1. Understanding Stocks

2. What is a stock? A share in the ownership of a company
Share, equity, stock ALL SAME THING!
When you own stock, you are automatically an “owner”/”shareholder” in that particular company

3. Being a Shareholder Ownership percentage
divide number of shares you have by the total number of shares outstanding/offered by the company
Apple 908 million shares
Own 10 shares
10/908 million .01%...
Can you call Mark Zuckerberg if you own Facebook stock?
Institutional investors & billionaires!
Does it mean anything else??? Any decision making – can listen to earnings calls – vote on board of directors.. Most do not

4. Benefits of stock ownership
Making Money!!
Capital Gains
Stock price higher than when you bought it
Dividends
Percentage of companies profits paid to shareholders, usually each quarter
No liability

5. Risks of Stock Ownership
Bankruptcy – you are the last to be paid
Stock price can go down
Only really gain if you sell

6. Do all companies offer stock?
NO!!!
Only incorporated companies (go public)
Google inc.
Can stay private & ask venture capitalists to invest (risky)

7. Why would a company incorporate?
Raise revenue
Take out a loan (debt financing) OR
Sell shares (equity financing)
Limited Liability

8. What it means for the company?
“Owners” are not the only owners any more
might not even own a majority of stock…
Warren Buffet could become a majority share holder & make decisions!
Could vote to remove management
Board of Directors – chosen by shareholders
Share in decision making process

9. How stocks trade
A market/exchange where stocks are bought and sold (secondary market)
NYSE/New York Stock Exchange
Real people on trading floor
NASDAQ (OTC)
computerized
Lots large technology companies
AMEX (bought by NASDAQ)
Small cap stocks & derivatives
Since 1926, the average large stock has returned close to 10% a year. If you're saving for retirement, that's a pretty good deal -- much better than U.S. savings bonds, or stashing cash under your mattress.
Of course, "over time" is a relative term. As any stock investor knows, prolonged bear markets can decimate a portfolio.
Since World War II, Wall Street has endured several bear markets -- defined as a sustained decline of more than 20% in the value of the Dow Jones Industrial Average.
Bull markets eventually follow these downturns, but again, the term "eventually" offers small sustenance in the midst of the downdraft.
London, hong kong, over the counter bulletin boards (OTCBB) – penny stocks - little to no regulation

10. How do you buy a stock?
Brokerage firm
Full service
Discount

11. What determines a stock’s initial price?
Initial Public Offering – first time (Facebook)
Price determined by owners & investment bank
Primary market
Bought by investment back then investment bank offers to the public

12. What determines a stock’s price on the secondary market?
Supply & demand
Earnings reports
P/E Ratio
Market value per share/earnings per share
Current events
*** do not mix up stock’s price with the value of a company ***
Market valuation – total shares outstanding X price/share

13. Market Terms Bull market Bear market All going down
All going up
Bear market
All going down
What makes the stock market go up and down?
When do you buy? When do you sell?
Capital gains tax considerations versus ordinary income tax
Consumer confidence; world events; interest rates; success troubles individual companies; competition

14. How do you buy stock??

15. Now, the real question….
How do you decide which stocks to buy???