STOCK MARKET How it Works

Wall Street Open M-F, 9:30 am – 4:00 pm (EST) Largest stock exchanges in the U.S. are the New York Stock Exchange and NASDAQ Other stock exchanges include AMEX, regional exchanges, and international exchanges

Features of the Stock Market Stocks buy ownership in a corporation Bonds are a loan Mutual Funds are a combination of the two; group of investors who pool their money

Features of the Stock Market Commodities and futures are other investments options on stock market The stock market prices are based on bids by buyers and offers by sellers This market is very open; all sides know the same information about the corporations The market is based on supply and demand and can change price for a variety of reasons Runs like an auction

Regulations SEC is in charge of regulating the buying and selling on the stock exchange All information must be made available to all parties, no one can change their portfolio through “insider trading”

What the Stock Market Does Purpose for businesses is to raise financial capital (money) for expansion Goal of investors is to make a return on the purchase of stocks, etc. 1) buy low, sell high 2) earn dividends (corporate profits to owners)

What the Stock Market Does Buying and selling can occur through the stockbrokers, online Only brokerage firms with a seat on the floor can buy and sell http://www.youtube.com/watch?v=Q7FdaiPQuDg http://www.youtube.com/watch?v=a27J3vWAlWM&feature=endscreen&NR=1

Types of Markets Bull Market: prices are rising; dividends are up Considered good; time to sell or keep dividends Bear Market: prices are falling; dividends are down Considered bad; time to buy or reinvest dividend

Stock Market Indexes/Averages An average of how the market behaved that day, for comparison over time Main averages: DOW Jones: NYSE, 300 solid corp. NASDAQ Composite: NASDAQ companies S&P 500: 500 richest companies http://money.cnn.com/data/markets/

STOCKS Advantages Disadvantages High rate of return Simple and cheap to buy ($ few hundred) Can buy and sell anytime Disadvantages High maintenance Higher risk

BONDS Advantages Disadvantages Safe Money secure from your spending Low maintenance Disadvantages Low rate of return Cannot sell until mature May not keep up with inflation Expensive to start

MUTUAL FUNDS Advantages Disadvantages Money is diversified (spread out) Medium rate of return Cheap to start Buy/sell anytime Disadvantages Some maintenance required No control over companies bought Less $ than stocks Medium risk

Rates of Return Stocks Bonds Mutual Funds 7-12% return Starts at $500 riskiest Bonds 3-5% return Starts at $1000 safest Mutual Funds 5-11% return Mid and variable risk