Why People Buy Stock?  Pros and Cons
Why do people buy stock? When people invest in stock, they are looking to get a return on their investment in two ways:  1...
APPRECIATION(INCREASE) IN    VALUE
A stock appreciation (increase)is the differencebetween the price you paid for the stock and itscurrent market price or va...
DIVIDEND INCOME
What is a dividend?  Based on the performance of a company and  other factors, a company may decide to issue  a one-time p...
Example: Phillips Morris Co. declares a 3 cent dividend to all shareholders. If you only own two shares, then your total d...
Important Note: Start-up companies rarely declare dividends. If you are looking for dividend income, then you should look ...
THERE ARE ADVANTAGES      ANDDISADVANTAGES  OF OWNING     STOCK
Advantages of Owning Stock1. You own a piece (percentage) of a company.   Ultimately stock is an asset just like your   ho...
Disadvantages of Owning Stock1. Stock can decrease in value.2. If the corporation goes out of business, then your   stock ...
Summary• People invest in stock to get a return in the  form of dividend income and appreciation of  the value of the stoc...
Upcoming SlideShare
Loading in...5
×

Why People Buy Stock

1,232

Published on

This presentation explains why people buy stock. It talks about capital appreciation and dividends.

Published in: Economy & Finance, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
1,232
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
2
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Transcript of "Why People Buy Stock"

  1. 1. Why People Buy Stock? Pros and Cons
  2. 2. Why do people buy stock? When people invest in stock, they are looking to get a return on their investment in two ways: 1) Appreciation (Increase) of Value 2) Dividend Income
  3. 3. APPRECIATION(INCREASE) IN VALUE
  4. 4. A stock appreciation (increase)is the differencebetween the price you paid for the stock and itscurrent market price or value.If the price you paid for the shares is less than itscurrent value, then the stocks value hasappreciated (increased).If the price you paid for the shares is more thanits current value, then the stocks value hasdepreciated (decreased).
  5. 5. DIVIDEND INCOME
  6. 6. What is a dividend? Based on the performance of a company and other factors, a company may decide to issue a one-time payment or a dividend to all stockholders. This payment or dividend is given on a per share basis. The dividend amount is usually a very small sum.
  7. 7. Example: Phillips Morris Co. declares a 3 cent dividend to all shareholders. If you only own two shares, then your total dividend payment is 6 cents. $.03 2 $.06 Dividend x Shares = Cents
  8. 8. Important Note: Start-up companies rarely declare dividends. If you are looking for dividend income, then you should look at established corporations.
  9. 9. THERE ARE ADVANTAGES ANDDISADVANTAGES OF OWNING STOCK
  10. 10. Advantages of Owning Stock1. You own a piece (percentage) of a company. Ultimately stock is an asset just like your house or car.2. Stock can appreciate in value.3. Stock can give you current income via dividends.4. Usually yields higher returns than traditional investments such as saving accounts, CD’s, saving bonds, and money market accounts.
  11. 11. Disadvantages of Owning Stock1. Stock can decrease in value.2. If the corporation goes out of business, then your stock in that company has no value. (ENRON)3. Unless you own a significant amount of shares, you don’t have much input in the everyday operation of the corporation. You are basically placing your hopes in the management team and the employees of the corporation.4. Riskier than traditional investments such as saving accounts, CD’s, savings bonds, money market accounts.
  12. 12. Summary• People invest in stock to get a return in the form of dividend income and appreciation of the value of the stock.• Stocks usually yield higher returns than traditional investments.• Stocks are riskier than traditional investments.• Stockholders are considered owners of the corporation.

×