Stock Market Basics

investor

A person who gives money to any of the above in return for a share of the company.

entrepreneur

A person who has a creative vision for a product and service and then creates and launches a business.

Options:

A privilege, sold by one party to another, that gives the buyer the right, to buy or sell a stock at an agreed-upon price within a certain period or on a specific date

Exchanges

A stock exchange is a market in which securities are bought and sold New York Stock Exchange (NYSE) American Stock Exchange (AMEX) NASDAQ

private corporation

An individual or partnership can decide to incorporate.. The main reasons to incorporate are... - If someone sues the company only can sue the corporation - It is easier to raise money to grow the business - Tax reasons. You can't buy shares of a private company on the stock market.

Why invest in stocks?

The return on investments in the market are 3-4 times the annual return of inflation, savings and treasury bonds You can make good money in the market You can lose money too . . .

Bonds:

a debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate.

Dividends

a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. _____________ can be issued as cash payments, as shares of stock, or other property.

Selling Short:

a trade in which the investor borrows a security and sells it to another investor in market.

Bear Market:

is a market in which the economy is bad and a recession is looming

Bull Market:

is a market in which the economy is great and stock prices are rising

Indices: Index

Index: A collection of stocks representative of the stock market Dow Jones: 30 most significant stocks in the stock market S&P 500: 500 largest companies on the US stock market NASDAQ Composite: all stocks on the NASDAQ

company

A a business formed to manufacture or supply or services for a profit.

partnership

A company owned and managed by two or more people who share its profits or losses. A partnership is not separate from its owners, who are liable for the company's debt.

sole proprietorship

A company owned and run by one individual who receives its profits it bears it losses.

Futures:

A financial contract obligating the buyer to purchase an asset at a predetermined future date and price (i.e. currency, commodities)

sector

A group of companies that are involved in the same business.

Types of Stock

Common Stock: most common form of stock One vote per share Dividends are not guaranteed Preferred Stock: Fixed dividend May not include voting. Companies may customize other "classes" of stock.

Markets

Primary Markets: where stocks are created Secondary Markets: investors trade previously issued stocks The Stock Market *Companies are not involved in the buying and selling of their stock.

stock exchange

Once a company goes public, then the shares trade on one of the major US stock exchanges

How Do You Make Money in the Market?

Stock Price Goes Up and You Sell Buy low, sell high Dividends Not all companies pay dividends

Stocks

Stock is ownership in a publicly traded company. Stock is a claim on the company's assets and earnings The more stock you have, the greater your claim as an owner.

What causes stock prices to change?

Supply and Demand Earnings and Expectations Sentiments and Attitudes Economic Indicators Follow the Leader (volume) Anything

Initial Public Offering

The first time a stock is sold to the public Sold in the Primary Market

Stock broker

The person who actually makes the trade for you. Today, you can use Etrade and online brokers.

public corporation

The stock of a public company is owned and traded by individual and institutional investors. IPO- Initial Public Offering When a company decides it needs to raise more money and go public it files an IPO

Dividend Per Share:

annual dividend payment per share.

Buying on Margin:

borrowed money that is used to purchase securities.

Dollar Cost Average:

buying a fixed dollar amount of a particular investment on a regular schedule

Open:

current day's opening price

Price:

current stock price

Ticker Symbol:

the alphabetic name that identifies the stock.

Day's Range:

the current day's price range

Price/Earnings Ratio:

the current stock price divided by earnings per share for the last four quarters

52-Week High and Low:

the highest and lowest prices at which a stock has traded over the past year

Close:

the last trading price from the previous day

Net Change:

the net change from the previous day

Trading Volume:

the total number of shares traded for the day

Market Capitalization:

the value of a company that is traded on the stock market, calculated by multiplying the total number of shares by the present share price.