1. GUTIC Edward Thomson
27th
September 2012
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[Subject of presentation]
[Your name]
[Date]
Introduction to the stock market
Edward Thomson
www.gutic.co.uk

2. GUTIC Edward Thomson
27th
September 2012
Before we start…
Stocks (American) = Shares (British)
Please like our new Facebook page:
www.facebook.com/guticnow
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3. GUTIC Edward Thomson
27th
September 2012
I. Introduction
- What are shares?
- Why invest?
II. Market Dynamicss
- What drives the market?
III. Strategies
- Fundamental vs technical
IV. Getting started
- Using Google finance
V. Conclusion
Content
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4. GUTIC Edward Thomson
27th
September 2012
I. Introduction
II. Market Dynamics
III. Strategies
IV. Getting started
V. Conclusion
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5. GUTIC Edward Thomson
27th
September 2012
What 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): money
paid back with interest.
— You may never get your money back with shares
(risky?)
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6. GUTIC Edward Thomson
27th
September 2012
Why 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 run
Riskier than bonds or cash but potentially greater rewards
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7. GUTIC Edward Thomson
27th
September 2012
Chasing wiggles
Wiggles are noise – short term thinking
Long term – stock market is up
Long term view
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8. GUTIC Edward Thomson
27th
September 2012
I. Introduction
II. Market Dynamics
III. Strategies
IV. Getting started
V. Conclusion
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9. GUTIC Edward Thomson
27th
September 2012
Market 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 to
understand.
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10. GUTIC Edward Thomson
27th
September 2012
Market 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.
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11. GUTIC Edward Thomson
27th
September 2012
Example – GGP (AIM listed)
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Slow moving – very few trades
More trades – faster price movement
Popularity
(sentiment)
drives short
term price
volume
Share price
doesn’t
necessarily
reflect value

12. GUTIC Edward Thomson
27th
September 2012
I. Introduction
II. Market Dynamics
III. Strategies
IV. Getting started
V. Conclusion
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13. GUTIC Edward Thomson
27th
September 2012
Analysis strategies
Fundamental vs Technical
— Fundamental analysis
judge company value and determine fair price
— long term investment (years)
— short term price movement irrelevant
— want good history of dividends
— Technical analysis
determine how price will change
— short term focus (weeks/days/seconds)
— trading not investing
— fundamentals not important
— use technical indicators / complex models
Would you pay £10
for an apple?
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14. GUTIC Edward Thomson
27th
September 2012
Analysis strategies
Passive vs Active
— Passive funds
Buy & hold the market – follows an index
— long term investment (years)
— growth through volume and dividends
— low cost, few transactions / taxes
— Active funds
Try 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 varies
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15. GUTIC Edward Thomson
27th
September 2012
I. Introduction
II. Market Dynamics
III. Strategies
IV. Getting started
V. Conclusion
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16. GUTIC Edward Thomson
27th
September 2012
Getting started – example using Google finance: Tesco
Price (pence) Day’s movement Company news‘value’ numbers
Similar
companies
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17. GUTIC Edward Thomson
27th
September 2012
I. Introduction
II. Market Dynamics
III. Strategies
IV. Getting started
V. Conclusion
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18. GUTIC Edward Thomson
27th
September 2012
Conclusion
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— 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)
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