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Introduction to the stock market

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  • 1. GUTIC Edward Thomson27thSeptember 20129/26/2012 2010 DB Blue template1[Subject of presentation][Your name][Date]Introduction to the stock marketEdward Thomsonwww.gutic.co.uk
  • 2. GUTIC Edward Thomson27thSeptember 2012Before we start…Stocks (American) = Shares (British)Please like our new Facebook page:www.facebook.com/guticnow9/26/2012 2010 DB Blue template2
  • 3. GUTIC Edward Thomson27thSeptember 2012I. Introduction- What are shares?- Why invest?II. Market Dynamicss- What drives the market?III. Strategies- Fundamental vs technicalIV. Getting started- Using Google financeV. ConclusionContent05/13/13 03:10 AM 2010 DB Blue template39/26/201232010 DB Blue template
  • 4. GUTIC Edward Thomson27thSeptember 2012I. IntroductionII. Market DynamicsIII. StrategiesIV. Getting startedV. Conclusion05/13/13 03:10 AM 2010 DB Blue template49/26/201242010 DB Blue template
  • 5. GUTIC Edward Thomson27thSeptember 2012What are shares?Share market (eg London Stock Exchange)— Companies looking to raise money (capital)— Company sells part ownership:Investor becomes an owner of the company— Different from a loan (corporate bond): moneypaid back with interest.— You may never get your money back with shares(risky?)9/26/201252010 DB Blue template
  • 6. GUTIC Edward Thomson27thSeptember 2012Why invest?Rewards— Dividends: a share of the companies profits— similar to interest in a bank account— superior returns to a savings account— Growth: appreciation of asset price— price could collapse to zero— Voting rights – determine how company is runRiskier than bonds or cash but potentially greater rewards9/26/201262010 DB Blue template
  • 7. GUTIC Edward Thomson27thSeptember 2012Chasing wigglesWiggles are noise – short term thinkingLong term – stock market is upLong term view9/26/2012 2010 DB Blue template7
  • 8. GUTIC Edward Thomson27thSeptember 2012I. IntroductionII. Market DynamicsIII. StrategiesIV. Getting startedV. Conclusion05/13/13 03:10 AM 2010 DB Blue template89/26/201282010 DB Blue template
  • 9. GUTIC Edward Thomson27thSeptember 2012Market Dynamics --- What drives prices?Supply vs Demand— Low demand: lower price Low supply: higher price— High demand: higher price High supply: lower price— Supply:— How many shares are there in existence? (millions)— Are there many sellers? (market conditions)— Is there easy access? (stockbroker availability)The supply side is probably easier tounderstand.9/26/201292010 DB Blue template
  • 10. GUTIC Edward Thomson27thSeptember 2012Market Dynamics— Demand:— How popular is the company? (hot tech stock)— Are there many buyers? (crowded market place)— What drives popularity?— How do we determine a fair price for the company?— Are we willing to pay a premium in order to get a great company?— What about sentiment? (good news and bad news)Decision making in the market place is like a virus.An idea spreads as it gains popularity.Irrationality can take over.9/26/2012102010 DB Blue template
  • 11. GUTIC Edward Thomson27thSeptember 2012Example – GGP (AIM listed)9/26/2012 2010 DB Blue template11Slow moving – very few tradesMore trades – faster price movementPopularity(sentiment)drives shortterm pricevolumeShare pricedoesn’tnecessarilyreflect value
  • 12. GUTIC Edward Thomson27thSeptember 2012I. IntroductionII. Market DynamicsIII. StrategiesIV. Getting startedV. Conclusion05/13/13 03:10 AM 2010 DB Blue template129/26/2012122010 DB Blue template
  • 13. GUTIC Edward Thomson27thSeptember 2012Analysis strategiesFundamental vs Technical— Fundamental analysisjudge company value and determine fair price— long term investment (years)— short term price movement irrelevant— want good history of dividends— Technical analysisdetermine how price will change— short term focus (weeks/days/seconds)— trading not investing— fundamentals not important— use technical indicators / complex modelsWould you pay £10for an apple?9/26/2012132010 DB Blue template
  • 14. GUTIC Edward Thomson27thSeptember 2012Analysis strategiesPassive vs Active— Passive fundsBuy & hold the market – follows an index— long term investment (years)— growth through volume and dividends— low cost, few transactions / taxes— Active fundsTry to beat the market, or perform a specialist role—Tries to pick the best stocks in the market—Can have many transactions (costs)—Can engage in shorting and hedging—Time horizon varies9/26/2012142010 DB Blue template
  • 15. GUTIC Edward Thomson27thSeptember 2012I. IntroductionII. Market DynamicsIII. StrategiesIV. Getting startedV. Conclusion05/13/13 03:10 AM 2010 DB Blue template159/26/2012152010 DB Blue template
  • 16. GUTIC Edward Thomson27thSeptember 2012Getting started – example using Google finance: TescoPrice (pence) Day’s movement Company news‘value’ numbersSimilarcompanies9/26/2012162010 DB Blue template
  • 17. GUTIC Edward Thomson27thSeptember 2012I. IntroductionII. Market DynamicsIII. StrategiesIV. Getting startedV. Conclusion05/13/13 03:10 AM 2010 DB Blue template179/26/2012172010 DB Blue template
  • 18. GUTIC Edward Thomson27thSeptember 2012Conclusion05/13/13 03:10 AM 2010 DB Blue template18— Investing in stocks should give good returns— Has risks— Supply and Demand drive price— The demand side can be very complicated— Price does not reflect true value— Sentiment affects price but value— Stocks can become over valued (or under valued)9/26/2012182010 DB Blue template