The Stock Market

What is Stock?

• Stock is a paper certificate proving partial ownership of a company.

Security:

• Proof that the holder owns something or is owed a sum of money.

• Examples?

Why is Stock issued?

• Corporations issue stock to raise operating capital.

How does an investor benefit from owning stock?

Voting Rights:

• Owning stock may entitle the shareholder to a vote in the company.

• If someone owns more than 50% they control the votes.

Dividend:

• A share of the company’s profits

• Normally paid quarterly

Profit from sales:

• Rule of Thumb:

•Buy Low Sell High

Baseball Card AnalogyPrimary Market

Private Collector Private Collector

Secondary Market(Stock Exchange)

Income Stock:

• Solid company that pays a good dividend.

Growth Stock:

• Company that pays a low dividend, but uses capital to expand and grow.

• Speculator

What causes stock prices to rise or fall?

• DEMAND• The company’s profits

–Attractive –Unattractive

• Psychology• Current Events

How is stock purchased?

• Brokers purchase stock on behalf of their customers for a commission

• Must be members of the exchange.

• Online

What is the New York Stock Exchange?

• Established in the 1700’s as a place to trade stock

• America’s largest exchange• Secondary Market• 1366 Members• 2800 Companies Listed

• Decide to Buy/Sell Stock• Contact Broker• Order sent to Booth at NYSE• Order given to Floor Rep• Trading Post• Specialist• Buy or Sell is carried out• Price is adjusted• Account is settled

Steps to Buying/Selling Stock

What is NASDAQ?

• National Association of Securities Dealers Automated Quotation System

• Over the Counter Market

What is the Dow Jones Industrial Average?

• The average of 30 big companies.

SEC

• Securities and Exchange Commission