1. 1.12.2.G1 STOCKS Essential Questions 1.In what ways does the stock market impact the personal wealth of an individual and a business? 2.Why diversify within a portfolio? http://www.investopedia.com/video/play/pick-your- investing-style#axzz1cCDFWuQy (Security, capital, stock ticker, stock symbol, bull & bear market, stock exchange, stock index, dividends, capital gain/loss, stock split, classifications (growth, income, blue chip, speculative, cyclical, counter cyclical, commodity)

2. 1.12.2.G1 Stocks Securities: A document showing ownership of a publicly-traded company or a promise to collect borrowed funds. Securities are tradable. * At their most basic, securities refer to stocks and bonds. Stock: type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings. Capital: Money a business gets in order to operate. Equity Capital: Sale of stocks Debt Capital: Sale of bonds H28 http://www.investopedia.com/video/play/sto cks-versus-bonds#axzz1cCDFWuQy http://www.investopedia.com/video/play/what- are-stocks#axzz1cCDFWuQy

3. 1.12.2.G1 Stocks H28 Public Corporation: Sell stock to anyone who is willing to purchase on public exchange vs. Private Corporation: Ownership is held by a select group (IPO) Initial Public Offering: First time a company sells its stock to the public http://www.investopedia.com/video/play/init ial-public-offering#axzz1cCDFWuQy Business & Stock After IPO http://www.investopedia.com/video/play/W hy-Do-Companies-Care-About-Their- Stock-Price#axzz1cCDFWuQy

4. 1.12.2.G1 Stock s NYSE: Oldest/largest by vol. traded & mkt. cap. (2,800 Companies) Issued at least 1 million shares worth $100 million Earned >$10 million in last 3 years NASDAQ: Largest trading volume (over 2,900)- More volatile Issued 1.25 million shares worth $70 million Earned >$11 million in last 3 years OTC / Pink Sheets: Smaller companies & bonds Unable to meet exchange requirements (penny stocks) Stock Exchanges A place where securities are bought & sold by professional stockbrokers Listing Requirements: Conditions imposed by a stock exchange upon companies that want to be listed on that exchange. (Min. # of shares, min. mkt. cap, & min. annual income

5. 1.12.2.G1 Stocks Capital Gain/Loss: Difference between the purchase price & selling price when an investor buys a security and sells it later. Dividends: Portion of the profits paid to the shareholders of a company. Decided by board of directors & not required. © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona An imaginary portfolio of securities representing a particular market or a portion of it. DJIA (The Dow Jones Industrial Average) – 30 Blue chip S&P 500 Stock Index http://www.investopedia.com/video/play/what-is- dividend#axzz1cCDFWuQy http://www.investopedia.com/video/play/what-is-the- dow-jones-industrial-average#axzz1cCDFWuQy

6. 1.12.2.G1 What Impacts stock price? Company profit: Long term stocks grow w/ profit Interest Rates: Higher rates = better returns on Bonds/Cds Economy: How strong/weak the economy Management: Company managers and CEOs Industry: The other companies and markets Technology: How technology is changing industries and consumers T009-02.06 H22 Make stock price go up: Strong economic growth Low interest rates Low inflation Strong industry conditions Proper decisions by firm Make stock price go down: Weak economy High interest rates High inflation Weak industry conditions Improper decisions made by the firm

7. 1.12.2.G1 Reading Stock Quotes © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona http://www.lifehack.org/articles/money/stoc k-quotes-how-to-read-%E2%80%94-and- use-%E2%80%94-them.html

8. 1.12.2.G1 Stock Quote © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

9. 1.12.2.G1 Dividend / Yield © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Dividends are cash paid per share annually Dividend yield is the yearly dividend expressed as a % of the price: (div x 4 / pps) –If a company paid $1.28 in dividends (for the year) for a stock with a market price of $50.00, the dividend yield percentage would be 2.5% (1.28/50) 52-Week High Low StockDivYLD % EPSP/EVol 100s Prev. Close Net Chg 4336AAR.322.52.2522147942.027 http://www.investopedia.com/video/play/understanding- dividend-yields#axzz1cCDFWuQy

10. 1.12.2.G1 Volume 52-Week High Low StockDivYLD % EPSP/EVol 100s Prev. Close Net Chg 4336AAR.322.52.2522147942.027 © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Total number of shares traded throughout the day Prev. close is the price of the last share sold on the previous day Net change is the difference between the closing price of the share from the prior day and the current day

11. 1.12.2.G1 Stock Classifications A variety of type of stocks are necessary for a diversified portfolio Seven basic classifications - Growth- Countercyclical - Income- Blue Chip - Value- Speculative - Cyclical © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

12. 1.12.2.G1 Growth Stock Growth stocks: consistent record of relatively rapid growth and earnings in all economic conditions –New companies expending product lines –Examples include Coca-Cola and Wal-Mart © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Income Stock Income stocks pay higher than average dividends –Company retains small portion of profits –Steady stream of income such as utility companies –Dividend Yield over 5% & predictable

13. 1.12.2.G1 Cyclical Stock Cyclical stocks are influenced by changes in the economic business cycle –Companies which operate in major consumer dependent industries (Ford) –Reflects state of economy © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

14. 1.12.2.G1 Countercyclical Stock Countercyclical stocks: consistent returns even when the economy is suffering –Products are always in demand –Good for investors who want dividends –Examples are utility companies and grocery stores –Beta is 1.0 or below, even negative © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

15. 1.12.2.G1 Speculative Stock Speculative stocks are companies with potential for substantial earnings –Very high risk stocks –Examples include internet and video game companies © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

16. 1.12.2.G1 Blue-chip Stock Blue-chip stocks: long records of profit, dividend payments, and a good reputation for management –Less risky –Grow at a consistent rate –Examples are McDonalds, Wal-Mart and General Electric © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

17. 1.12.2.G1 Ups and Downs The term bull market means the market is doing well because investors are optimistic about the economy and are purchasing stocks The term bear market means the market is doing poorly and investors are not purchasing stocks or selling stocks already owned http://www.investopedia.com/video/play/wh at-are-bull-and-bear- markets#axzz1cCDFWuQy

18. 1.12.2.G1 Stock Split © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Shares Issued: Value: Your Shares: Your Value: 2 For 1 Split BeforeAfter 10,00020,000 $50/share$25/share 200 shares400 shares$10,000 Types of Orders Market Order: Auction, buy or sell at current value Limit Order: Buy or sell at a specific price http://www.investopedia.com/video/play/un derstanding-stock-splits#axzz1cCDFWuQy http://www.investopedia.com/video/play/ho w-do-limit-orders-work#axzz1cCDFWuQy

19. 1.12.2.G1 Things to remember… 1.Looking at a stock price alone doesn’t tell us much about a stock 2.If the stock price is close to the 52 week high, you may want to hold off 3.Companies typically choose to reinvest their earnings (growth), give it to shareholders (income) or a combination of the two 4.High dividend yield - over (4%) = income stock 5.Yield refers to the return to investors