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
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
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