The Language of the  Stock Market Family Economics & Financial Education © Family Economics & Financial Education – Revise...
Why Learn About Stocks <ul><li>The stock market is the core of America’s economic system </li></ul><ul><ul><li>Stock is a ...
Why Companies Issue Stock <ul><li>When a company would like to grow, it issues stocks to raise funds and pay for ongoing b...
Risk vs. Return <ul><li>On average, stocks have a high rate of return </li></ul><ul><ul><li>The increase or decrease in th...
2 Basic Types of Stock Common Stock Vs.  Preferred Stock © Family Economics & Financial Education – Revised November 2004 ...
Common Stock <ul><li>Common stock – shares or units of ownership in a public corporation </li></ul><ul><ul><li>Most basic ...
Preferred Stock <ul><li>Preferred stock – shares which pay fixed dividends and have priority over common stock </li></ul><...
Stock Classifications © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the ...
Stock Classifications <ul><li>A variety of type of stocks are necessary for a diversified portfolio </li></ul><ul><li>Seve...
Growth Stock <ul><li>Growth stocks are from companies who have a consistent record of relatively rapid growth and earnings...
Income Stock <ul><li>Income stocks pay higher than average dividends </li></ul><ul><ul><li>Company only retains small port...
Value Stock <ul><li>Value stocks are from companies which have a low market price considering historical earning records a...
Cyclical Stock <ul><li>Cyclical stocks are influenced by changes in the economic business cycle </li></ul><ul><ul><li>Comp...
Countercyclical Stock <ul><li>Countercyclical stocks are companies which give consistent returns even when the economy is ...
Speculative Stock <ul><li>Speculative stocks are companies with potential for substantial earnings </li></ul><ul><ul><li>V...
Blue-chip Stock <ul><li>Blue-chip stocks are from nationally recognized companies with long records of profit, dividend pa...
Researching A Stock © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the St...
Book Value <ul><li>Book value is the net worth of a company </li></ul><ul><ul><li>Assets-Liabilities = Book value </li></u...
Earnings per Share <ul><li>How much income a company has available to pay in dividends and reinvest as retained earnings o...
Price/Earnings Ratio <ul><li>Price/earnings ratio is the relationship between the price of one share of stock and the annu...
P/E Ratio Continued <ul><ul><li>Most companies have between a 5-25 P/E ratio </li></ul></ul><ul><ul><ul><li>7-10 P/E ratio...
Beta <ul><li>Beta measures a stocks volatility compared to overall changes in the stock market </li></ul><ul><ul><li>If a ...
Reading Stock Quotes © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the S...
Year to Date Percent Change © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language o...
52-Week High Low © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock...
Stock Name © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Marke...
Dividends per share © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the St...
Dividend Yield Percentage © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of ...
Price/Earnings Ratio © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the S...
Volume © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – ...
High and Low © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Mar...
Close © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – S...
Net Change © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Marke...
How Well the Stock Market is Doing Overall © Family Economics & Financial Education – Revised November 2004 – Investing Un...
3 Basic Indicators <ul><li>Dow Jones Industrial Average (“DOW”) </li></ul><ul><ul><li>Lists the 30 leading industrial blue...
Ups and Downs <ul><li>The term bull market means the market is doing well because investors are optimistic about the econo...
Purchasing Stock © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock...
Brokers <ul><li>A Broker is a person who is licensed to buy and sell stocks, provide investment advice, and collect a comm...
Organized Exchanges <ul><li>Minimum requirements for a stock to ensure only reputable companies are used </li></ul><ul><li...
New York Stock Exchange <ul><li>New York Stock Exchange (NYSE) </li></ul><ul><ul><li>Oldest and largest, began in 1792 </l...
American Stock Exchange <ul><li>American Stock Exchange </li></ul><ul><ul><li>Began in 1849 </li></ul></ul><ul><ul><li>2 n...
Regional Stock Exchanges <ul><li>Regional Stock Exchanges </li></ul><ul><ul><li>Stocks are traded to investors living in a...
NASDAQ <ul><li>National Association of Securities Dealers Automated Quotations </li></ul><ul><ul><li>Stocks are traded in ...
Supply vs. Demand <ul><li>The stock exchange is organized based upon the laws of supply and demand </li></ul><ul><ul><li>S...
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Language of the-stock_market-powerpoint_presentation_1122g1

  1. 1. The Language of the Stock Market Family Economics & Financial Education © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  2. 2. Why Learn About Stocks <ul><li>The stock market is the core of America’s economic system </li></ul><ul><ul><li>Stock is a share of ownership in the assets and earnings of a company </li></ul></ul><ul><ul><li>Bond is a type of debt that a company issues to investors for a specified amount of time. </li></ul></ul><ul><ul><li>Stock market is a general term used to describe all transactions involving the buying and selling of stocks and bonds issued by a company </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  3. 3. Why Companies Issue Stock <ul><li>When a company would like to grow, it issues stocks to raise funds and pay for ongoing business activities </li></ul><ul><li>It is popular because: </li></ul><ul><ul><li>The company does not have to repay the money </li></ul></ul><ul><ul><li>Paying dividends is optional </li></ul></ul><ul><ul><ul><li>Dividends are distributions of earnings paid to stockholders </li></ul></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  4. 4. Risk vs. Return <ul><li>On average, stocks have a high rate of return </li></ul><ul><ul><li>The increase or decrease in the original purchase price of an investment </li></ul></ul><ul><li>Higher rate of return = greater risk </li></ul><ul><ul><li>Uncertainty about the outcome of an investment </li></ul></ul><ul><li>Stocks provide portfolio diversification </li></ul><ul><ul><li>Money invested in a variety of investment tools </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  5. 5. 2 Basic Types of Stock Common Stock Vs. Preferred Stock © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  6. 6. Common Stock <ul><li>Common stock – shares or units of ownership in a public corporation </li></ul><ul><ul><li>Most basic form of ownership </li></ul></ul><ul><ul><li>One vote per share owned to determine company’s board of directors </li></ul></ul><ul><li>Ways the stock value can change </li></ul><ul><ul><li>The dollar value increases or decreases </li></ul></ul><ul><ul><li>Stock split occurs – shares owned by existing stockholders are divided into a larger number of shares </li></ul></ul><ul><ul><li>A merger of two companies </li></ul></ul><ul><ul><li>Dividends are paid </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  7. 7. Preferred Stock <ul><li>Preferred stock – shares which pay fixed dividends and have priority over common stock </li></ul><ul><ul><li>Less risk than common stock </li></ul></ul><ul><ul><li>No voting rights </li></ul></ul><ul><ul><li>Dividends are stated as a percentage known as the par value </li></ul></ul><ul><ul><ul><li>Fixed value stated on the stock certificate </li></ul></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  8. 8. Stock Classifications © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  9. 9. Stock Classifications <ul><li>A variety of type of stocks are necessary for a diversified portfolio </li></ul><ul><li>Seven basic classifications </li></ul><ul><ul><li>Growth, Income, Value, Cyclical, Countercyclical, Speculative, Blue Chip </li></ul></ul><ul><li>Some stocks can be classified into more than one category </li></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  10. 10. Growth Stock <ul><li>Growth stocks are from companies who have a consistent record of relatively rapid growth and earnings in all economic conditions </li></ul><ul><ul><li>New companies expanding product lines </li></ul></ul><ul><ul><li>Usually does not pay dividends </li></ul></ul><ul><ul><li>Beta is 1.5 or higher </li></ul></ul><ul><ul><li>Examples include Coca-Cola and Wal-Mart </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  11. 11. Income Stock <ul><li>Income stocks pay higher than average dividends </li></ul><ul><ul><li>Company only retains small portion of profits </li></ul></ul><ul><ul><li>Companies with a steady stream of income such as utility companies </li></ul></ul><ul><ul><li>Beta is less than 1.0 </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  12. 12. Value Stock <ul><li>Value stocks are from companies which have a low market price considering historical earning records and value of assets </li></ul><ul><ul><li>Viewed as investment bargains </li></ul></ul><ul><ul><li>Previous examples are Time Warner and IBM </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  13. 13. Cyclical Stock <ul><li>Cyclical stocks are influenced by changes in the economic business cycle </li></ul><ul><ul><li>Companies which operate in major consumer dependent industries </li></ul></ul><ul><ul><ul><li>Automobiles, housing, airlines </li></ul></ul></ul><ul><ul><li>Beta is generally 1.0 </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  14. 14. Countercyclical Stock <ul><li>Countercyclical stocks are companies which give consistent returns even when the economy is suffering </li></ul><ul><ul><li>Products are always in demand </li></ul></ul><ul><ul><li>Good for investors who want dividends </li></ul></ul><ul><ul><li>Examples are utility companies and grocery stores </li></ul></ul><ul><ul><li>Beta is 1.0 or below, even negative </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  15. 15. Speculative Stock <ul><li>Speculative stocks are companies with potential for substantial earnings </li></ul><ul><ul><li>Very high risk stocks </li></ul></ul><ul><ul><li>Examples include internet and video game companies </li></ul></ul><ul><ul><li>Beta is 2.0 </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  16. 16. Blue-chip Stock <ul><li>Blue-chip stocks are from nationally recognized companies with long records of profit, dividend payments, and a good reputation for management </li></ul><ul><ul><li>Less risky </li></ul></ul><ul><ul><li>Grow at a consistent rate </li></ul></ul><ul><ul><li>Examples are McDonalds, Wal-Mart and General Electric </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  17. 17. Researching A Stock © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  18. 18. Book Value <ul><li>Book value is the net worth of a company </li></ul><ul><ul><li>Assets-Liabilities = Book value </li></ul></ul><ul><ul><li>Information can be found in the company’s annual report </li></ul></ul><ul><ul><li>Indicates what would happen if a company’s assets were sold, debts paid, and proceeds distributed to stockholders </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  19. 19. Earnings per Share <ul><li>How much income a company has available to pay in dividends and reinvest as retained earnings on a per share basis </li></ul><ul><ul><li>After tax annual earnings </li></ul></ul><ul><ul><li>= Earnings per share </li></ul></ul><ul><ul><li>Total number of shares of common stock </li></ul></ul><ul><ul><li>Information can be found in the business section of many newspapers </li></ul></ul><ul><ul><li>Indicates how well a company is doing (the quality of products, customer service, and operations management) </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  20. 20. Price/Earnings Ratio <ul><li>Price/earnings ratio is the relationship between the price of one share of stock and the annual earnings of the company (P/E ratio) </li></ul><ul><li>Price per share </li></ul><ul><li>= P/E ratio </li></ul><ul><li>Earnings per share of stock </li></ul><ul><ul><li>Information can be found in a newspaper </li></ul></ul><ul><ul><li>Most widely used critical measure of a stock’s price </li></ul></ul><ul><ul><li>Represents how much an investor is willing to pay for each dollar of a company’s earnings </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  21. 21. P/E Ratio Continued <ul><ul><li>Most companies have between a 5-25 P/E ratio </li></ul></ul><ul><ul><ul><li>7-10 P/E ratios are financially successful companies </li></ul></ul></ul><ul><ul><ul><li>15-25 P/E ratios are rapidly growing companies </li></ul></ul></ul><ul><ul><ul><li>40-50 P/E ratios are speculative companies </li></ul></ul></ul><ul><ul><li>Lower P/E stocks pay higher dividends and have less risk, lower prices, and slow growth </li></ul></ul><ul><ul><li>High P/E ratios indicate the firm is expected to have a lot of growth in the future </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  22. 22. Beta <ul><li>Beta measures a stocks volatility compared to overall changes in the stock market </li></ul><ul><ul><li>If a stock has a beta of +1.5 and the market went up 10%, the value of the stock is expected to rise 15% </li></ul></ul><ul><ul><li>Average beta is between +0.5 - +2.0 </li></ul></ul><ul><ul><li>Information can be found by doing an internet search for “Stock ticker symbol + beta” </li></ul></ul><ul><ul><li>A higher beta indicates more risk because the stock price change will be more drastic </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  23. 23. Reading Stock Quotes © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  24. 24. Year to Date Percent Change © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona <ul><li>Year to date percent change is the stock price percent change from January 1 st of the current year </li></ul><ul><ul><li>If a stock was $43.00 on January 1 st and $36.00 on July 30 th, , the percentage change would be -16.3% </li></ul></ul>YTD % 52-Week High Low Stock Div YLD % P/E Vol 100s High Low Close Net Chg -16.3 43 36 AAR .33 2.5 22 1479 40 37 42 .027
  25. 25. 52-Week High Low © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona 52-Week High & Low shows the highest and lowest prices the stock was sold per share during the last 52 weeks YTD % 52-Week High Low Stock Div YLD % P/E Vol 100s High Low Close Net Chg -16.3 43 36 AAR .33 2.5 22 1479 40 37 42 .027
  26. 26. Stock Name © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Stock – Each company’s stock is provided with an abbreviated trading symbol name YTD % 52-Week High Low Stock Div YLD % P/E Vol 100s High Low Close Net Chg -16.3 43 36 AAR .33 2.5 22 1479 40 37 42 .027
  27. 27. Dividends per share © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona <ul><li>Dividends per share is the total cash paid to common stockholders per share annually </li></ul><ul><ul><li>Helpful when determining the type of stock </li></ul></ul><ul><ul><li>If a company paid $10,000 in dividends for 30,000 shares, the dividends per share would be $0.33 </li></ul></ul>YTD % 52-Week High Low Stock Div YLD % P/E Vol 100s High Low Close Net Chg -16.3 43 36 AAR .33 2.5 22 1479 40 37 42 .027
  28. 28. Dividend Yield Percentage © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona <ul><li>Dividend yield percentage is the dividend expressed as a percentage of the price of the share </li></ul><ul><ul><li>If a company paid $1.25 in dividends for a stock with a market price of $50.00, the dividend yield percentage would be 2.5% (1.25/50) </li></ul></ul><ul><ul><li>Helpful to know how much income to expect. A company paying high dividends is not reinvesting money to grow. </li></ul></ul>YTD % 52-Week High Low Stock Div YLD % P/E Vol 100s High Low Close Net Chg -16.3 43 36 AAR .33 2.5 22 1479 40 37 42 .027
  29. 29. Price/Earnings Ratio © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona <ul><li>Price/earnings ratio is the closing price of the share compared to the annual earnings per share </li></ul><ul><ul><li>If the stock’s market price is $50.00 and the earnings per share is $2.25, the P/E ratio is 22.2 </li></ul></ul><ul><ul><ul><li>For every dollar the company earns, the stock’s market price is worth $22.00 </li></ul></ul></ul><ul><ul><li>A high number indicates people are optimistic about the company and health of the market. </li></ul></ul>YTD % 52-Week High Low Stock Div YLD % P/E Vol 100s High Low Close Net Chg -16.3 43 36 AAR .33 2.5 22 1479 40 37 42 .027
  30. 30. Volume © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona <ul><li>Vol 100’s is the number of transactions to the share on the reported day </li></ul><ul><ul><li>Represented in hundreds (take the number and add two zeros) </li></ul></ul>YTD % 52-Week High Low Stock Div YLD % P/E Vol 100s High Low Close Net Chg -16.3 43 36 AAR .33 2.5 22 1479 40 37 42 .027
  31. 31. High and Low © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona <ul><li>High and low entries represent the high and low selling price of one share for the previous day </li></ul>YTD % 52-Week High Low Stock Div YLD % P/E Vol 100s High Low Close Net Chg -16.3 43 36 AAR .33 2.5 22 1479 40 37 42 .027
  32. 32. Close © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona <ul><li>Close is the price of the last share sold for the day </li></ul>YTD % 52-Week High Low Stock Div YLD % P/E Vol 100s High Low Close Net Chg -16.3 43 36 AAR .33 2.5 22 1479 40 37 42 .027
  33. 33. Net Change © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona <ul><li>Net change is the difference between the closing price of the share from the prior day and the current day </li></ul>YTD % 52-Week High Low Stock Div YLD % P/E Vol 100s High Low Close Net Chg -16.3 43 36 AAR .33 2.5 22 1479 40 37 42 .027
  34. 34. How Well the Stock Market is Doing Overall © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  35. 35. 3 Basic Indicators <ul><li>Dow Jones Industrial Average (“DOW”) </li></ul><ul><ul><li>Lists the 30 leading industrial blue chip stocks </li></ul></ul><ul><li>Standard and Poor’s 500 Composite Index </li></ul><ul><ul><li>Covers market activity for 500 stocks </li></ul></ul><ul><ul><li>More accurate than DOW because it evaluates a greater variety of stock </li></ul></ul><ul><li>National Association of Security Dealers Automated Quotations (“NASDAQ”) </li></ul><ul><ul><li>Monitors fast moving technology companies </li></ul></ul><ul><ul><li>Speculative stocks, show dramatic ups and downs </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  36. 36. Ups and Downs <ul><li>The term bull market means the market is doing well because investors are optimistic about the economy and are purchasing stocks </li></ul><ul><li>The term bear market means the market is doing poorly and investors are not purchasing stocks or selling stocks already owned </li></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  37. 37. Purchasing Stock © Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  38. 38. Brokers <ul><li>A Broker is a person who is licensed to buy and sell stocks, provide investment advice, and collect a commission on each purchase or sale </li></ul><ul><ul><li>Purchases stocks on an organized exchange (stock market) </li></ul></ul><ul><ul><li>Over ¾ of all stocks are bought and sold on an organized exchange </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  39. 39. Organized Exchanges <ul><li>Minimum requirements for a stock to ensure only reputable companies are used </li></ul><ul><li>Each exchange has a limited number of seats available which brokerage firms purchase to give them the legal right to buy and sell stocks on the exchange </li></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  40. 40. New York Stock Exchange <ul><li>New York Stock Exchange (NYSE) </li></ul><ul><ul><li>Oldest and largest, began in 1792 </li></ul></ul><ul><ul><li>1,366 seats available </li></ul></ul><ul><ul><li>2,800 companies </li></ul></ul><ul><ul><li>Average stock price is $33.00 </li></ul></ul><ul><ul><li>Strict requirements </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  41. 41. American Stock Exchange <ul><li>American Stock Exchange </li></ul><ul><ul><li>Began in 1849 </li></ul></ul><ul><ul><li>2 nd largest exchange </li></ul></ul><ul><ul><li>It’s requirements are not as strict as NYSE allowing younger, smaller companies to list </li></ul></ul><ul><ul><li>Average stock price is $24.00 </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  42. 42. Regional Stock Exchanges <ul><li>Regional Stock Exchanges </li></ul><ul><ul><li>Stocks are traded to investors living in a specific geographical area </li></ul></ul><ul><ul><ul><li>Including Boston, Cincinnati, Philadelphia, Spokane </li></ul></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  43. 43. NASDAQ <ul><li>National Association of Securities Dealers Automated Quotations </li></ul><ul><ul><li>Stocks are traded in an over the counter electronic market </li></ul></ul><ul><ul><li>4,000 small companies </li></ul></ul><ul><ul><ul><li>Company requirements are not as strict </li></ul></ul></ul><ul><ul><li>More volatile because companies are young and new </li></ul></ul><ul><ul><li>Average stock price is $11.00 </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
  44. 44. Supply vs. Demand <ul><li>The stock exchange is organized based upon the laws of supply and demand </li></ul><ul><ul><li>Supply is the relationship of prices to the quantities of a good or service sellers are willing to offer for sale at any given point in time </li></ul></ul><ul><ul><li>Demand is the relationship of prices to the quantities and the corresponding quantities of a good or service buyers are willing to purchase at any given point in time. </li></ul></ul>© Family Economics & Financial Education – Revised November 2004 – Investing Unit – Language of the Stock Market – Slide Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

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