Stocks (PLVS)

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Stocks (PLVS)

  1. 1. STOCKS Definition --Ownership interest in a corporation
  2. 2. STOCK FACTS <ul><li>Stocks may help you achieve long-term financial goals </li></ul><ul><li>Stock prices rise and fall </li></ul><ul><li>Good management reduces risk </li></ul>
  3. 3. STOCK FACTS <ul><li>Sold in shares </li></ul><ul><li>Shares = individual units of ownership </li></ul><ul><li>Shareholders—investors who purchase </li></ul><ul><li> stock </li></ul><ul><li>Shareholders—part owners </li></ul><ul><li>Shareholders—may make $ </li></ul><ul><li>Shareholders—may lose $ </li></ul>
  4. 4. HOW ARE STOCKS TRADED? <ul><li>Initial public offering —investors buy directly from the company </li></ul><ul><li>Later— investors usually buy from owners who want to sell stock </li></ul><ul><li>Stock Market —organized trading of stock </li></ul>
  5. 5. WHERE ARE STOCKS TRADED? <ul><li>Stock Exchange—trading floor </li></ul><ul><li>NYSE—New York Stock Exchange </li></ul><ul><li>(oldest stock exchange; largest </li></ul><ul><li> and wealthiest companies) </li></ul><ul><li>AMEX—American Stock Exchange </li></ul><ul><ul><ul><ul><li>(second oldest stock exchange; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>small and medium-sized </li></ul></ul></ul></ul><ul><ul><ul><ul><li>companies) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>**requirements must be met to be listed </li></ul></ul></ul></ul><ul><ul><ul><ul><li> on an exchange </li></ul></ul></ul></ul>
  6. 6. STOCK FACTS <ul><li>Over-the-counter stocks—not listed on any stock exchange </li></ul><ul><li>Traded through phone and computer </li></ul><ul><li>Nasdaq—largest electronic network; lists stocks </li></ul>
  7. 7. STOCK MARKET REGULATION <ul><li>Securities and Exchange Commission </li></ul><ul><li>--requires disclosure of accurate and honest information </li></ul><ul><li>--brings lawsuits against fraudulent companies </li></ul><ul><li>--oversees activities of the exchanges, OTC stocks, investment advisors, and others involved in buying/selling stock </li></ul>
  8. 8. RETURNS ON STOCKS <ul><li>DIVIDENDS </li></ul><ul><li>payment to shareholders that represents a portion of the company’s net profits </li></ul><ul><li>**usually paid 4 x yr. </li></ul><ul><li>CAPITAL GAINS AND LOSSES </li></ul><ul><li>capital gain--buy low/sell high </li></ul><ul><li>capital loss—sell lower than bought </li></ul>
  9. 9. STOCKBROKER <ul><li>Individual or firm that will buy and sell stock for clients </li></ul><ul><li>--full service brokers-buy/sell, advise </li></ul><ul><li>--discount brokers-basic service; cost much less </li></ul><ul><li>On-line brokers help find info for clients. </li></ul>
  10. 10. OTHER WAYS TO BUY STOCK <ul><li>401(k) Plan </li></ul><ul><li>ESOP (employee stock option program) </li></ul><ul><li>Direct stock plan (buy directly from company) </li></ul>
  11. 11. RISKS OF OWNING STOCK <ul><li>Company’s Health </li></ul><ul><li>Industry Trends </li></ul><ul><li>Economic Factors </li></ul><ul><li>National and World Events </li></ul>
  12. 12. TRACKING THE STOCK MARKET <ul><li>INDEXES—way to measure overall price changes in the stock market </li></ul><ul><ul><li>Nasdaq Composite Index—tracks 5,000 domestic stocks </li></ul></ul><ul><ul><li>Dow Jones Industrial Average—tracks 30 large, well-known companies (financial services, technology, retail, entertainment, and consumer goods) </li></ul></ul>
  13. 13. TYPES OF STOCK/RISKS <ul><li>COMMON STOCK </li></ul><ul><ul><li>Voting rights </li></ul></ul><ul><ul><li>Dividends vary </li></ul></ul><ul><ul><li>Risk varies </li></ul></ul><ul><ul><li>Return varies </li></ul></ul><ul><li>PREFERRED STOCK </li></ul><ul><ul><li>No voting rights </li></ul></ul><ul><ul><li>Dividends fixed </li></ul></ul><ul><ul><li>Less risk </li></ul></ul><ul><ul><li>Fixed return </li></ul></ul>
  14. 14. MINIMIZE THE RISK <ul><li>Long-term investment </li></ul><ul><li>Diversified portfolio </li></ul><ul><li>Research and monitor </li></ul><ul><li>Maintain discipline </li></ul>
  15. 15. Assignment <ul><li>PAGE 350 </li></ul><ul><li>QUESTIONS 1, 2, 10 </li></ul>

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