Investing in the Stock Market

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Investing in the Stock Market
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STOCK MARKET
Is the most well known way of investing money.
Fast Money
Long Term Income
Somewhat secure
The stock market or as it is sometimes referred
to The Securities Exchange is where you buy
sell securities
Securities
A company which pools the of many
investors to buy a large selection of
securities that meet the funds stated
investment goals.
Bond Funds
Stocks (Shares)
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Securities Exchange
A securities exchange is a marketplace where
brokers meet to buy and sell securities.
The largest and most well known exchange in the
US is the
Another smaller exchange is the American Stock
Exchange, it is also located in New York
www.amex.com
NASDAQ
There are 5 smaller regional exchanges in the US.

• Arizona Stock Exchange (AZX) www.azx.com

• Boston Stock Exchange (BSE) www.bostonstock.com

• Chicago Stock Exchange (CHX) www.chicagostockex.co
  m

• Pacific Stock Exchange (PCX) www.pacificex.com

• Philadelphia Stock Exchange (PHLX) www.phlx.com

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Other Known Security Exchanges

• Cincinnati Stock Exchange www.cincinnatistock.com

• Chicago Board of Trade www.cbot.com

• The Chicago Board Options Exchange www.cboe.com

• Chicago Mercantile Exchange www.cme.com

• Commodex www.commodex.com

• Kansas City Board of Trade www.kcbt.com

• Mid America Commodity Exchange www.midam.com

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Over the Counter Market
The OTC Market
Mostly technology stock appear on this market.
This large exchange is called
NASDAQ is the worlds largest electronic stock
exchange.
There is no central location for NASDAQ, it is a
operated solely through the use of sophisticated
computers and telecommunications networks.
NASDAQ currently lists over 4100 different
companies.
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Cycles of the Stock Market
Just like our economy the stock market goes
through phases. Each cycle corresponds to the
phase of the business world.
Bull Market
Optimism in our economy also helps to drive the
Just like optimism drives the prices up the
opposite holds true.
Bear Market develops
During a Bear Market prices generally fall
This type of market generally lasts a short
period of time, but can be very destructive.
A Bull Market generally lasts times
longer than a Bear Market.
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Stocks
When you buy stock in a business you are said to
be a _____________ or __________________
With this ownership comes power! The amount of
power that you hold in the business is based on
the
The most powerful shareholder is the one who
owns of the stocks issued by a corporation.
When you buy shares in a corporation you receive
a stock certificate.
This certificate shows
Every certificate should have
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BACK
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Types of Stocks
Stocks can be broken down into 2 types
Common Stock is a class of stock in which the
owner of the stock shares
You stand to profit when the company profits.
You have a say in major policy decisions such as
issuing more stocks, selling the company to
outside buyers or changing the people in charge.
Realize most companies issue large s of stocks.
For you to have a relevant say in how the
corporation is ran you have to have lots of
shares
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Types of Stocks cont.
One way to let your vote be heard is by signing
over your vote to someone else. This is known
as a ________. In doing this your vote can be
heard from someone who has more power than you.
As a shareholder you
Preferred Stocks
Preferred Stock is a stock where the dividends
are _________, regardless of how the company is
doing financially.
This type of stock is ____________________.
It is more expensive because even if a company
doesnt make it still has to pay dividends to
its shareholders.
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Preferred Stocks
Preferred stock is ________ because you are
guaranteed to make dividend off your shares.
As a preferred stockholder you do not have voting
privileges.
When dividends are paid preferred shareholders
receive their
In the event the company does go out of business
the Preferred Shareholder receives their money
first.
When a stock is preferred it will have a ___
following its stock symbol in the listings.
Stocks are traded in
A round lot is when stocks are sold in multiples
of
A odd lot is when stocks are sold in numbers
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Purpose of Stocks
Corporations provide stock
With this extra the corporation can
Buy new or advanced products.
Hire employees
DISADVANTAGES
Extra to take care of the public relations.
Get stockholder information out.
Bring in an extra accountant to take care of .
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Brokers
Before you can even consider being involved in
the Securities Market you must first hire a
__________.
A Broker is a
Brokers will use your to buy securities that
interest you.
They will also sell your stocks when you feel the
time is right.
There are a couple different types of brokers
Full service and Discount.
Full Service Brokers
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Full Service Broker cont.
They also charge a commission fee for each item
that is sold. This is generally 15-25.
When playing the stock market game make sure that
you pay attention to which broker you are
using.
This fee is added to the overall price of the
transaction. It is added to each transaction
that is completed.
Merrill Lynch www.ml.com
EX
Morgan Stanley Dean Witter www.msdw.com
Charles Schwab www.schwab.com
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Discount Brokers
This type of broker is good for the experienced
investor.
This type of broker charges a fee commission.
But it is generally 1/2 that charged by the
Full Service Broker.
EX
E-Trade www.etrade.com
York Securities www.yorktrade.com
Bull Bear Securities www.bullbear.com
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Calculating Stock Costs Profit/Loss
Calculating Stock Costs
When you buy a stock you need to know
How many shares you purchased, price/share and
commission fee.
Calculating Profit or Loss
It is always a good idea to check on the amount
of profit/loss you have.
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Calculating Stock Value
EX You BT 1000 shares of Hewlett Packard for
45. How much did it cost to buy those shares?
EX You BT 1000 shares of Sony for 25. A week
later Sony is selling for 30. How much have
you made if the broker you choice takes a 20
commission out of the profit?
EX You BT 1200 shares of Tropicana for 43. A
week later Tropicana is selling for 32?
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Dividends
Every quarter or so the corporation will figure
out where it stands financially.
If the corporation finds that it has made money
it will then give a of that back to the
shareholders in what is called a ___________.
Dividends are
A shareholder receives a check from the
corporation even if they own one share. Even if
the dividend is .01.
Dividends can be in a
Sometimes corporations will give out more shares
in a business rather than give out money.
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Calculating Dividends
When calculating a dividend you must know a
couple things
How many shares you own and what the dividend
amount is.
EX Sony finds that it has made a profit this
quarter and decides it is going to give each
shareholder 3/share. You own 1100 shares.
How much will you receive?
EX Tropicana finds that it has made a profit of
45,000 this quarter and decides it is going to
give 3 of the profit to each shareholder. You
own 1500 shares, how much will you make?
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Stock Ticker
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Researching Stocks
There are many things that help to influence the
price of stocks.
Internal Factors
Earnings Growth, Sales Growth, Product Releases,
Leadership Changes, and Pending Lawsuits.
External Factors
Market Competition, Economic News, Government
Changes
Ultimately you will look _at_
Do they produce a useful product?
Corporations revenues?
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Researching Stocks Cont.
P/E Growth
Most investors that are looking for quick use
the P/E ratio (Price-to-earning ratio)
If this is above the S P 500 (Standard Poors)
then this is a great investment. You will make
good .
Tech Stocks are good examples of high P/E
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Researching Stocks Cont.
Cyclical Stocks
These are generally the companies that sell
products that are demanded more during one
season.
This type of stock can be highly demanded one
minute and then in surplus the next.
EX General Motors
This is a very risky stock, but if you get in at
the right time this stock can be very profitable.
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Researching Stocks Cont.
Non-Cyclical Stocks
This is a very dependable stock.
You cant expect to make a lot of quick money
off of this type of stock. It will go up as
time goes by, but not at a rapid pace like a
cyclical stock.
Technology Stocks
The technological age has brought about the
technology stock.
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Researching Stocks Cont.
Technology Stocks cont
5 years ago this market was the fastest growing
stock.
Microsoft, Dell, Cisco Systems, JDS Uniphase,
Yahoo
If you invested 100 in Microsoft 5 years ago you
would now have 10,000. If you invested that
same 100 in Dell you would now have 90,000.
If you get into the right stock at the right time
you can make a lot of .
If you invested that same 100 in Drkoop.com you
would now have 2.80
Net Zero has dropped 68, E-Toys 77, and Ask
Jeeves 80 in one year.
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Researching Stocks Cont.
Income Stocks
This type of stock generally gives large
dividends and raises in price steadily over time.
High Income Stocks are usually Utility Stocks, or
Real Estate Invest Trust (REIT)
REIT has high cash flow because of real estate
rentals that is given back to the
shareholder via a dividend.
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Researching Stocks Cont.
Blue Chip Stocks (Growth Stocks)
These stocks have been around for a long time.
Steady earnings and a good reputation is
usually expected with this type of stock.
This type of stock has high liquidity-easy
accessibility to cash from the stock. You can
cash in and still make good money off of what is
left in the stock.
These are the old market stocks. (NYSE)
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Researching Stocks Cont.
Penny Stocks
This type of stock is usually the new business.
This stock generally starts out _at_
Can be a very profitable stock if you pick the
right one.
Most will start out with small IPOs
(______________________________) and after a
couple days the IPO can double. But as time
goes by most of these stocks fall back to the
original IPO and then gradually move up.
Most stocks start off here and then turn into one
of the other types of stocks we have talked
about.
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NYSE

• _________________________
• More than 3,000 domestic and non-U.S. companies
  have stocks listed on NYSE
• Examples
• Back

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NASDAQ-AMEX

• Pronounced nazzdack
• Recently merged with AMEX (second largest floor
  based exchange in the U.S. stock market)
• Not an exchange,
• There is NO trading floor
• Nasdaq ______________ sit at computer terminals
  at offices around the country. Back

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NASDAQ

• Founded in ________
• First a trading place for small companies
• Growing and has surpassed the daily trading
  volume of the NYSE
• Examples High tech companies
• Microsoft, Intel, Cisco
• Two submarkets National (4500) and Small Cap
  (2000)
• Back

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Calculating Stock Cost

• You buy 400 shares of stock in Dell Computer
  Company for 28.82/share. The commission you
  were charged was 20. How much would this stock
  cost you?

Back
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Calculating Profit/Loss

• The stock you bought from Dell is now worth
  29.10. How much Profit/Loss did you make/lose?

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