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Warm Up What does it mean when a person has stock in a company? Monday, March 23, 2015 Objective: Students will be able to assess ways to be a wise investor in the stock market and in other personal investment options. Purpose: Making investments can be risky, so it is important to know how to identify risks when making an investment. Stocks • Stock: a portion of ownership of a company • People who own stocks are called shareholders • By selling shares, corporations raise money to start, run, and expand their businesses. Benefits of Stocks • Dividends: the profits by the corporation that are paid to the stockholders. • The size of the dividend depends on the amount of profit that the corporation made. • Capital Gains: the difference between a higher selling price and a lower purchasing price. • You could also have a capital loss Risks of Stocks • Buying stock is a risky business because stockholders may lose a lot of money. • The more money that an investor pays for stock, the greater the risk of losing money. Stock Exchanges • Stock Exchange: market for buying and selling stock • Most American stock exchanges are in New York • Most newspapers publish the results of daily activity on the floor of major stock exchanges. Buying Stocks • Most people buy and sell stocks through brokers • Brokers buy and sell stocks for others in exchange for a small fee • Others will buy and sell stocks on the floor of a stock exchange • Some even buy and sell stocks online, although it is not as secure New York Stock Exchange • Largest stock exchange in the world • Two indices • The Dow (The Dow Jones Industrial Average) • They take the 30 most representative companies in each industry and come up with an index number • S&P 500: Looks at 500 different companies as a measure of the overall stock market performance. New York Stock Exchange • NASDAQ: stock index of technological companies • Stock indices tell us: • How well the economy is performing • How the economy will perform in the future • Stock prices change due to the performance of a company