Basics of the Stock Market

Ed Werner Business Development Director CANDO

What are Stocks?

Stocks are ownership in a company Stocks are made up of shares Each share is a portion of the company A company has a finite number of shares As a companys value changes, so does the value of its shares Playing the market is attempting to predict this changing value

Why Do Companies Sell Stock?

Finance business ventures Finance growth Capitalize new equipment - In other words Raise money (and share risk)

How is Money Made?

Trading
Buy low, sell high!!!

Dividends
Sharing profits Encouraging ownership

Types of Stocks
Preferred
Represents ownership in a corporation with a predetermined guaranteed dividend

Common
Also represents ownership but dividends can be paid in one of three ways
1) 2) 3)

Cash paid out as taxable income Stocks paid out in more shares Property paid out in products or services

Other Terms
Mutual Funds
Professional portfolio managers

Bonds
Similar to a loan with a set rate of return Can be public or private

IPO (initial public offering)

Generally higher risk and higher yield Investigate thoroughly!

Bull vs Bear Market Ticker

Market Indicators
S&P 500
An index made up of five hundred different stocks. Each is selected for liquidity, size, and industry. The index is weighted for market capitalization. The S&P 500 is the benchmark of the overall market, and frequently used as the standard of comparison in terms of investment performance.

Dow Jones Industrial Average

An index of thirty, blue chip stocks that are traded in the United States. It is believed that by looking at the companies on the list, a person can get a general picture of how the market as a whole is performing.

Stock Exchanges
NYSE New York Stock Exchange
Company symbols are 3 letters

NASDAQ National Association of Securities Dealers Automated Quotation System

Company symbols are 4 letters

Others Chicago Mercantile, AMEX, etc

Strategies
Buy what you know Diversify Investigate Watch fees

What does the future hold?

Buy

Buy 100 shares on 22nd for $78.10 = $7,810

Buy

Sell 1

Sell 2

Buy 100 shares on 22nd for $78.10 = $7,810 Sell on 30th for $78.75 = $7,875 for $65 profit (38% annual return) Sell on 11th for $84.20 = $8,410 for $600 profit (148% annual return)

What does the future hold?

Buy

Buy 100 shares on Sep. 14nd for $79.50 = $7,950 Sell on Oct. 10th for $79.00 = $7,900 for $50 loss (-9% annual return) Sell on Dec 6th for $83.90 = $8,390 for $440 profit (38% annual return)

Buy

Sell 1

Sell 2

Buy 100 shares on Sep. 14nd for $79.50 = $7,950 Sell on Oct. 10th for $79.00 = $7,900 for $50 loss (-9% annual return) Sell on Dec 6th for $83.90 = $8,390 for $440 profit (38% annual return)

DAY Investment Exercise

Pick three stocks each ($10,000) Justify buy recommendation
Why does it look good? What do we want from it?
Price rise Dividends

Determine strategy (when to sell) Next meeting we will review and purchase