This presentation explains why people buy stock. It talks about capital appreciation and dividends.
Text of Why People Buy Stock
1. Why People Buy Stock? Pros and Cons
2. Why do people buy stock? When people invest in stock, they
are looking to get a return on their investment in two ways: 1)
Appreciation (Increase) of Value 2) Dividend Income
3. APPRECIATION(INCREASE) IN VALUE
4. A stock appreciation (increase)is the differencebetween the
price you paid for the stock and itscurrent market price or
value.If the price you paid for the shares is less than itscurrent
value, then the stocks value hasappreciated (increased).If the
price you paid for the shares is more thanits current value, then
the stocks value hasdepreciated (decreased).
5. DIVIDEND INCOME
6. What is a dividend? Based on the performance of a company
and other factors, a company may decide to issue a one-time payment
or a dividend to all stockholders. This payment or dividend is
given on a per share basis. The dividend amount is usually a very
7. Example: Phillips Morris Co. declares a 3 cent dividend to
all shareholders. If you only own two shares, then your total
dividend payment is 6 cents. $.03 2 $.06 Dividend x Shares =
8. Important Note: Start-up companies rarely declare dividends.
If you are looking for dividend income, then you should look at
9. THERE ARE ADVANTAGES ANDDISADVANTAGES OF OWNING STOCK
10. Advantages of Owning Stock1. You own a piece (percentage)
of a company. Ultimately stock is an asset just like your house or
car.2. Stock can appreciate in value.3. Stock can give you current
income via dividends.4. Usually yields higher returns than
traditional investments such as saving accounts, CDs, saving bonds,
and money market accounts.
11. Disadvantages of Owning Stock1. Stock can decrease in
value.2. If the corporation goes out of business, then your stock
in that company has no value. (ENRON)3. Unless you own a
significant amount of shares, you dont have much input in the
everyday operation of the corporation. You are basically placing
your hopes in the management team and the employees of the
corporation.4. Riskier than traditional investments such as saving
accounts, CDs, savings bonds, money market accounts.
12. Summary People invest in stock to get a return in the form
of dividend income and appreciation of the value of the stock.
Stocks usually yield higher returns than traditional investments.
Stocks are riskier than traditional investments. Stockholders are
considered owners of the corporation.