1. Personal Finance Mr. Hargett 2013-14 Stock Market

2. Stock What is a stock? Part ownership or equity in a corporation Common Stock- Preferred Stock- Why Buy Stock? Invest in or support a company that you hope will provide returns on your investment.

3. Stock Types Common Stock- One vote per share Don’t receive Dividends unless Declared oSuccessful = large dividends oPoor = no dividends Preferred Stock- No Vote Fixed dividends based on percentage of original purchase of sales price If huge losses = no dividends, but must be repaid before any common dividends paid Lower Risk

4. Stocks Info Why do companies issue Stock? To raise money to pay for equipment, buildings, and operating expenses 1 st issued to ? Investment Bankers, they pay money for the stocks to the company Why do they buy them? Hoping to resell on the public market for a higher price What are stock markets? Places or ways in which people buy and sell stocks

5. Stock Markets Formal Stock Exchanges New York Stock Exchange (NYSE)- 1 2011 Trade Value- $20,161,000,000,000 Tokyo Stock Exchange (TSE)- 3 London Stock Exchange (LSE)- 4 Oldest (1801) Shanghai Stock Exchange (SSE)- 5 Not completely open to the foreign investors Hong Kong Stock Exchange (HKSE)- 6 Toronto Stock Exchange- 7 2011 Trade Value- $1,542,000,000,000

6. Stock Markets- cont Electronic Markets National Association of Securities Dealers Automated Quotations (NASDAQ)- 2 2011 Trade Value- $13,552,000,000,000 Tend to be less expensive to trade in a computer system Market Indexes Dow Jones Industrial Average S and P 500 Show trends in a market, large or focused http://money.cnn.com/data/world_markets/americas/

7. Investment in Stocks How do people earn money with stocks? Capital gains from selling high, buying low Dividends What are dividends? Part of the company’s profits, distributed to the owners What determines the price of a stock? Market value, reports, investment trends Main advantage of owning stock Sharing in the company’s profits as the company grows, hopefully equaling an above-average return on an investment

8. Investment in Stocks- cont Main disadvantage of owning stock Chance of losing all or part of the investment Terms? Portfolio- An itemized list of investments Diversify- To spread out or vary investments

9. Other Investments Mutual Funds Is a financial organization that accepts funds from many people and invests them is a variety of stocks. Load Funds Sales people receive a commission when bought or sold ~ 6% No-Load Funds No sales commission, thus you have to peruse the fund Maintenance Fee Annual fee that pays for the cost of operating the fund oRange from 0.4% - 3.0% oInvest in a No-load, low maintenance fee fund is recommended

10. Other Investments- cont Bonds Is a promise to repay the holder a fixed sum of money on the maturity date plus annual interest payments. Treasury Bonds Different in the face value is not met until maturity Corporate Bonds oMost bonds are transferable, so they are resold on the secondary bond market. Currencies A world market effects?

11. Other Investments- cont 2 ETFs- Exchange Traded Funds A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold. By owning an ETF, you get the diversification of an index fund as well as the ability to sell short, buy on margin and purchase as little as one share. Another advantage is that the expense ratios for most ETFs are lower than those of the average mutual fund. When buying and selling ETFs, you have to pay the same commission to your broker that you'd pay on any regular order.

12. Other Investments- cont 3 ETFs- Exchange Traded Funds- cont One of the most widely known ETFs is called the Spider (SPDR), which tracks the S&P 500 index and trades under the symbol SPY. Commodities A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often used as inputs in the production of other goods or services. The quality of a given commodity may differ slightly, but it is essentially uniform across producers. When they are traded on an exchange, commodities must also meet specified minimum standards, also known as a basis grade.

13. Other Investments- cont 4 Commodities- cont Any good exchanged during commerce, which includes goods traded on a commodity exchange. http://www.cmegroup.com/product-codes-listing/cbot- market.html

14. Bear vs Bull Markets Bear Market A time when stock prices are falling Bears fight coming down on prey Bull Market A time when stock prices are rising Bulls fight in an upward motion History

15. Our system Capitalism A system in which individuals are free to own, trade, and use things in order to make a profit Corporations A legally established company Sole-Proprietor, C and S Corporations, Partnership, Trust, Non-Profit Can be private or public Private- Held Privately ohttp://www.forbes.com/lists/2011/21/private-companies- 11_rank.html Public- Sold on the Stock Exchange ohttp://www.forbes.com/global2000/list/

16. Public Corporations One of the biggest differences between the two types of companies deals with public disclosure. If it's a public U.S. company, which means it is trading on a U.S. stock exchange, it is typically required to file quarterly earnings reports (among other things) with the Securities and Exchange Commission (SEC). This information is also made available to shareholders and the public. Private companies, however, are not required to disclose their financial information to anyone since they do not trade stock on a stock exchange.U.S. stock exchangeSecurities and Exchange Commission

17. Misc Items Stockbroker- a professional who is licensed to buy and sell Underwriter- buys new securities issued and resells as individual stocks or bonds to the public. Cash Accounts- Pay cash for every transaction Margin Accounts- Broker lends you a portion of the funds at the time of purchase and the security acts as collateral. Short Sell- selling what you don’t own, then buying lower and making money on the margin. Covering- Replacing the shares borrowed from broker Called Away- Elimination of contract due to obligation

18. Misc Items- cont 2 Going Long- Buying for increase in price over time Stock Split- Dividing a stock into more parts or reverse Technical Analysis- The academic study of historical chart patterns and trends of publicly traded stocks. Technical analysis of stocks and trends employs the use of tools such as bar or candlestick charts and trading volumes to determine the future behavior of a stock. Much of this practice involves discovering the overall trend line of a stock's movement. Inflation- Decrease in the value 2% inflation = $1.00 today = $1.02 later

19. Misc Items- cont 3 Equity- Refers to total assets minus liabilities Gross vs Net Income Gross is also called Revenue and is total income Net is gross income minus expenses or liabilities

20. Financial Pages Stock Name or Symbol (SYM) Closing Price- Price at the close of the previous day Net Change- Change from the previous day to closing price 52 week Hi- Lo- Shows the range over the last year Dividend (DIV)- The value that is paid as a dividend Yield (YLD)- Dividend as a percent of the closing price Price to Earning (P/E)- Ratio is obtained by dividing the stock’s price by the company’s latest 12 month earning/share Volume (VOL 100s)- 100s of share traded on the previous day