1 / 15

What are stocks?

What are stocks?. Represent a fraction of ownership in a corporation Referred as: Shares Equity Stock. Characteristics. Represent a claim to part of the corporations assets and earnings Ownership gives shareholders the right to vote on management placement and policies

reyna
Download Presentation

What are stocks?

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. What are stocks? • Represent a fraction of ownership in a corporation • Referred as: • Shares • Equity • Stock

  2. Characteristics • Represent a claim to part of the corporations assets and earnings • Ownership gives shareholders the right to vote on management placement and policies • Price determined by supply and demand • Potential to earn a lot if a company is successful, but also stand to lose entire investment if the company isn't successful. 

  3. Types of Stocks • Common Stock • Preferred Stock

  4. Common Stocks • Represents voting rights • Most frequently used • Returns • Dividends • Capital Appreciation

  5. Types Of Stock Returns • Capital Appreciation: A rise in the value of an asset based on a rise in market price • Dividends:Distributing a portion of company earnings, decided by the board of directors, to its shareholders

  6. Preferred Stocks • Preference in dividends. • Preference in assets in the event of liquidation. • Convertible into common stock. • Nonvoting.

  7. Risk • Systematic risk • The risk inherent to the entire market • Unsystematic risk • Company specific risk that is inherent in each investment

  8. Advantages • Limited liability • Historically outperforms other investment alternatives • Very liquid

  9. Disadvantages • Does not guarantee a return • Less claim on assets than creditors • Bond Holders>Preferred > Common • Not all pay dividends

  10. Trading Stocks • Most stocks are traded on exchanges • Places where buyers and sellers meet and decide on a price.  Physical Virtual

  11. Purchasing Stocks • Using a Broker • Party that arranges transactions between a buyer and a seller, and gets a commission • Full- service brokerages • Discount brokerages • Using dividend reinvestment plans • Reinvesting dividends to acquire additional shares

  12. Mutual Funds • A mutual fund is a collection of stocks and/or bonds. Investors make money three ways: 1) A fund pays out nearly all of the income it receives over the year to fund owners in the form of a distribution. 2) If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass on these gains to investors in a distribution. 3) The value of the fund's shares increase in price.

  13. Advantages of Mutual Funds • Diversification • Economies of Scale • Liquidity • Simplicity

  14. Disadvantages of Mutual Funds • Professional Management • Costs • Dilution • Taxes

  15. Exchange Traded Funds • Securities that are created to behave the same way as a specific index o a collection of different securities

More Related