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Welcome Miami Northwestern Bulls!

Welcome Miami Northwestern Bulls!. Florida International University State Farm Financial Literacy Lab. What are stocks?. Represent a fraction of ownership in a corporation Referred as: Shares Equity Stock. Characteristics.

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Welcome Miami Northwestern Bulls!

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  1. Welcome Miami Northwestern Bulls! Florida International University State Farm Financial Literacy Lab

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

  3. 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. 

  4. Types of Stocks • Common Stock • Preferred Stock

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

  6. 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

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

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

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

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

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

  12. Purchasing Stocks • Using a Broker • Party that arranges transactions between a buyer and a seller, and gets a commission • Using dividend reinvestment plans • Reinvesting dividends to acquire additional shares

  13. 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.

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

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

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