oEQUITY=OWNERSHIP OF PART OF CORPORATION

oSTOCKHOLDER=PERSON WHO BUYS STOCK

oPRICE OF STOCK =DETERMINED BY HOW MUCH INVESTORS WANT TO PAY

VIDEO: WHAT IS PURPOSE OF THE STOCK MARKET

What is stock?

Common & Preferred Stock

COMMON STOCK If price increasessell shares at a profit If price decreasesshares lose value Earn dividends if corporation pays them

PREFERRED STOCK Dividend payment has priority Dividends do not increase if company prospers If company fails, shareholders more likely to get $$$$

back

Schoolhouse Rock BASIC DEFINITIONS

Blue Chip Stocks

Blue Chip Stocks

LARGE CAP = $1B valueMarket cap = # of shares multiplied by price of shares

Why invest in Blue Chips? Reliable returns Well established Dividends

Examples of Blue Chips Heinz, Coca Cola, Gilette, Exxon, General Mills, Kellogg , IBM, Nestle, McDonalds Origin of “Blue Chip

Major Exchanges in U.S.

New York Stock Exchange (NYSE)History of the New York Stock ExchangeNASDAQNASDAQ—What is it? American Stock Exchange

Talking about stocks….

Indexes

In the case of financial markets, an index is an imaginary portfolio of securities representing a particular market or a portion of it. Each index has its own calculation methodology. Thus, the percentage change is more important than the actual numeric value.

Stock and bond market indexes are used to construct index mutual funds and exchange-traded funds (ETFs) whose portfolios mirror the components of the index.

most well known: S & P 500 (index includes 500 leading companies in leading industries of the

U.S. economy, capturing 75% coverage of U.S. equities, mostly blue chips)

Examples of Index Funds

S & P 500 (index includes 500 leading companies in leading industries of the U.S. economy, capturing 75% coverage of U.S. equities, mostly blue chips)

Dow Jones Industrial Average (represent sectors)

NASDAQ 100 (many hi-tech companies)DJ Wilshire 5000 MSCI EAFE (foreign stocks in Europe,

Australasia, Far East)

RESEARCH ON COMPANIES

Finance Yahoo

Additional Resources: Class Website with Links

Bear Market

Meanings of “Public” and “Private”