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What is the Stock Market?

What is the Stock Market?. What companies do you support?. Would you like to own a part of one of these companies? What if I told you that you could (when you’re 18, of course)?.

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What is the Stock Market?

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  1. What is the Stock Market?

  2. What companies do you support? Would you like to own a part of one of these companies? What if I told you that you could (when you’re 18, of course)?

  3. Let’s start by looking at how McDonald’s began as a hamburger stand and grew to be one of the largest companies in the world. 1948 - Dick and Mac McDonald open the first McDonald’s drive-thru restaurant in San Bernardino, California. 1955 - Total sales for the company are $193,772. 1961 - Ray Kroc buys out the McDonald brothers for $2.7 million. 1964 - The company’s gross sales hit $130 million 1965 - McDonald’s celebrates its 10th anniversary with the first public stock offering at $22.50 per share. (McDonald’s becomes a publicly traded company.) 2000 - Sales exceed $40 billion 2013 – May 6, you can buy 1 share of McDonalds for $102.07 1,000,000,000 Shares Outstanding (one billion) So…you would own 0.00000010207 of McDonalds

  4. How much money would you earn a year from a $100 investment in a savings account? Answer: Less than $1.00 Less than 1% So that’s why people invest in the stock market. They want a better return on their investment.

  5. YIELD also called RETURN The profit or income produced by a financial investment, usually shown as a percentage If you invest $400 and you make a profit of $20, what is your yield percentage? 20/400 = 5% Isn’t that better than a saving’s account at a bank?

  6. SHARE One of the parts into which the ownership of a corporation is divided. STOCK Stock represents a claim on the company's assets and earnings. Words to know… STOCK MARKET A stockmarket is a market for the trading of publicly held company stock and associated financial instruments. DIVIDEND –A payment to the stockholders of a corporation from the company’s earnings. (The board of directors decide if they want to share some of their profit with their shareholders. The money they pay quarterly is a dividend)

  7. Stock Exchanges Places where the stocks and bonds of member companies are traded.

  8. New York Stock Exchange (NYSE):The world’s largest and leading stock exchange. It lists stock of the oldest, largest, and best-known companies. Abercrombie & Fitch Bank of America Coca Cola Dominos Pizza Exxon Mobil Ford Motor Gamestop Johnson & Johnson Kellogg Mattel Radioshack Sony Time Warner Cable Full list: http://www.advfn.com/nyse/newyorkstockexchange.asp?companies=A

  9. The New York Stock Exchange (NYSE ) is a Floor Based Exchange

  10. Other American Stock Exchanges AMERICAN STOCK EXCHANGE(AMEX) The nation's second largest floor-based exchange • NASDAQ • Trades most active stocks listed on NYSE & AMEX as well as young small companies • Dealers Automated Quotation • Started in 1971 • Worlds first electronic stock market • No specialists — linked by computer network The Pacific Exchange (PCX) is the third largest stock options exchange in the world.

  11. New York Stock Exchange I’m parked on Wall Street Wall Street - The main street in New York City's financial district. The term is often used to mean the entire financial district in New York or the world of U.S. finance and investments. “On Wall Street today…”

  12. Penny Stock A stock that sells for less than $1 a share but may also rise to as much as $10/share as a result of heavy promotion. Penny stocks are highly speculative and risky. Many brokerages don't cover them simply because they are so difficult to track and predict. Blue Chip: A term used to describe stocks of high-quality, financially sound corporations. (Companies like McDonalds, IBM, Pepsi) These stocks are usually less risky than other stocks.

  13. Broker: One that acts as an agent between a buyer and seller who charges a commission for the service. (PaineWebber, Merrill Lynch) • Commission: • A fee paid to a broker for buying or selling securities. • Full service broker - 2-3% (smaller on larger trades) • Discount broker - $5.25 a trade (E-Trade, Charles Schwab)

  14. Principal: The amount of your own money you put into an investment. If you buy 10 shares of McDonalds for $30 a share, how much have you invested? $300 If you sell your 10 shares a year later for $40 a share, how much money have you made? $400 – 300 = $100 What is your principal? $300

  15. PORTFOLIO The stocks and other investments owned by an individual or institution. Microsoft Warner Bros. General Electric McDonalds Diversification - Reducing investment risk by spreading your money among different classes of investments.

  16. Bear Market: A market that is going down. This expression comes from the way that a bear attacks, by swinging its paw downward. Bull BEAR A market that is going up. This expression comes from the way that a bull attacks, by lowering its head and then bringing its horns up.

  17. 1 Year (daily) What makes stocks go up and down? • How much people are willing to pay • How cheaply owners are willing to sell

  18. INDEX A statistical measure of change in a securities market. Indexes are useful tools for tracking market trends. • Dow Jones - The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. • S & P 500 - The S&P 500 is one of the most commonly used benchmarks of the overall stock market. • NASDAQ Composite - The Nasdaq Composite Index represents all the stocks that trade on the Nasdaq stock market.

  19. Securities and Exchange Commission The federal agency that regulates stock transactions.

  20. The End READ ON IF YOU’RE INTERESTED IN LEARNING MORE…

  21. Price-to-Earning Ratio (P/E) A valuation ratio of a company's current share price compared to its per-share earnings. In general, a high P/E means high projected earnings in the future. If your stock is selling for $50 a share and earning are $10 per share, the P/E ratio is: Price $50 Earning $10 P/E Ratio = 5

  22. What Are Mutual Funds? An open-ended investment that pools money from individuals and uses it to buy securities such as stocks, bonds and money market instruments. (Oppenheimer, Fidelity, Vanguard) Disadvantages: • Not Insured • Limits Gains • Charge Loads (Sales Charge up to 8.5%) and Operating Expenses • Advantages: • Diversification • Professional Management • Liquidity • Convenience

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