Stock Market Introduction to the Stock Market
Stock Market Challenge Each team will invest $100,000 on the market. Then throughout the rest of the term we will monitor your money. To prepare for the “Stock Market Challenge” we must learn a little about the stock market itself.
Purpose of the Stock Market • Almost every large corporation started out as a small, mom-and-pop operation and through growth, became financial giants. • Wal-Mart, Dell Computer, and McDonald’s had combined profits of $10.34 billion this year. • Wal-Mart was originally a single-store business in Arkansas.
Stock Market • Dell computer began with Michael Dell selling computers out of his college dorm room. • McDonald’s was once a small restaurant no one had heard of.
How did they grow? • How did these small companies grow from tiny, hometown enterprises to three of the largest businesses in the American economy? • They raised capital by selling stock in themselves.
What is a stock? • Partial ownership in a business - Stocks are made up of shares - Each share represents a portion of the company - A company only has a finite number of shares • Dividends = Profits paid out to stock holders four times a year or re-invested into the company • Types of Stocks • Common Stocks – people owning stock can vote for the directors of the company • Example: NW Natural Gas, GM • Preferred Stock – fixed dividends, no voting privileges • Example: Nike, McDonalds • Other words used for stocks • Equities • Securities • Shares
Types of Stocks • Common Stocks – people owning stock can vote for the directors of the company • Example: NW Natural Gas, GM • Preferred Stock – fixed dividends, no voting privileges • Example: Nike, McDonalds
What is the difference between a mutual fund and a stock? • Mutual fund • Investment through a broker into a fund that has multiple stocks in many companies • Benefits: • Lower risk because you are diversifying your investment
Major Stock Markets • New York Stock Exchange (NYSE) • Wall Street (Traditional Companies-Wal Mart, McDonalds) • Company Symbols are 3 letters • National Association of Securities Dealers Automated Quotations (NASDAQ) • Mostly technology stocks (Microsoft) • Automated • Company symbols are 4 letters • Others – Chicago Mercantile, AMEX, etc
Market Indicators • Dow Jones Industrial Average • An index of thirty, blue chip stocks that are traded in the United States. It is believed that by looking at the companies on the list, a person can get a general picture of how the market as a whole is performing.
Market Indicators • S&P 500 • An index made up of five hundred different stocks. • Each is selected for liquidity, size, and industry. • The index is weighted for market capitalization. • The S&P 500 is the benchmark of the overall market, and frequently used as the standard of comparison in terms of investment performance.
How do I purchase stock? • Brokerage House • Full Service Brokers • Dean Witter, Merrill Lynch, Prudential Bach • Discount Brokers • Charles Schwab, Ameritrade, eTrade
Reading Stock Pages http://finance.yahoo.com/q?s=NKE
Other Stock Resources • http://money.cnn.com/data/markets/ • CNN MONEY • http://www.google.com/finance?tab=we# • GOOGLE FINANCE
Strategies • Buy what you know • Diversify • Investigate (Research) Where? - Watch fees