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Everyone will need a calculator If you do not have one, get one from the box where your Freyonomy is located. Pay your Thursday and Wednesday bills Tickets are $50 each Max of 10 tickets Cannot win more than once Write name on ticket and fold in half Bellwork Stock Market Game Intro Stock Notes Group Signup Investment Calculations Exit Ticket 1st Period Dahmir Johnny Mike Davin Keith 2nd Period Darius Dominique Jewel Tyrny Sperlin 4th Period Horizio Christina Yawa Mike Tatiyana Make up in tutorial Tues or Thurs 3:30 – 4:15 Virtual $100,000 Teams of 3 to 5 + Stocks, Bonds, & Mutual Funds Why are corporations so successful? • One reason is corporations raise money through selling stocks and bonds • But what is a stock???? A stock is a type of investment that signifies ownership in a corporation. Benefit- A holder of stock (a shareholder) has a claim to a part of the corporation's assets and earnings. Ownership is determined by the number of shares a person owns relative to the number of outstanding shares. For example, if a company has 100 shares of stock outstanding and you own 10 shares, you would own and have claim to 10% of the company's earnings. Most companies start off as private Created by individuals or groups Ex. Milton Hershey became the first American to develop a formula for manufacturing milk chocolate Before you can buy stock the company has to go “public” Companies that go public often have great demand and need more $$$ than banks can provide Public companies will sell stocks to the general public and the company will then use the $$ from stocks to improve the business Examples of public companies- Google, Nike, Apple, Walmart Some corporations decide to remain private and do not sell stock to the general public Chick-fil-a, Mars Chocolate, Dell Stocks are investments in which the goal is to make money (profit) Dividend payments- small percentage of corporation profits paid back to stockholders. Capital gains- reselling stocks for profit Most people try to buy stocks at a lower price and sell them later when they reach a higher price This is similar to if you bought a car for $5,000 and then resold it for $6,000 (you profited $1,000) • Most stocks are resold to investors through a stock exchange. • Oldest and largest organized stock exchange- New York Stock Exchange (NYSE) • NASDAQ- The centralized computer system that allows people to make trades online Stockbrokers buy and sell stocks for customers for a commission. Stock index- measures the performance of many individual stocks and the stock market as a whole Can be indicative of the economy’s general health Most well-known: Dow Jones Industrial Average (“The Dow”) Shows how 30 large publicly owned American companies have performed over time S&P 500 Shows how the top 500 publicly traded American companies have performed over time Bull market- stock market prices rise steadily over a relatively long period of time. Bear market- stock market prices decline steadily over a relatively long period of time. Origin of names unclear but recall bears are sluggish and bulls are spirited and quick 1. Between 2007-2009, do you think the Dow and S&P showed stock prices generally increasing or decreasing? Why? 2. Would this be a bull market or bear market? 3. Between 2009-2012, do you think the Dow and S&P showed stock prices generally increasing or decreasing? Why? 4. Would this be a bull market or bear market? When you buy a stock, you’re buying a portion of a company. You should buy stock in companies that are: Currently profitable You think will become profitable in the future (more risky) When people invest, they don’t invest chump change. However, it is unwise to tie up all of your savings in stocks. Most people “buy and hold for the long term” But continue to monitor your stocks and consider selling them if: they’re not appreciating in value if general economic conditions have changed Financial Health Care Companies that manufacture goods or provide services that people want but don't necessarily need Consumer Staples Companies engaged in the creation, storage, and exchange of digital information Consumer Discretionary Companies involved in the exploration, production, or management of energy resources Information Technology Companies engaged in the production and delivery of medicine and health care–related goods and services Energy includes banks, investment companies, insurance companies and real estate Companies that provide goods and services that people use on a daily basis Utilities Companies engaged in the production and delivery of electric power, natural gas, water, and other utility services Write the name of a company engaged in each of the 7 industry sectors The group that correctly comes up with an example for each group first wins! Financial Health Care Energy Information Technology Consumer Discretionary Consumer Staples Utilities Which portfolio is more diversified? Portfolio A Portfolio B Ticker and # of Shares Name of Business Ticker and # Name of of Shares Business SBUX 100 Starbucks WLP 100 Wellpoint (Health care) TIF 200 Tiffany’s Jewelry INN 200 Summit Hotel Properties NKE 250 Nike GPE 250 Georgia Power WMT 50 Walmart WMT 50 Walmart AAPL 350 Apple GOOG 350 Google HD 150 Home Depot BP 150 British Petroleum (BP) Stocks Mutual Bonds Funds Stocks- are an investment in a single corporation Advantage- If your stock does well you can make a lot of money. Disadvantage- It’s risky to invest in only one company (putting all your eggs in one basket) If your stock does poorly, you can lose a lot of money. Mutual funds are collections of stocks and bonds that are managed by a financial expert. These funds often contain stocks and bonds from many different companies. Advantage- Mutual funds are more stable because you are investing in several companies instead of just one. So if one company performs poorly, the others may still be doing well enough that you do not lose money. Disadvantage- Return on investments is typically lower than well performing single stocks. Bonds- formalized loans that investors offer to businesses and government agencies Bonds do not offer corporate ownership of any kind, but often offer regular interest payments (called coupons) and/or full repayment at the end of the bond (loan) term. Advantage- There is little to no risk in bonds. Interest rates vary with market conditions but typically fluctuate much less than stocks and mutual funds. Disadvantage- Interest rates on bonds are typically lower than the rate of return on profitable stocks and mutual funds. __________________ The least risky but typically the lowest rate of return _________________ The most risky but can have a very high rate of return at times _________________ Moderate risk that is spread out among companies, moderate rate of return on investments Which do you prefer as an investment? Stocks, mutual funds or bonds? Why?