1. Investing in Equities and Options

2. Stocks and Efficient Markets
Equities, or shares of common stock, represent ownership of corporations
People can purchase stock through a stockbroker, brokerage firm, or indirectly through mutual funds and 401k plans

3. Stocks and Efficient Markets
Efficient Market Hypothesis – the idea that stocks are usually priced correctly and that bargains are hard to find because stocks are closely followed by investors
Portfolio Diversification – the practice of holding a large number of different stocks so that increases in some offset the decreases in the others

4. Stocks and Efficient Markets
Mutual Funds – a company that sells stock in itself to investors
When a mutual fund invests money it receives and makes a profit, investors can sell their shares for a profit
The market value of a mutual fund is called the Net Asset Value (NAV)

5. Stocks and Efficient Markets
401k Plans
A tax deferred investment and savings plan
Acts as a personal pension fund for employees
Deducted directly from payroll
Some employers will match contributions up to a certain dollar amount

6. Stock Markets and Their Performance
Stock Exchanges
A place where buyers and sellers of stocks meet to trade stocks
Can be a physical place. NYSE and AMEX
Or a digital exchange. NASDAQ
Over-the-counter market – Stocks that are not listed on any stock exchange can be traded though electronic markets

7. Stock Markets and Their Performance
Measuring Performance
Dow Jones Industrial Average
A collection of 30 Stocks used as a sample of the health of the industrial market
Standard and Poor’s 500 (S&P 500)
A collection of 500 of the largest most important stocks to measure the market as a whole

8. Trading in the Future
Most buying and selling is spot market trading, or the current price of stocks
Options – Ability to buy or sell at a specific price
Call option – Ability to buy stock in the future at a specific price
Put option – Ability to sell a stock in the future at a specific price