Download The Stock Market

 Stock-
represent
ownership in a
corporation
 Shares- portions
of stock
• Purpose??...
• Raise money to
start or expand a
business.
How do Stockholders make a Profit?
•
Dividends-Pay out by
corporations. Paid in quarters.
• The higher the profit, the larger
the dividend per share of stock.
• Capital Gains-Sell the stock for
more than he or she paid for it.
– Capital Loss- Selling a stock at
a lower price than it was
purchased for.
Types of Stocks
 Income
Stock-Stock pays
dividends at regular times during
the year

Ex: most commonly found as companies operating within real estate, energy sectors, utilities, natural resources and financial institutions.
BP, Exxon,
Citigroup
Growth Stock
Pays
few or no dividends
Company reinvests earnings
The business then Increases
its value over time.
 Examples: Aeropostale, Urban
Outfitters, Panera Bread
Common Stock
Investors
who are
voting owners of the
company.
One vote for each
share.
Fannie Mae, Citigroup,
Exxon
Preferred Stock
Investors
who are nonvoting
owners of the company.
 Receive dividends before the
owners of common stock.
If the company goes out of
business, preferred stockholders
get their investments back before
common stockholders.
Blue-Chip Stock
Is
the stock of a wellestablished company
having stable earnings and
no extensive liabilities
 Wal-Mart, Coca-Cola, Gillette,
and Exxon-Mobile.
Risks of Buying Stock
 Purchasing
stock is risky
because the firm selling the stock
may earn lower profits than
expected, or it may lose money.
 If a company goes bankrupt,
stockholders might not get their
money back!!
How Are Stocks Traded?
 Stockbroker-a
person who links
buyers and sellers of stock.
 Advises them to buy or sell
particular stocks.
 Brokerage Firm-businesses that
specialize in trading stocks.
 Stockbrokers and brokerage firms
cover their costs and earn a profit
by charging a commission, or fee
for each transaction.
Options for Buying Stock
•
Stock Splits
• Owners of common stock may
sometimes vote on whether to
initiate a stock split.
• A stock split means that each single
share of stock splits into more than
one share.
• A company may seek to split a stock
when the price of stock becomes so
high.
Example: You own 200 shares of
GM. Each share is worth $100.
After the split, you own 2 shares
of GM stock for every single
share you owned, so now you
have 400 shares. However each
share is now worth only $50.
Futures
•
Futures are contracts to buy or sell
commodities at a specific date in the
future at a price specified today.
• Markets in which futures are bought
and sold are associated with grain and
livestock.
 Ex:
Buyer and seller agree
today at price of $4.50 for a
bushel of soybeans 6 or 9
months in the future. The
buyer would pay some portion
of the money today, and the
seller would deliver the goods
in the future.
Options-Contracts
that
give investors the right
to buy or sell stock at a
certain price for a
specific period of time
Pay 10% up front, option
to buy the rest later
3 to 6 months
Day Trading
Try
to predict minute-by minute
price changes based on computer
programs.
Many trades made each day.
Stocks held for minutes or even
seconds.
Extremely Risky!!!
Stock Exchanges
 Markets
for buying and selling
stock
 Major US Markets
 New York Stock Exchange (NYSE)
 NASDAQ-AMEX (National
Association of Securities Dealers’
Automated Quotation systemAmerican Stock Exchange)
 OTC Market (Over the Counter)
New York Stock Exchange (NYSE)
New York Stock Exchange
 The country’s largest and most
powerful exchange
 Began in 1792
 Handles stock and bond transactions
for only the largest & most established
companies (Deals mostly with BlueChip Stock)
○Ex:, Disney, Nike, Coco Cola,
Macy’s etc.
http://www.nyse.com/
NASDAQ-AMEX
 2 merged together in 1998
 Sells slightly riskier stocks from
less-established and small
companies
○Pharmaceutical companies,
energy companies
○Microsoft, Apple, Intel
○http://www.nasdaq.com/
OTC (Over the Counter) Market
An electronic
marketplace for stock
that is not listed or
traded on an organized
exchange.
New and Growing
Companies.
How to Read a Stock Table
The Dow Jones Industrial Average
 Has
shown how certain stocks have
traded on every business day since
1896.
 Represent 30 large companies in
various industries, such as food,
entertainment and technology.
 Ex: McDonalds, Microsoft, CocaCola, Citigroup, Walt Disney,
Continental Airlines, FedEx
 Dow Jones
S&P 500
Standard
& Poor’s 500
Tracks the price changes
of 500 different stocks as
a measure of overall
stock market
performance.
Bull and Bear Markets
 Bull
Market-Stocks rise
steadily over a period of
time
 Bear Market-Market falls for
a period of time
The Great Crash of 1929
 The
1920s saw a long term Bull
market
 Dow was at an all-time high in 1929
(381 points)
 Investors were buying on margin
(credit)
 small amount up front & promise
to pay rest later
•
•
October 23, 1929 Dow had
dropped 21 points in one
hour, next day investors
began to sell and stock
prices fell
October 29, 1929 Black
Tuesday 16.4 million shares
were sold