STOCK MARKET TERMS AND LINGO

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Coral Hopkins
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1 STOCK MARKET TERMS AND LINGO

2 Types of Ownership Structures Sole Proprietorship - A company owned by an individual Partnership - A company owned by more than one individual Corporation - A company owned by Stockholders. A Private Corporation shares are owned by individuals A Public Corporation shares are traded on a public exchange. Corporations are owned by stockholders. Stockholders are individuals who have purchased a share (or many shares) of stock issued by the corporation. The initial offer of stocks is known as an initial public offering

3 Public Corporations Public corporations are owned by stockholders Stockholders are individuals who have purchased stocks (shares) in the company The corporations are public because anyone can buy stock in the company

4 Private Companies: Pros and Cons Pros Greater control over the company More personal profits Don t have to please external shareholders Cons Reduces ability to raise money for expansion or improvement Owners would have to use their own money, borrow from a bank or use the profits to expand/improve

5 Public Companies: Pros and Cons Pros Increase ability to obtain money for expansion, conduct research, and purchase equipment Cons Less individual profit Financial statements available to the public

6 Benefits of Owning Stock Companies compensate their stockholders in two ways: Payment of dividends dividends are a percentage of the company s earnings Increasing the price of the stock Not all of the company s money goes to stockholders Retained earnings are held by the company to pay for growth and invest or pay off prior debt

7 What Causes a Stock Price to Rise A stock s price is based on how well the corporation is doing for example: if the corporation is doing well, its price will rise Higher demand = increase in price More supply than demand = lower in price More Buyers than Sellers

8 What Causes a Stock Price to Rise Reasons for increase in stock price include: introduction of new product cheaper production than expected economic trends have positive effect for company s product

9 What Causes a Stock Price to Fall On the flip side if a corporation is doing poorly, its price will fall More Sellers than Buyers Reasons for decrease in stock price include: corporation s product gets undercut cost of production is higher than expected economic trends prohibit product sales

10 Bear vs. Bull Market

11 Partner Activity A - Apple ipods are introduced to the market for the first time. What happens to Apple s stock? B - Gas prices rise. What happens to the stock for Tesla (the electric car maker)? A - Knockoff Hollister shirts are released. They are cheaper than Hollister brand shirts. What happens to the stock for Hollister? B - Florida has unusually cold weather, negatively impacting the crop of oranges, making oranges more rare and more expensive. What happens to Tropicana stock? A - A serious hurricane hits and many buildings are damaged. What happens to Home Depot stock?

12 Partner Activity B - Tax on cigarettes is increased by the federal government. What happens to Malboro stock? A - An electronics company improves its assembly line to reduce the cost of production. What happens to its stock? B - Enron is accused of insider trading (an illegal activity by the executives). What happens to its stock? A - The U.S. declares a new military venture in response to civil unrest in the Middle East. What happens to the stock of a military equipment manufacturer? B - How did the BP Oil Spill impact the stock of BP?

13 How can you minimize risk

14 Minimizing Risk To minimize risk, avoid putting all of your investments in one place diversification When you invest in stock, you are taking a risk on the probability of making a profit or losing money on your investment The collection of stock that you own is called a portfolio

15 In real life, where do you buy and sell stock?

16 Buying and Selling Stocks How to buy stock: find someone who is willing to sell the stock, or buy the stock from the company directly In trading between the buyer and seller, there is usually a broker who conducts the transaction The broker charges a fee for the transaction, which is called the brokerage commission

17 Stock Markets A stock market is a place where stocks are bought and sold Exchanging of stock is usually done electronically New York Stock Exchange (NYSE)

STOCK IN YOUR FUTURE GUIDE FOR VOLUNTEERS AND TEACHERS

JA TAKE STOCK IN YOUR FUTURE GUIDE FOR VOLUNTEERS AND TEACHERS Prerequisite for JA Stock Market Challenge Fall 2013 JA TAKE STOCK IN YOUR FUTURE COURSE GUIDE FOR VOLUNTEERS Page 1 Dear Volunteer, Thank