An Introduction to Stocks

1. An Introduction to Stocks Excerpts Taken from slideshow of Jason Lee

2. Stock Basics(What are stocks?) Excerpts Taken from slideshow of Jason Lee

3. What is the stock market? • Refers to buying and selling of shares, or stock, in all kinds of companies, both in the United States and around the world. • Anyone who owns purchases stock in a company is it’s stockholder (also called shareholder) Excerpts Taken from slideshow of Jason Lee

4. Stock Market Basics: • Stock Certificates • A printed legal document showing ownership. • In our digital age they have become less common Excerpts Taken from slideshow of Jason Lee

5. What is a stock? • Stock symbols • Set of letters that represent a security traded on an exchange • Ex. MSFT, GS, AAPL, MA, BUD, LUV Excerpts Taken from slideshow of Jason Lee

6. How to Make Money on Stocks • Dividends – • money given to stockholders by the company from company profits • NOT ALL STOCKS PAY DIVIDENDS • Stock Sell – • Stock changes value based on what people are willing to pay for the stock • You can sell the stock through a brokerage firm and collect the cash value • You can sell the stock and buy other stocks in its place (called a trade) Excerpts Taken from slideshow of Jason Lee

7. Stock Types: • Preferred Stock – ownership in a corporation that gives you the first right to dividends • Common Stock – basic form of ownership of a corporation Excerpts Taken from slideshow of Jason Lee

8. Stock Market Terms: • Market Value – the price at which a share of stock can be bought and sold in the stock market • Stockbroker – a licensed specialist in buying and selling stocks and bonds Excerpts Taken from slideshow of Jason Lee

9. Stock Exchange • Business organization that accommodates the buying and selling of securities Exchanges • Lists stocks and sets policies for how stocks are traded • Major exchanges • New York Stock Exchange (NYSE) • American Stock Exchange (AMEX) • NASDAQ Excerpts Taken from slideshow of Jason Lee

10. The Indices (index) • Imaginary collection of stocks that is supposed to represent the stock market • S&P 500 • (500 largest companies on US stock Market) • Dow Jones • (30 most significant stocks in the stock market) • Nasdaq Composite • (index representing all the stocks on the Nasdaq(tech)) Excerpts Taken from slideshow of Jason Lee

11. What Causes Stock Prices to Change? • Supply and Demand • Earnings (expectations) • Sentiments, attitudes, & sense of greed • Economic Indicators • Follow the leader • Manipulation • LOTS of different theories Excerpts Taken from slideshow of Jason Lee

12. Economic Factors! • Inflation/Recession – Higher prices can result in lower spending by consumers, reducing company profits. • Interest Rates – As the cost of money changes, company profits can increase or decline. • Consumer Spending – Profits of companies that sell products and services to households are directly affected by buying habits. • Employment – As people obtain or lose jobs, the amount of money they have for spending will affect company profits. Excerpts Taken from slideshow of Jason Lee

13. Why invest? Why stocks?(What about my savings account?) Excerpts Taken from slideshow of Jason Lee

14. Why Invest? • Opportunity to Make Money!!! • Short Term vs. Long Term Goals • Long Term • Buying a new house, car, etc. • Short Term • Buying food, gasoline, books, clothes, etc. Excerpts Taken from slideshow of Jason Lee

15. Determining Your Financial Goals • Investing is a long car trip. There needs to be a lot of planning that goes into it. • How much money do you want to make? By when? • Will you need to live off your investments in future years? • What will you be using your money for? • Having a good understanding of yourself will allow you to align your risk tolerance with various strategies • Think about your risk tolerance, time horizons for your investments, and your time commitment Excerpts Taken from slideshow of Jason Lee

16. Why the Stock Market? Excerpts Taken from slideshow of Jason Lee

17. You can make good money… (But don’t forget, you can lose a lot of it too) NASDAQ (1999-2001) +50% loss in 1 year 136% Gain in less than 1 year Excerpts Taken from slideshow of Jason Lee

18. Apple Computers (+750% in 24 months) Excerpts Taken from slideshow of Jason Lee

19. Urban Outfitters (+330% in 23 months) Excerpts Taken from slideshow of Jason Lee

20. You can choose companies in which you want to invest money Many companies pay a dividend Opportunity to make money You can track your investment growth on the Internet or newspaper You can plan your future by investing Support our economy Advantages of Stock Market Investing Excerpts Taken from slideshow of Jason Lee

21. Not guaranteed to make a profit You may lose your future investment plan Current events can play a major role in the market (September 11, 2001, etc) Companies may lie about profits and sales to persuade investors (Enron, Martha Stewart, etc) Disadvantages of Stock Market Investing! Excerpts Taken from slideshow of Jason Lee

22. Mutual Funds • Funds in which investment professionals manage your money and decide on the investments • These funds often amount to millions and billions of dollars and come in a variety of types • Advantages • Simplicity / Professional Management / Diversification / Liquidity / Usually Low Risk • Disadvantages • Fees (and lots of them) Excerpts Taken from slideshow of Jason Lee

23. The Risk / Return Tradeoff “principle that potential return rises with an increase in risk” Low risk with lower returns, high risk with high returns Important to know your personal risk tolerance when choosing investments Balance between risk and reward Excerpts Taken from slideshow of Jason Lee

24. What is Your Risk Tolerance? Excerpts Taken from slideshow of Jason Lee Source: Investopedia. “Determining Risk and The Risk Pyramid.” May 2 2003