What is a Stock? BCHS Investment Club. Stock Represents a share of ownership in a publicly held company (privately held companies do not issue stock).

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Presentation transcript:

What is a Stock? BCHS Investment Club

Stock Represents a share of ownership in a publicly held company (privately held companies do not issue stock). Investor shares in wealth and risks of company. You are a part owner of the company no matter how many shares you own.

Types of Companies Public Company Owned by investors through purchase of stock. EX: Nike, Facebook, Apple, IBM, Fossil Private Company A company owned by a person, family, or small group of investors. Does not sell shares of stock in the company to the public. EX: M & M/Mars; Bass Pro Shops; Burger King

Stock Exchanges New York Stock Exchange (NYSE) American Stock Exchange (AMEX) National Association of Securities Dealers Automated Quotations (NASDAQ)

Types of Stock Common Stock Shares of a company that do not guarantee a dividend and have more risk and volatility than preferred stock. Has the right to vote in company elections and issues at the annual meeting of shareholders. Preferred Stock Shares of ownership of a company in which the share holder is guaranteed a dividend if one is declared and whose shares are usually not as volatile as common stock. No voting rights in company elections and decisions.

Reasons for Buying Stock To make money – Dividends – Selling stock at a higher price Shareholders have limited liability – Can only lose what you invested

Risk The chance of losing all or part of an investment. Stockholders should make investment decisions based upon their “risk tolerance”.

Initial Public Offering (IPO) Private company “goes public” and offers shares for sale to the public. Demand for product/service is too much for banks to finance.

Purchasing Stock Stock is bought on a “price per share” basis. There is a fee, or commission every time you buy and/or sell stock (for us, it will be 1% of the purchase price). EX: if Nike stock is $74.52 per share and you buy 100 shares, it will cost $7, ($74.52 X 100 shares= $7, ; commission on sale = 1% of $7,453, which =$74.52)

Dividends Part of a company’s profits (earnings) that it pays as money to stockholders. Dividends can be paid monthly, quarterly, semi-annually, or annually.