The Stock Market Understand the risks Describe how stocks are traded Identify how stock performance is measured Explain the causes and effects of the stock market crash in 1929

Buying Stock Shares – owning a portion of a company - corporations raise money for starting, running and expanding; equities Two ways shareholders profit - Dividends-corps pay out profits;usually 4 times a year - Capital Gains-to sell a stock more than he paid for it; sells less than he paid for it-Capital loss

Types of Stock Income stock -pays dividends at regular times during the year Growth stock -pays few or no dividends;reinvests in business for long term gains Common stock -voting owner; vote on board members, splitting stocks-(when 1 share is split into 2, -if a stock is too expensive a comp. may split; stock split) Preferred stock - no voting power but receive dividends first

Risks of Buying A firm may earn lower profits and receive no dividends and stock value goes down - If you sell (Capital loss) Stocks are a risk, the higher the risk the bigger the dividend or capital gain A savings account or bond earns interest (money paid for lending) over time and are safe Day traders – try to make money by minute to minute trades in hopes to make profits

How stocks are Traded Stockbrokers – link buyers and sellers; give advice to buy or sell - Companies don’t sell stock - Work for Brokerage Firms (business that specializes in trading stocks) - they make profit from commissions and fees on each transaction

Stock Exchanges -markets for buying and selling stock NYSE- New York Stock Exchange – U.S. largest and most powerful - started in 1792 - handles stock and bonds for blue chip companies (comp that continue to profit) Nasdaq – American market for trades made electronically; started in 1971 Dow Jones Industrial – represents 30 large companies; food, entertainment, and tech industries - S & P 500 (Standard and Poor) – tracks price changes of 500 different stocks to measure overall stock market performance Bull Market – stock market rises steadily over time Bear Market – stock market falls steadily over time

The Great Crash of 1929 1929 – Economy in excellent shape and the stock market was the main indicator Market was soaring –(1925-27 billion by 1929-81 billion) total market value Small number companies and families owned much of the nations wealth Ordinary debt by consumers Producers making more goods than people could by (surplus) causing prices to fall (deflation) Debt from speculation-people borrowed money to invest speculating a high return – some used entire savings Buying on the margin – pay a small portion and borrow from brokerage firms – 5 million in 1928 to 850 million in 1929 In Sept – stock market began to fall 381 by the Dow to 360 in one day Banks wanted loans repaid and people started to panic and sell off stocks to quick for the market to handle Too late – peoples shares turned into a fraction of what they paid for it