies. The Index includes substantial industrial companies with a history of successful growth and wide investor interest.