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Understanding Stocks

Understanding Stocks. What is a stock?. A share in the ownership of a company When you own stock, you are automatically an “owner”/”shareholder” in that particular company (Funds – buy stocks that are bundled together). How much do I own?. Ownership percentage

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Understanding Stocks

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  1. Understanding Stocks

  2. What is a stock? • A share in the ownership of a company • When you own stock, you are automatically an “owner”/”shareholder” in that particular company • (Funds – buy stocks that are bundled together)

  3. How much do I own? • Ownership percentage • divide number of shares you have by the total number of shares outstanding/offered by the company • Apple 908 million shares • Own 10 shares • 10/908 million – you do the math!! • .01%...

  4. What companies have stock? • Usually incorporate (go public) • Can stay private & ask venture capitalists to invest (risky) • Initial Public Offering – first time (Facebook) • Price determined by owners & investment bank Purpose • raise revenue, decrease own financial risk • Take out a loan (debt financing) or sell shares (equity financing)

  5. What it means for the company? • Owners not the only owners any more – might not even be majority owners • Board of Directors – chosen by shareholders • Share in decision making process • Warren Buffet could become a majority share holder & make decisions!

  6. What determines a stock’s price? • Initially – investment bank & owner • Supply & demand • P/E Ratio • Current events

  7. Benefits of stock ownership • Making Money!! • Selling stock at a profit (stock appreciates & you sell it) • Dividend paying stocks (more steady) • Percentage of companies profits paid to shareholders • No liability

  8. Risks of Stock Ownership • Bankruptcy – you are the last to be paid • Stock price can go down • Only really gain if you sell

  9. The stock market • A market/exchange where stocks are bought and sold • Computerized really • NYSE – people running around • AMEX • NASDAQ • Technology companies

  10. How you buy a stock

  11. When do you buy?? • Bull market • All going up • Bear market • All going down

  12. What stocks should you buy?

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