INVESTING IN STOCKS MONEY MANAGEMENT CHAPTER 12 NOTES

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INVESTING IN STOCKSMONEY MANAGEMENT CHAPTER 12
NOTES

• BUYING STOCKS
• According to our book, over 50,000 Americans own
  stock in more than 34,000 different publicly
  traded companies! A public corporation is a
  company whose stock is traded openly on stock
  markets like the NYSE or NASDAQ
• Stocks are traded in round lots or odd lots.
• A ______________________________ is 100 shares or
  multiples of 100.
• An _____________________________ is less than a
  100 shares.
• Brokerage Firms sometimes charge more for odd lot
  purchases. This is because the firm will have to
  combine odd lot purchases to make a round lot
  purchase before they can submit the order!
• COMMON STOCK
• ______________________________________________ is
  a class of stock in which the owner of the stock
  shares directly in the success or failure of a
  business.
• As a shareholder you stand to profit when the
  company profits. You also have some say in policy
  decisions like whether to issue more stock to
  outside buyers, changes on the board of directors
  etc
• The more shares you own, the more say you have
  and the greater your power is.
• When the company does well, they will often pay
  ____________________ which are a portion of the
  profits that are redistributed to the
  shareholders of a corporation. Dividends are
  usually declared once a year.
• Common stockholders can lose all of their
  investment in a business if the stock bottoms
  out!
• Common stockholders are entitled to vote for the
  board of directors that runs the corporation.
• When you assign your right to vote to someone
  else that is known as a ________________.
• PREFERRED STOCK
• In addition to common stock, investors can
  purchase ____________________________________.
• Dividends are fixed, regardless of how the
  company does, making it less risky than common
  stock.
• In the event the company fails,
  __________________________________________________
  __.
• The investor can only lose as much as they put
  in, no more!

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INVESTING IN STOCKSMONEY MANAGEMENT CHAPTER 12
NOTES

• DEFENSIVE VS. CYCLICAL STOCKS
• A ______________________________ is one that
  remains stable and pays dividends during an
  economic decline.
• Generally, companies in this category have a
  history of stable earnings.
• A defensive stock is not as subject to the ups
  and downs of business cycles.
• The demand for their products is consistent
  regardless of economic conditions.
• Examples include Food, Utilities, and Health
  Care industries
• _________________________ do well when the
  economy is table or growing, but do very poorly
  during recessions.
• Examples are airline companies and other
  industries based on traveling people may feel
  like they cant afford an expensive vacation.
• STOCK VALUES AND RETURN ON INVESTMENT
• When you buy a stock you will pay its
  _________________________________.
• Market Value reflects ____________________________
  __________________________________________.
• How a company is doing, its track record, and how
  well it is expected to do in the future will
  determine market value.
• Stocks can be considered _________________________
  _______ or ______________________________ if
  they are selling for a price that is not
  justified by their earnings potential.
• You can use ratios such as Earnings per Share
  (EPS) and the Price/Earnings Ratio (P/E) to
  determine if a stock is under or overvalued.
• HOW DO YOU MAKE MONEY BUYING STOCK?
• There are two major ways
• __________________________________________________
  ________________________________.
• __________________________________________________
  ________________________________
• The ______________________________________________
  _ is how much money you make from the investment.
  It is the difference between what you paid for
  the stock and what you sold it for, plus any
  dividends you earned!

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INVESTING IN STOCKSMONEY MANAGEMENT CHAPTER 12
NOTES

• INVESTMENT STRATEGIES
• Once stock has been acquired, your investment may
  be either short or long term.
• Generally, if you buy and sell stock within a
  short period of time, you are considered a
  ______________________________________, or
  trader.
• If you hold your investments for a long period of
  time (a year or more), you are considered an
  _________________________________.
• SHORT-TERM STRATEGY
• ___________________________________ strategy
  used if you feel like a stock price is going to
  drop!
• To sell short, you borrow a certain number of
  shares from a broker.
• You then sell them at the current price and hold
  on to the cash.
• Once the price has dropped, you buy back the
  correct number of shares at the lower price. This
  is called _______________________________________
  ______________.
• You then return the correct number of shares to
  the broker and keep the extra money!
• LONG-TERM TECHNIQUES
• As you may have already learned, investing in the
  stock market for the short-term is highly
  speculative and extremely risky.
• Most advisors recommend long-term investment
  strategies instead. Thats how to make the stock
  market work for you! ?
• The most popular long-term investment strategy is
  the _____________ ________.
• Pick solid companies with great growth and
  earnings potential and HOLD on to the stock!
  Collect your dividends and watch your portfolio
  grow!
• STOCK SPLITS
• __________________________________ can also add
  to your investment.
• A stock split occurs when ________________________
  _______________ __________________________________
  __________________________.
• For example Lets say Google believes that its
  stock is getting too expensive. They want the
  price to be cut in half. So they execute a two to
  one (21) stock split.