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Chase Reed, Teen Entrepreneur: 'Sneakers are Like the Stock Market' | CNBC

Learn about the stock market, how it works, and how to make investment decisions. Discover the primary and secondary markets, fundamental analysis, and the concept of day trading vs long-term investment.

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Chase Reed, Teen Entrepreneur: 'Sneakers are Like the Stock Market' | CNBC

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  1. Chase Reed, Teen Entrepreneur: 'Sneakers are Like the Stock Market' | CNBC

  2. Introduction to the Stock Market • What is a market? “A regular gathering of people for the purchase and sale of provisions, livestock, and other commodities.” • Markets no longer need to be a physical meeting place. • Internet-based auction sites are markets in that take place entirely online. The parties never physically meet. • Can you name examples of a market? • Farmers’ market • Auction house • eBay • Stock market

  3. Stock Market Overview Company X needs resources to expand business Offers stock for sale for the first time in an Initial Public Offering (IPO) purchased by investment bankers Primary Market Company X stock is offered for sale by brokers on a major stock market Secondary Market New York Stock Exchange (NYSE) Individual investor purchases company X stock online or with a phone call NASDAQ Stock Market

  4. Terms to Know Securities: Interest or ownership in a company or other entity (examples include stocks and bonds) Trade: When a security is purchased or sold in the market

  5. Why is a Broker-Dealer Needed? Brokers-Dealers are intermediaries licensed to trade securities. Individuals are not allowed to buy and sell directly! Some examples include:

  6. Valuation: How Do I Value a Company? What factors affect the price you would pay for the lemonade stand? • Earnings consistency: Knowing you will earn $1,000 every year lets you calculate with certainty how long it will take you to earn back your investment. • Earnings growth: If you believe earnings will increase you may be willing to pay more. Why might earnings increase? • More people will know about the lemonade stand in Year 2, so it will hopefully get more business. • Maybe a school will be built on the corner where the lemonade stand operates. More children means more potential customers. • Heat wave: if it’s hot outside people more people are likely to buy lemonade. • Other reasons?

  7. Example: How Do I Value a Company? Handout or paper Dante started a lemonade stand last year on the corner of Flatbush and Atlantic near his home in Brooklyn, NY. The lemonade stand was open for business during the summer months and made $1,000 in profit for Dante. Below is a breakdown of Dante’s revenue, costs, and profit: Notes: Dante has decided to sell his lemonade stand business to you. How much would you be willing to pay and why?

  8. Investment Decisions: Fundamental Analysis What are some questions you should ask before buying a stock? • What does the company make or what service does it provide? • Who runs the company? Have there been any recent changes? • Who are its competitors? • What advantages does the company have over its competitors? • What are the risks to its business? • How much money does the company make? (Revenue) • How much money does the company earn? (Profits)

  9. Valuation: How Do I Value Starbucks Stock? Why is Starbucks so much more “expensive”? • Investors believe that Starbucks will earn far more in the future • Investing in Starbucks  right to those future earnings • Starbucks is continuously developing new, innovative offerings  investors hope Starbucks will make more money • Remember, when you buy a stock you are hoping to receive the future profits of the company!

  10. Day Trading Day trading is the buying and selling a stock within a day (typically within minutes or hours).

  11. Long-Term Investment 1985

  12. Stock Research • How to research stocks you would like to invest in: • Descriptions can be found from the website www.wikinvest.com, which can help you research stocks in your free time. • You can also research stocks on Yahoo Finance, Google Finance, or other financial websites. • Think about why they may or may not represent good purchases. • What resources are available to you to conduct your research? • Public web sites such as Yahoo Finance and Google Finance. • Web sites and publications from financial firms such as Barron’s, Bloomberg and Morningstar (sometimes for a fee). • Securities and Exchange Commission’s (SEC) Edgar web site. • It is essential to verify the trust worthiness of your sources. Just because it’s on the internet doesn’t make it true! • If something is too good to be true, then it probably is!

  13. Talk About It! Ask your parents, family members/relatives and older friends: • Do they have a plan to invest their money? Why or why not? • Do they invest in any stocks? If so, how did they make their decision?

  14. Any questions? The End Module 6

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