The Stock Market

1
The Stock Market

• Entrepreneurship
• Mr. Rodrigues

2
Corporations

• Defined A Business that is registered by a state
  and operates apart from its owners.
• A corporation exists separate from its owners
• Treated as an Artificial Person or Thing
• It pays taxes, hires people, enters into
  contracts, accrues debt
• Corporations can have an unlimited lifespan
• Individuals who start a corporation are called
  promoters
• Promoters must file Articles of Incorporation
  with the state
• Name of Corporation
• Promoters Names /Addresses
• Why and how long it will be in business
• Ownership of a corporation is allotted through
  the possession of stock.

3
Very Basic Overview of Stock

• Stock is considered pieces of a corporation
• Stock is split into shares
• People who buy and own stock are called
  shareholders or stockholders
• They are all partial owners of the company
  according to the amount of stock they hold
• Price follows basic economics
• The greater the number of Shares, the lower the
  price
• The lower the number of Shares, the higher the
  price
• The amount of control you have in the company
  increases with the amount of stock you own
• Companies issue stock to help fund the corporation

4
Stock Indexes

• Between the NYSE, NASDAQ and AMEX, there are
  thousands of companies that have stock for sale.
• Some of these companies are more important than
  others.
• What we have set up is the Dow Jones Industrial
  Average (DJIA) or Dow
• The Dow is made up of key stocks that are
  characteristic of the entire US Economy.
• These stocks are usually the most widely owned
  stocks from the most successful, reputable
  companies

5
Stocks on the Dow

• 3M Sticky Notes, tape
• Alcoa Aluminum
• ATT Phones / Internet
• Boeing Airplanes, Defense, Satellites
• Coca-Cola beverages
• Exxon Mobile Oil/Gas
• General Electric Diversified Industries

• General Motors automobiles
• Hewlett Packard- computers
• IBM computer services
• McDonalds -- food
• Microsoft -- software
• Procter Gamble consumer goods
• Verizon -- telecommunications
• Wal-Mart general retail
• Walt Disney entertainment

6
NYSE

• The NYSE is located in New York, NY on Wall and
  Broad Streets.
• It is considered the financial capital of the US
  and the world
• Here, stocks are exchanged in a traditional
  mannera mix of human interaction and
  computerized transactions

7
NASDAQ

• The NASDAQ is a decentralized stock exchange that
  operates completely electronically.
• Various computers link buyers and sellers
  together without any human interaction occurring.
• Generally the NASDAQ is comprised on smaller,
  more technologically advanced companies

8
SP 500

• The SP 500 is a group of the largest (most
  capital) US companies
• Tracking the SP 500 can provide more insight
  into how the overall Economy is performing
• This group or index is much broader than the DOW
  and provides a more comprehensive look at the
  economyhowever it lacks the diversity of the DOW

9
The Securities and Exchange Commission

• What is to stop companies you invest in from
  cheating you?
• The SEC is a government agency whose purpose is
  to regulate the securities industry (the stock
  markets). It was created after the Great
  Depression when Congress passed the Securities
  Exchange Act of 1934.

10
THE SEC

• All companies traded on the many stock exchanges
  across America have to be registered with the
  SEC. Each must follow rules about what they can
  do with their stock, how they can advertise, and
  much more.
• SEC rules and regulations not only pertain to
  companies on the Exchange, but to the brokers
  that trade, and to you, the investor.

11
Insider Trading

• Insider information is information that a person
  obtains about a company that is not available to
  the rest of the public, that can be used to their
  advantage while buying stocks.
• For example, lets say you are the CEO of company
  XYZ, and company ABC is now in negotiations with
  you to merge, and create a much larger company
  called GHI Inc.
• Now, usually mergers cause stock prices to go up,
  so if you, knowing that a merger is going to take
  place, go out and buy a lot of stock from both
  company ABC, and XYZ, you are using insider
  information, and are breaking the law.
• INSIDER TRADING IS LIKE SELLNG CRACK, ITS
  ILLEGAL but many get away with doing it because
  it is hard to track

12
Annual Reports

• The Securities and Exchanges Act of 1934 also
  mandated that companies file an Annual Report.
• An Annual Report is a book printed annually that
  contains all of the financial information
  concerning a company.
• The annual report was designed to make companies
  more transparent and allow investors real insight
  into the companies financial health

13
Buying on Margin

• When buying on margin, you partially purchase
  stocks with money that is not yoursit belongs to
  the bank.
• The bank loans you the money and charges you
  interesthowever you may be able to cover the
  interest charge with a success investment
• Since the 1930s, investors must have at least 50
  of the stocks value invested with cash

14
Mutual Funds

• In modern times, less people buy individual
  stocks. They generally invest in Mutual Funds.
• A mutual fund is a professionally managed
  investment that is made up of a combination of
  stocks.
• There are many different types of Mutual Funds
  available
• Well it was pretty easy to buy a few shares of
  McDonalds, but what if you are not sure about
  which stock you should buy? Maybe you would
  rather let a professional choose the stocks for
  you. Well, you are not alone. Millions of people
  turn over control of their finances to
  professionals by buying Mutual Funds. There are
  two types of mutual funds, open and closed.
• Open mutual funds, such as Fidelity Magellan, let
  people put their money in them, just like a bank.
  The difference is that banks take your money and
  lend it out, and then pay you interest on the
  money you gave it. This is static, in that it
  does not change. When you put your money in, the
  bank usually says we will give you 3 percent
  interest. When you put your money in a mutual
  fund, they take that money, along with that of
  millions of other people who are investing, and
  buy stocks and bonds with it. They then take out
  part of the profits for themselves, a commission,
  and give you your share.
• Closed end mutual funds, are similar to their
  open counterparts in that you turn over control
  of your money to professionals but, rather than
  putting money in them like a bank, you buy shares
  like a stock. This means that a closed end mutual
  fund acts just like any other stock on the Stock
  Exchange, they have Ticker Symbols, and are
  traded. The difference is that these mutual
  funds, instead of making burgers, or creating
  airplanes, take the money they have, invest it,
  and return the profits to the share holders.