Manhasset Secondary School



When you buy stock, you own part of the company.When you buy a bond, you are lending the company money.Over time, stocks do better, but bonds are safer.WHY DO PEOPLE BUY STOCK?Having stock means owning a share of that company; in this way when you buy stock, you can said to be a "shareholder" of the company (in the case of a fund, the fund would be the shareholder). As the company earns money, so do you; because you own a share of the company, your share goes up in value with the value of the company. People buy stock so that they can resell it later at a higher priceWhy do companies sell stock?To raise money!-if they got the loan from the bank, they would have to repay with interest-The bank may have refused their loan applicationDisadvantage –you give up control of the companyTypes of Stock90% common stock-voting privileges dividends (company not required to pay)10% preferredwill get paid dividends before the common stockholders, but after bondholderno voting privilegesLevels of Riskblue chip-large, well established companies with lower risk (ie Exxon, General Motors, IBM) Dow Jones Industrial Average is the average of the top 30 blue-chip stocks. It is an indicator of how well our economy is doing.speculative stocks-new firms-higher risk levelMutual funds-people pool their money and buy a portfolio of many different stocks.BEARS VS. BULLSTwo words you may hear regarding the stock market is "bull" and "bear". A "bear" market is one where stock prices have been going down, generally meaning that stocks are undervalued and it is a good time to buy. A "bull" market is the opposite; it means that stock prices have been going up so, stocks are overvalued and it is a good time to sell.Where to buy Stocks-need a stock broker with eitherStock Exchange Floor-only companies listed on the exchangeThe floor of the New York Stock Exchange is the picture that most people have in their minds when they think of trading stocks. That's because the NYSE still uses a physical exchange floor, where the "market makers" use handheld terminals, overhead monitors, and hand gestures to complete their transactions.The NYSE depends on these specialists, or market makers, to match buyers with sellers. They also ensure that a robust "market" exists for the stock, or stocks, they are responsible for managing. The NYSE trading floor, and all of the people that make trading a reality, is quite a sight to behold. That is why pictures of the stock exchange floor often appear in the newspaper.In 2008 AMEX was acquired by NYSEElectronic Exchanges-companies not listed on exchangeUnlike the NYSE, the NASDAQ is a completely electronic exchange. The NASDAQ uses a sophisticated network of computers to match buyers with sellers of stock. This makes electronic exchanges very fast, with almost instantaneous confirmation of stock trades.Electronic exchanges give many investors an added feeling of control over their trades. But either method, exchange floors or electronic exchanges, still requires the use of a stockbroker.How to Read a Stock Table:Give out the handoutHow to Read a Stock Ticker:Ticker SymbolThe Unique Characters used to identify the company.Shares TradedThe volume for the trade being quoted. Abbreviations are K = 1,000, M = 1 million and B = 1 billionPrice TradedThe price per share for the articular trade (the last bid price).Change DirectionShows whether the stock is trading higher or lower than the previous day\'s closing price.Change Amount The difference in prie from the previous dayYou can tell where a stock trades by looking at the number of letters in the stock symbol. If the symbol has three letters, the stock likely trades on the NYSE or American Stock Exchange (AMEX). A four-letter symbol indicates the stock likely trades on the Nasdaq. Some Nasdaq stocks have five letters, which usually means the stock is foreign. This is designated by an 'F' or 'Y' at the end of the stock symbol. To learn more, see Why do some stock symbols have three letters while others have four? On many tickers, colors are also used to indicate how the stock is trading. Here is the color scheme most TV networks use: Green indicates the stock is trading higher than the previous day\'s close. Red indicates the stock is trading lower than the previous day\'s close. Blue or white means the stock is unchanged from the previous closing price. How to Find out a stock’s symbol: HYPERLINK "" How to Pick a Good StockEarnings per share =Net income – dividends paid outAverage number of outstanding sharesEarnings-pershare don’t tell us much, alone, but you can compare the current figure to previous years and compare it to the figure for competitor companies, to see how the company is doing.P/E ratio =Current share priceEarnings per shareDebt-Asset ratio =Total LiabilitiesTotal Assets***if this is over 1, it is not good. More debt than assets***Calculating the Rate of Return on InvestmentsLet's say you invest $100 in stock, which is called your capital. One year later, your investment yields $110. What is the rate of return of your investment? We calculate it by using the following formula:((Return - Capital) / Capital) × 100% = Rate of ReturnTherefore,(($110 - $100) / $100) × 100% = 10%Your rate of return is 10%. ................
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