What’s a stock? • A stock is a share in the ownership of a company.
How do I make money with a stock? • There are several ways to make money in the stock market. • Appreciation - An increase in the value of an stock over time. • Dividend Yield - A distribution of a portion of a company's profits to its shareholders.
The Math Breakdown • I buy 10 shares of Company XYZ stock at $1.00 a share. That’s $10.00. • The price rises to $2.00 a share. Now my 10 shares are worth $20.00. • Company XYZ has a bad year and the stock falls from $2.00 a share to $0.10 a share. What are my 10 shares worth now? • $1.00
Dividends • INTC offers a 3% dividend yield annually. • That means if you own 10 shares of INTC at $10.00, you will receive $3.00 at the end of the year in dividends. • 10 x $10.00 = $100.00 • 100.00 x 3% = $3.00 • Along with the dividends INTC can fluctuate up or down in price. Why do they fluctuate?
Stock Prices • Stock prices go up and down based on supply and demand. • Supply and demand is a basic concept in the market economy. • If more people want to buy a stock (demand) than sell it (supply), then the price moves up. Conversely, if more people wanted to sell a stock than buy it, there would be greater supply than demand, and the price would fall.
Activity #1 – Market Efficiency, Long Term Investing, and Timing the Market.