Chapter 15


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Chapter 15

  1. 1. Chapter 15. MAKING YOUR MONEY GROW - THE STOCK MARKET What Makes the Stock Market Tick?… How Can the Stock Market Help You Meet Goals?… What Kind of Help Can You Get? A. Stock Ownership as a Form of Investing 1. Lending vs. Buying, Debt vs. Equity 2. Primary vs. Secondary Markets 3. Possibilities vs. Probabilities 4. Cautions 5. How a Business Operates
  2. 2. B. How the Stock Markets Operate 1. The Prospectus 2. Investor’s Insurance 3. Keeping the Records 4. Executing an Order a. Market orders b. Limit orders c. Time orders d. Fill or Kill orders C. Who Invests in the Stock Market, and What are They Seeking? 1. Investors by Objective a. Short-term growth b. Long-term growth c. Income d. “No Foggy Idea”
  3. 3. C. Who Invests in the Stock Market, and What are They Seeking? (continued) 2. Investors by Size a. Individuals vs. Institutions 3. Investors by Type a. Novices b. Insiders c. Hunch players d. Theory traders e. Sentimentalists f. Technical analysts g. Fundamentalists h. Prudent Investors - A mixed breed
  4. 4. D. Basic Stock Market Information 1. Price Quotations and How to Read Them 2. Stock Market Indicators and Indices a. The Dow Jones Averages b. Standard and Poor’s c. New York Stock Exchange Index, American Exchange, NASDAQ 3. Classification of Stocks a. By “personality” - blue chip, glamour, “new economy” b. By objective - income, growth c. By industry grouping 4. Dividends and how they are paid a. “ex-dividend” date b. Dividend reinvestment plans
  5. 5. D. Basic Stock Market Information, (continued) 5. Commissions 6. Buying Long and Selling Short 7. Buying on Margin 8. Stock Splits and Stock Dividends 9. Common vs. Preferred Shares a. Cumulative preferred b. Convertible preferred 10. Warrants
  6. 6. D. Basic Stock Market Information, continued 11. Stock Option Trading a. Placing a bet b. Calls and puts c. Buying call options d. Selling call options 12. Rating the Stocks E. Price vs. Value - What Can Affect the Worth of a Stock 1. The Underlying Value 2. The Actual Price
  7. 7. F. Mutual Funds in the Stock Market (in conjunction with Slide 4 of Chapter 14) 1. Mutual Fund listings 2. Mutual Fund advertising 3. Mutual Fund mistakes 4. Mutual Fund “families” 5. Exchange Traded Funds (ETFs) G. Online Trading H. Choosing Your Broker - A Guide Through the Investment Jungle
  8. 8. TALKING POINTS… Chapter Fifteen, Number One <ul><li>You and some friends create an investment club. You’ll pool money every month, members will make recommendations on buying and selling stocks, you’ll vote, and hopefully some day you’ll reap a fortune. At the first meeting there is dissension in the ranks. How would you react to these statements from other members, assuming you want to keep the club together? </li></ul><ul><li>1. “Since we’ve agreed (which you have) that this is not ‘serious’ money, but ‘fun’ money, we should go for the long shots, the crap shoots, the next dot-com revolution.” </li></ul><ul><li>2. “I joined so I could learn something about the stock market. We should give serious thought to each stock we pick, analyze it, and vote accordingly. Sounds boring perhaps, but we’re not here for laughs.” </li></ul><ul><li>3. “I’ve had a spectacular record in the market. If you just take my advice, you’ll make a bundle.” </li></ul><ul><li>4. “Frankly, I’m a stock market dummy. I don’t know a dividend from a duck. I’ll vote for whatever sounds most interesting at the time.” </li></ul>
  9. 9. TALKING POINTS… Chapter Fifteen, Number Two <ul><li>You’re interviewing potential stock brokers for your own account. Right now, you tell them, your account is very small, but with good luck and guidance, it will grow considerably over the years. How would you react to these responses from each? </li></ul><ul><li>A. Broker A, who is your 1st choice based on the interview and recommendations says, “To be honest with you, I can’t afford to open up and manage an acct. as small as yours. Feel free to call me if you ever need a second opinion, and maybe some day, when your account is bigger, we can do business.” </li></ul><ul><li>B. Broker B is aggressive but eager and sincere. “I’ll work my butt off for you, day and night. I’m going to make your account grow so fast it’ll make your head spin. You’ll get all my firms best tips first.” </li></ul><ul><li>C. Broker C is very stand-offish, but has a phenomenal success record in picking winners. “I’ll handle your account only if you give me complete authorization to make all the decisions.” </li></ul><ul><li>D. Broker D is a dear old friend who you see socially quite often. “Come on, Pat. It’s me. Fran. Your buddy. Surely you wouldn’t give your account to anyone else. That would break my heart.” </li></ul>