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Title: Investing in the Stock Market
Description: Blue Chips, Penny Stocks, Dividends. Learn the steps in gaining huge returns in the Stock Market
Description: Blue Chips, Penny Stocks, Dividends. Learn the steps in gaining huge returns in the Stock Market
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Investing in the Stock
Market
By: Jerome Ramos
FIN01 Basic Finance
Pay taxes
Spend it (consume today)
Save it (delay consumption to future)
Invest it
Using money you have saved to purchase a
product that will create benefits in the future
Saving and investing involves trade-offs
Saving
Business Investment
Not consuming all current income
Examples: Savings Account, Certificate of Deposit
Production and purchase of capital goods
Examples: machines, buildings and equipment that can
be used to produce more goods and services in the
future
Personal investment
Purchasing financial securities
Examples: stocks, bonds, real estate, mutual funds
Pay a higher rate of return in the long run than the
interest paid on savings accounts
...
2
...
4
...
6
...
8
...
10
...
12
...
Share in moneymarket mutual fund
Credit card with
$5,000 line of credit
Eurodollar savings
account in a Swiss
Bank
Your House
Oil painting by Monet
Categorize as “very liquid,” “somewhat liquid” or “illiquid”
NYSE - New York Stock Exchange – “The Big
Board”
Founded in 1792, the oldest and most prestigious
stock exchange in the U
...
– 3,000 mostly large-cap
companies
NASDAQ - National Association of Securities
Dealers Automated Quotation System computerized national trading system that lists more
than 5300 small-cap & technology companies
AMEX - The American Stock Exchange founded in
1842 as the New York Curb Exchange – 700 companies
Largest most consistently profitable companies
that usually pay dividends
Coca-Cola
General Electric
McDonald’s
Exxon-Mobile
Wal-Mart
Gillette
Common Stock
The most basic form of ownership that a corporation
issues
...
The value of a common stock is directly influenced
by the successes and failures of the issuing company
...
Preferred Stock
They receive their dividends before common stock
owners
If the company goes out of business, preferred
stockholders are paid back the money they invested
before the common stockholders
For these reasons, preferred stock is generally less
risky than common stock
The main drawback of preferred stock is that it
cannot benefit as much from company profits
because it only pays a fixed dividend
Capital Gains
A profit made when selling stock at a higher price
than they paid for it
...
For example, if you buy 100 shares of Company XYZ
at $100
...
00 a share ($12,500), you’ve realized a
capital gain of $25
...
00
...
For example, if Company XYZ declares an annual
dividend of $10
...
00 a year, or, $250
...
Who Decides Dividends?
A companies board of directors decides how large a
dividend the company will pay, or whether it will
pay one at all
...
Usually only large, established companies pay
dividends
...
Taking a company through a public
offering on the U
...
securities markets is a
major undertaking
It is a source of pride, an opportunity for
business growth, and a serious legal
responsibility
...
Downside – give up control
Earn regular income – dividend payments
Buy low, sell high…hopefully ☺
Sell at higher price than you bought?
Capital gain
Sell at lower price than you bought?
Capital loss
When do you reap the benefits?
Ups and Downs
Throughout its history, the stock market has tended
to move in cycles of activity
...
While it's impossible to predict the market's
future activity, one thing is certain: The stock
market will continue to experience ups and
downs
...
"The market's up" or “the market's down,"
refers to the Dow Jones Industrial Average
...
Composite
of 30 companies
...
S
...
These thresholds, know as "circuit breakers,"
are updated quarterly and use the Dow Jones
Industrial Average as their benchmark
...
2,350 Point Drop
A 2350-point drop will halt trading for the
remainder of the day, regardless of the time it
occurs
...
74
-508
...
61
10/28/1929
260
...
33
-12
...
07
-30
...
73
11/06/1929
232
...
55
-9
...
27
-5
...
72
08/12/1932
63
...
79
-8
...
23
-6
...
29
10/26/1987
1793
...
83
-8
...
71
-7
...
84
10/15/2008
8577
...
05
-8
Title: Investing in the Stock Market
Description: Blue Chips, Penny Stocks, Dividends. Learn the steps in gaining huge returns in the Stock Market
Description: Blue Chips, Penny Stocks, Dividends. Learn the steps in gaining huge returns in the Stock Market