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Chapter 12 PowerPoint Presentation

Chapter 12

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Chapter 12

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  1. Investing in Stocks Chapter 12

  2. Types of Stock • Common Stock • Advantages • Voting Rights – Proxy • Usually cheaper than preferred • Disadvantages • More risky – last to get money • Not guaranteed a dividend

  3. Types of Stock • Preferred Stock • Advantages • First to get money if company goes under • Guaranteed a dividend first • Disadvantages • No voting rights • More expensive than common

  4. Stock Values & the Return on an Investment • Terms • Stock Certificate • Par Value – stated on certificate • Market Value – what you pay • Undervalued stocks vs Overvalued • Return – how much money you make from an investment • Factors that affect price • The company • Interest rates – lower the better for stocks • The market

  5. The Securities Market • Bull and Bear Markets • Bull Market • Rising stock prices • Feeling of investor optimism • Bear Market • Period of falling stock prices – 15% or more • Investors are pessimistic about overall economy. • Securities Exchanges • NYSE – largest, 1.1 million publicly owned shares = $9 million in capital • American Stock Exchange – smaller, 250,000 shares = $2.5 million in capital • NASDAQ – medium size, mostly tech. companies

  6. The Securities Market • Over-the-Counter Market • Network of brokers who buy and sell securities not listed on exchanges • Trades down by phone or internet

  7. Investment Strategies • Short-Term Techniques • “Playing the market.” • Buying on Margin • Borrowing from your broker • Leverage – use less of your own money & buy more stocks with less money. • Selling Short • Selling stocks borrowed from a broker that must be replaced at a later time.

  8. Investment Strategies • Long-Term Techniques • Buy and Hold • Dollar-Cost Averaging • Purchase of an equal dollar amount of the same stock at regular intervals. • Helps to avoid the situation of buying high and selling low.

  9. Stock Listings • Columns • 52 Wk High and Low • Stock name abbrev. & “pf” or “s” • Div – Dividend stated as dollar per share • Yld – Yield stated as a % --annual dividend/closing price • P/E ratio – price/earnings ratio • Sales in 100’s • Highest, lowest, and closing price • Net change