Stock Investing Basics - PowerPoint PPT Presentation

1 / 29
About This Presentation
Title:

Stock Investing Basics

Description:

Stock Investing Basics Important Terminology Related to Stock Investing Stock Stock represents ownership in a corporation. It also represents a proportional share in ... – PowerPoint PPT presentation

Number of Views:328
Avg rating:3.0/5.0
Slides: 30
Provided by: Defa300
Category:

less

Transcript and Presenter's Notes

Title: Stock Investing Basics


1
Stock Investing Basics
  • Important Terminology Related to Stock Investing

2
Stock
  • Stock represents ownership in a corporation.
  • It also represents a proportional share in the
    assets and profits of the issuing corporation.

3
Corporations
  • Corporations are legal entities owned by
    individual stockholders.
  • 20 of all businesses in the United States are
    classified as corporations.
  • 90 of all products sold and services provided in
    the United States come from corporations.
  • The two types of corporations are publicly traded
    and privately held.

4
Why do Corporations Issue Stock?
  • To raise financial capital that the company can
    use to expand its business operations, update
    equipment, and conduct research and development.
  • All of these efforts are designed to improve the
    corporations profitability.

5
Public Corporations
  • These are also referred to as publicly traded or
    publicly held corporations.
  • These are companies that sell their stock to the
    general public.
  • McDonalds, Wal-Mart, Home Depot, and Coca-Cola
    are all examples of publicly traded corporations.

6
Private Corporations
  • These are also referred to as privately held or
    closely held corporations.
  • These are corporations that issue stock but do
    not sell it to the general public.
  • Chick-fil-A is an example of such a company.

7
Why do People Invest in Stocks?
  • To make a profit! Historically, stocks have
    returned around 10.
  • Profits are made from stock in two ways
  • Dividends
  • Appreciation in value from the time of purchase
    until the time of sale (capital gains).

8
Common Stock
  • Common Stock Characteristics
  • The shareholder (person that owns the stock) has
    voting privileges on company matters.
  • The shareholder may receive dividends (profits of
    the corporation that are distributed to
    shareholders).
  • There is a greater potential for growth
    (appreciation in value) with common stock.

9
Preferred Stock
  • Preferred Stock Characteristics
  • The shareholder is guaranteed to be paid a
    dividend before common stock shareholders.
  • The shareholder has virtually no voting
    privileges in company matters.
  • A preferred share of stock is assigned a dollar
    value that is printed on the stock certificate
    (par value).
  • There is much less fluctuation in the price of
    preferred stocks compared to common stocks.
  • Preferred stock is a much more conservative
    investment than common stock.

10
Market Capitalization
  • This is the total number of stocks issued by a
    corporation multiplied by the current market
    price of the stock.
  • We are going to discuss three types of market
    capitalization
  • Large-Cap
  • Mid-Cap
  • Small-Cap

11
Large-Cap Stocks
  • These are the stocks of corporations that have
    market capitalizations in excess of 10 billion
    dollars.
  • Some examples of large-cap stocks include
    Exxon-Mobil (426 Billion), Microsoft (227
    Billion), Wal-Mart (197 Billion), and General
    Electric (228 Billion).

12
Mid-Cap Stocks
  • These are the stocks of corporations that have
    market capitalizations of between 2 billion and
    10 billion dollars.
  • Some examples of mid-cap stocks include Family
    Dollar (6 billion) and VeriSign (6 billion)

13
Small-Cap Stocks
  • These are the stocks of corporations that have
    market capitalizations of between 300 million and
    2 billion dollars.
  • Some examples of small-cap stocks include The
    Cheesecake Factory (1.8 billion) and Ann Taylor
    Stores (1.4 billion).

14
Stock Exchanges
  • A stock exchange is where shares of stock are
    bought and sold.
  • Some examples of stock exchanges include the New
    York Stock Exchange (NYSE) and the NASDAQ.
  • These are also sometimes referred to as
    securities exchanges.

15
NYSE
  • The New York Stock Exchange is one of the worlds
    largest and most well known exchanges.
  • More than 3000 corporations are listed on the
    NYSE.
  • The NYSE uses a combination of human floor
    traders and computerized trading.
  • The NYSE is open between 930 A.M.-400 P.M.
    (EST)
  • Some of the worlds largest and most well known
    companies are traded on the NYSE.
  • Some examples include Coca-Cola, Wal-Mart,
    Exxon-Mobil, General Electric, and McDonalds.

16
NASDAQ
  • NASDAQ stands for the National Association of
    Securities Dealers Automated Quotation System.
  • This is a completely computerized stock exchange.
  • More than 4000 corporations are listed on the
    NASDAQ.
  • The NASDAQ was started in 1971.
  • Many high tech companies are listed and traded on
    the NASDAQ.
  • Some examples include Microsoft, Intel, Dell,
    Amazon.com, Google, and Apple.

17
Brokerage Firms
  • A brokerage firm is a company that conducts
    securities trading (the buying and selling of
    stocks, bonds, mutual funds, etc), investment
    research, analysis, and advisory services for its
    clients.
  • We are going to talk about the differences
    between full-service and discount brokerage firms.

18
Full-Service Brokerage Firms
  • Full-service brokerage firms provide the most
  • personalized services (research, advice,
    retirement planning, tax tips, etc)
  • They also charge the highest fees and
    commissions.
  • Typically, full-service brokerages are best for
    individuals that do not have the time, level of
    comfort, or expertise to make their own
    investment decisions.
  • Some examples of full-service brokerage firms
    include Merrill Lynch and Edward Jones.

19
Discount Brokerage Firms
  • Discount brokerage firms carry out buy and sell
    orders for their clients but provide little or no
    investment advice.
  • The fees and commissions charged by discount
    brokerage firms are much lower than those charged
    by full-service firms.
  • Discount brokerage firms are best for individuals
    that have the ability, level of comfort, and
    expertise to conduct their own research and make
    their own investment decisions.
  • Some examples of discount brokerage firms
    include E-Trade and ShareBuilder.

20
Brokerage Firms (Continued)
  • Charles Schwab and TD Ameritrade are examples of
    brokerage firms that offer both full and discount
    services to their clients.
  • Fidelity and Vanguard are two of the largest
    mutual fund companies that also provide brokerage
    services to their clients.

21
Stock Performance Indicators
  • Some common indicators of stock market
    performance include the
  • Dow Jones Industrial Average
  • SP 500
  • NASDAQ

22
Dow Jones Industrial Average
  • The Dow Jones Industrial Average tracks the
    stocks of 30 of the largest and most widely held
    companies in the United States.
  • The DJIA is calculated by adding the sum stock
    values of the 30 companies listed in the index
    and dividing the sum by an established divisor.
  • The current divisor is .0123051408
  • Because the divisor is less than one it actually
    serves as a multiplier.

23
SP 500
  • This is a stock index that contains 500 large
    companies.
  • Each of these companies trade on either the New
    York Stock Exchange (NYSE) or on the National
    Association of Securities Dealers Automated
    Quotation System (NASDAQ)
  • It is the second most watched US index after the
    Dow Jones Industrial Average. However, many
    investors feel that the SP 500 is a better
    indicator of the overall stock market because it
    contains more companies.
  • Each of the 30 companies listed in the Dow Jones
    Industrial Average are also listed in the SP 500
    Index.

24
Types of Stock Investments
  • We are going to examine the following types of
    stocks
  • Blue-Chip Stocks
  • Income Stocks
  • Growth Stocks
  • Cyclical Stocks
  • Defensive Stocks
  • The stocks of some companies can fit into several
    of these categories.

25
Blue-Chip Stocks
  • These are the stocks of the most well established
    and financially sound companies.
  • All 30 of the stocks that make up the DJIA are
    blue-chips.

26
Income Stocks
  • These are the stocks of companies that pay
    regular and steadily increasing dividends.
  • These are typically conservative stock
    investments that may not appreciate (or decline)
    as much in value as other types of stocks.
  • Exxon-Mobil and Proctor Gamble are examples of
    income stocks.

27
Growth Stocks
  • These are the stocks of companies whose earnings
    are expected to grow at an above average rate.
  • Growth stock companies often do not pay
    dividends. They instead invest the profits back
    into the company in the hopes of becoming more
    profitable.
  • Google and Amazon.com are examples of growth
    stocks.

28
Cyclical Stocks
  • These are stocks that appreciate in value quickly
    when economic growth is strong and fall rapidly
    when economic growth is declining.
  • Alcoa, Caterpillar, and Ford are examples of
    cyclical stocks.

29
Defensive Stocks
  • These are stocks that remain stable during
    declines in the economy.
  • Blue-chip and income stocks like Exxon-Mobil and
    Proctor Gamble are examples of defensive
    stocks.
Write a Comment
User Comments (0)
About PowerShow.com