Investing in Stocks

 Common Stock  Advantages ▪ Voting Rights – Proxy ▪ Usually cheaper than preferred  Disadvantages ▪ More risky – last to get money ▪ Not guaranteed a dividend

 Preferred Stock  Advantages ▪ First to get money if company goes under ▪ Guaranteed a dividend first  Disadvantages ▪ No voting rights ▪ More expensive than common

 Terms  Stock Certificate  Par Value – stated on certificate  Market Value – what you pay  Undervalued stocks vs Overvalued  Return – how much money you make from an investment  Factors that affect price  The company  Interest rates – lower the better for stocks  The market

 Bull and Bear Markets  Bull Market ▪ Rising stock prices ▪ Feeling of investor optimism  Bear Market ▪ Period of falling stock prices – 15% or more ▪ Investors are pessimistic about overall economy.  Securities Exchanges  NYSE – largest, 1.1 million publicly owned shares = $9 million in capital  American Stock Exchange – smaller, 250,000 shares = $2.5 million in capital  NASDAQ – medium size, mostly tech. companies

 Over-the-Counter Market  Network of brokers who buy and sell securities not listed on exchanges  Trades down by phone or internet

 Short-Term Techniques  “Playing the market.”  Buying on Margin ▪ Borrowing from your broker ▪ Leverage – use less of your own money & buy more stocks with less money.  Selling Short ▪ Selling stocks borrowed from a broker that must be replaced at a later time.

 Long-Term Techniques  Buy and Hold  Dollar-Cost Averaging ▪ Purchase of an equal dollar amount of the same stock at regular intervals. ▪ Helps to avoid the situation of buying high and selling low.

 Columns  52 Wk High and Low  Stock name abbrev. & “pf” or “s”  Div – Dividend stated as dollar per share  Yld – Yield stated as a % --annual dividend/closing price  P/E ratio – price/earnings ratio  Sales in 100’s  Highest, lowest, and closing price  Net change