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Understanding the Stock Market: Gambling or Investment?

The debate surrounding the stock market often resembles a gamble to many, yet it can hold rewards for informed investors. This exploration dives into key concepts like Earnings per Share (EPS), Initial Public Offerings (IPOs), and market cycles such as Bull and Bear markets. We highlight the vocabulary of investing, the reasons companies issue stock, and factors influencing price fluctuations. By demystifying the stock market, individuals can intelligently navigate their investment choices and grasp whether investing is a strategic endeavor or mere chance.

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Understanding the Stock Market: Gambling or Investment?

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Presentation Transcript

  1. The Stock Market Is it Gambling or Something More?

  2. Clips from Wall Street • “Greed is Good” • http://www.youtube.com/watch?v=-TlIt6yJVHU&feature=related • http://www.dailymotion.com/video/xex9rz_gordon-gekko-greed-is-good-full-spe_shortfilms • http://www.americanrhetoric.com/MovieSpeeches/moviespeechwallstreet.html

  3. Some Words To Understand • Earnings per Share: The amount of profit to which each share is entitled.  • IPO: Short for Initial Public Offering. • Market Cap: The amount of money you would have to pay if you bought ever share of stock in a company. • Share: A share represents an investor's ownership in a "share" of the profits, losses, and assets of a company. • Ticker Symbol: A short group of letters that represents a particular stock (e.g., "Coca Cola" is referred to as "KO".)

  4. When you think of the Stock Market you tend to fall into one of two places • Know that they should invest for the long run, but don’t know where to begin • Feel like investing is some form of black magic • Investment is along the lines of blind faith • Believe that it is a form of gambling • Think that if you invest you are bound to lose money • Why would they think that?

  5. Why do Companies Issue Stock? • Raising money to expand • Two Options What are they?

  6. Some More Vocab • Bear Market: Slang for when the stock market is in a general, prolonged period of falling stock prices. • Bull Market: Slang for when the stock market is in a general, prolonged period of rising stock prices. • Dividend: A dividend is a portion of a company's earnings that is paid out to shareholders on a quarterly or annual basis. • Exchange: An exchange is a place in which options, futures, and shares in stocks, bonds, indexes, and commodities are traded.

  7. And a few more… • Index: An index is a benchmark which is used as a reference marker to which financial performance is measured and compared against. • Institution: A word used to describe any company, brokerage house, or entity that is not an individual. • Sector: A group of stocks that are in the same business • Volume: The number of shares of stock traded during a particular time period.

  8. 4 Reasons Prices Fluctuate • The 4 most common things that cause these price-swings. (In other words, we are answering the question • "Why do the stocks of good businesses sometimes sell below or above their intrinsic value?) • 1.) The investor vs. the speculator • 2.) The commodity nature of stocks • 3.) Life (it sounds general, but it will make more sense later) • 4.) Temporary Problems

  9. Let’s Take A Look At Some Stocks Two Sites You might Want to Check out… • http://www.google.com/finance • http://money.cnn.com/data/markets/

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