1. Introduction to Stocks Basics of Investing I Spring 2014 Accounting 101` K. Robinson

2. What is a stock?  Common stock  Gives you a “share” of ownership of a publicly traded company  Stock ownership – Voting rights – Claim to assets (behind debt holders) and earnings – Potentially entitled to dividends

3. What is a stock?  Ticker symbols – Set of letters that represent a security traded on an exchange – Ex. MSFT, GS, AAPL, MA, BUD, LUV  Stock quotes – List of prices for a stock at a particular point during the trading day  Stock tickers – What do those green and red numbers mean?

4. Basic Stock Quote

5. More Stock Quotes

6. Different Types of Stock  Preferred Stock – No voting rights to company issues – Issued fixed dividends forever – main form of return  Common Stock – Majority of stock we see and hear about in the news – Ownership of the company – Entitled to portion of the earnings – Earn returns mainly through capital gains  What are capital gains? – Increase in asset value relative to the purchases price – Not realized until asset is actually sold – Example.

7. Stocks vs. Bonds  Stocks are equity – Generally considered riskier – Quite possible to lose a significant portion, if not all, of your money – Potential for high returns  Bonds are debt – Lower and usually fixed return – Higher claim than stockholders  What does this mean?

8. What Can Cause Stock Prices to Change? EASY!  Supply and Demand! But…what affects supply / demand of a stock?

9. What Can Cause Stock Prices to Change?  Earnings & growth expectations  Positive / negative news  Economy sentiment  Investor sentiments & attitudes

10. Two Markets  Primary Market – market in which investors have first opportunity to buy newly issued shares – Initial Public Offering (IPO)  First time that company offers its shares to public markets (securities bought directly from company)  Where private companies become public  Secondary Market – investors trade already- issued shares of companies with each other – Ie. The stock market – Trading of a company’s stock DOES NOT DIRECTLY involve the company financially

11. How Stocks Are Traded  Major exchanges – Lists stocks (and other securities), sets policies for how stocks are traded  New York Stock Exchange (NYSE)  American Stock Exchange (AMEX)  National Association of Securities Dealers Automated Quotation  Only “publicly traded companies” are listed

12. Markets Indices  S&P 500 – 500 stocks chosen by Standard & Poor to represent US stock market  NASDAQ Composite--With approximately 3,700 companies and corporations, it has more trading volume than any other stock exchange in the world, many of which are technology and electronics  Dow Jones Industrial Average – 30 most significant stocks traded

13. Stocks Markets & Animals  Bull Market – When everything in the market is going great and stocks are generally heading upwards  Bear Market – When everything is NOT GOOD and stocks are generally headed downward  NOTE: Nothing lasts forever! Good times and bad times will end at some point http://www.investopedia.com/university/stocks/stocks7.asp

14. Brokerages  Need a medium to trade through – this is where brokerages come in  Criteria – Full service vs. discount – Fees (commission) – Services / tools – Minimum balance

15. Opening an Account  Not a hard process- most of it just some paperwork and mail – Sign-up online and download forms – Mail checks, forms, and copy of ID – Accounts created within a couple of days  What you will need: a computer, starting capital, and investing know-how

16. Brokerages  Some links for brokerage comparisons – Find something that works for what YOU need – No one broker that is best for all investors  http://www.investingonline.org/gso/broker_ratings.html  http://www.consumersearch.com/www/internet/online- brokers/  http://www.stockbrokerguide.com/  http://online-stock-trading-review.toptenreviews.com/

17. Different types of Orders  Market Order – Order to buy/sell at any given time.  Limit Order  Order executes to buy / sell at specified price of better (lower). Limit orders usually cost more, but useful for getting specified price  Stop Order  Order executes when the price surpasses a particular point, which helps buy or sell at a particular price. Limiting loss or locking profits

18. Basic Idea Behind Investing in Stocks  Buy your stocks when the prices are low.  Sell your stocks when the prices are high.