1. The Neatest Little Guide to Stock Market Investing UNDERSTANDING OUR FREE ENTERPRISE SYSTEM

2. Chapter 1- Speak the Language of Stocks  How to Make Money Owning Stocks  Why and How A Company Sells Stock  What People Mean by “The Market”  How to Choose a Broker to Buy Stocks  How to Evaluate Stocks  Three Stock Classifications You Should Know

3. How to Make Money Owning Stocks 1) Capital Appreciation: the profit you keep after you buy a stock and sell it for a higher price.  Buy low sell high  Buy high sell higher 2) Through dividends:  Companies might pay their stockholder’s dividends if the company did well.  The company decides how much to pay for each share and then multiplies that by the number of shares you own to determine how much you are paid Source: The Neatest Little Guide to Stock Market Investing –Chapter 1 pages 4,5

4. Why and How a Company Sells Stock WHY?  Companies sell stock to raise money without having to take out a loan.  They’d rather have your money!  You get a share of their company. How?  Stock Markets! 1.New York Stock Exchange 2.NASDAQ 3.NYSE Alternext US Source: The Neatest Little Guide to Stock Market Investing–Chapter 1 pages 7,8,9,10

5. What People Mean by “The Market” The market can refer to the stock market as measured by: 1.the Dow Jones Industrial Average (the Dow), which follows 30 well-known companies 2.The Standard and Poor’s 500 is another way of measuring the overall trend. It tracks 500 companies that own 75% of the entire U.S. Stock Market ◦S&P MidCap - Mid cap is a company with a market capitalization between $2 and $10 billion, which is calculated by multiplying the number of a company''''s shares outstanding by its stock price. Mid cap is an abbreviation for the term "middle capitalization.” ◦S&P SmallCap - $300. million & $2,000,000,000 (yes, that’s billion)! 3.The NASDAQ 100 follows 100 top stocks from the NASDAQ. Source: The Neatest Little Guide to Stock Market Investing–Chapter 1 pages 13,14

6. Here’s the total return of these five indexes after the crash of 2008 as of December 31, 2008 IndexTracks3-Year5-Year10-Year Dow Jones 30 Large Companies -15%-13%-2% S&P 500 500 Large Companies -25%-16%-24% S&P MidCap 400 400 Medium Companies -25%-4%41% S&P SmallCap 600 600 Small Companies -23%054% NASDAQ 100100 Leading NASDAQ Companies -23%-14%-31% Source: Stock Market Investing for Beginners, 2013 –Chapter 1 page 13

7. Here’s the total return of these five indexes three years after, as of December 30, 2011: IndexTracks3-Year5-Year10-Year Dow Jones 30 Large Companies 39%-2%22% S&P 500 500 Large Companies 39%-11%10% S&P MidCap 400 400 Medium Companies 63%9%73% S&P SmallCap 600 600 Small Companies 54%4%79% NASDAQ 100100 Leading NASDAQ Companies 88%30%44% Source: Stock Market Investing for Beginners Chapter 1 page 14

8. How to Choose a Broker to Buy Stocks There are two types of brokerage firms: 1.Full-Service Brokerage Firms: The largest brokerage firms in the world. ◦Examples: Bank of America, Goldman Sachs, Morgan Stanley… ◦Expensive and Misleading ◦Make money by selling shares of the companies they take public, so it doesn’t matter if the buyers are getting a good deal. ◦Have three different divisions: investment banking division, a research division, and a retail division. 2.Discount Brokerage Firms: They handle your buy and sell orders and charge a low commission. ◦Are able to give you a discount rate ◦Examples: Charles Schwab, E*Trade, Fidelity, Scottrade… Source: The Neatest Little Guide to Stock Market Investing–Chapter 1 pages 15, 16,17

9. How to Choose a Broker to Buy Stocks  Technology Has Made Full-Service Brokers Obsolete.  People now have the same access to information that brokers use.  Technology has also enabled people to buy and sell stocks using computers.  You should monitor your own investments. Source: The Neatest Little Guide to Stock Market Investing–Chapter 1 pages 18,19

10. How to Evaluate Stocks Growth Investing  Look for companies that are sales and earnings machines  pay very little in dividends because they are usually reinvesting back in the company.  very expensive but expected to pay off Value Investing  Look for stocks on the cheap  Have low P/E ratios and low price-to-book ratios  Investors are hoping these companies are going to have a comeback  Pay attention to dividend payments Source: The Neatest Little Guide to Stock Market Investing–Chapter 1 pages 20,21,22

11. How to Evaluate Stocks Fundamental Analysis:  Examines information about the company’s health and potential to succeed. Technical Analysis:  Examines the past behavior of the stock price and attempts to predict the future price Source: The Neatest Little Guide to Stock Market Investing–Chapter 1 pages 23, 24

12. Three Stock Classifications You Should Know 1.Company Size: also called market capitalization or market cap. 2.Industry Classification: If you know what industry the company operates in you can keep an eye on that industry for trends. 3.Growth or Value: Growth companies and value companies behave differently. Make sure you know which type you’re buying. Source: The Neatest Little Guide to Stock Market Investing–Chapter 1 pages 39,40,41,42,43

13. Chapter 4- Permanent Portfolios Limiting the Downside with Charts:  Timing  SMA  MACD  RSI  Using Them Together

14. Timing The most controversial of all market topics is timing. Three indicators used for timing are: 1.SMA 2.MACD 3.RSI Source: The Neatest Little Guide to Stock Market Investing–Chapter 4 page 141

15. Simple Moving Average, price line smooths out an investment’s path to show its trend more clearly SMA Source: The Neatest Little Guide to Stock Market Investing–Chapter 4 page 142

16. Shows trends in an investment by looking at the difference between fast and slow exponential moving averages of its closing prices MACD The Neatest Little Guide to Stock Market Investing- Chapter 4 pages 143, 144

17. RSI Relative Strength Index compares an investment’s current price with its past performance to gauge current strength. The Neatest Little Guide to Stock Market Investing- Chapter 4 pages 146, 147

18. Using them together  Getting the same signal from two of the three measurements is usually enough to warrant taking action.  Getting the same signal from all three is quite convincing. The Neatest Little Guide to Stock Market Investing- Chapter 4 pages 147, 148