Unit Two. Economics. Invest in Yourself - Overview Education as an investment

Transcription

1 Unit Two Economics Invest in Yourself - Overview Education as an investment

2 Why Invest? What might be a reason to invest in the stock market? Do these investments always leave us better off? Why not? Investing is like buying something. Should you buy something you don t understand?

3 Stock Market Performance since 1895

4

5 Risk vs. Return Type of Investment Possible Returns/Risks Most Risky Least Risky Collectibles/Commodities Stocks Corporate Bonds Government Bonds Money Market, CD s, Savings and Checking Accounts Illiquid Market/Impacted by volatile conditions (ie., weather) Subject to risks of the company and broader economy Subject to risks of the company, but, get preferential treatment to company assets Risk depends on the entity sponsoring the bonds Like Cash and have some guarantees from the government

6 Investing in Stock What is stock? What determines its value? Why does the value of stock change? - Both reality and perception matter to stock price - History of performance - Company expectations of future performance - Peer/Competitor performance/behavior - What do investors think about the future

7 Walmart (WMT) Started in 1962 by Sam Walton Incorporated in 1969 Listed on the New York Stock Exchange in Listed = Being Available to trade on a public exchange - What is the advantage of being Listed? Walmart family still owns about 50% of the stock Largest private employer in the world 2.3 million employees 11, 695 stores; in 28 countries; $480B in sales (62% sold in the U.S.) Market value (Capitalization) - $240B Volume 9M shares trade daily

8 Stock Market Charts Let s start with Walmart Charts

9 Stock Market Project phase I Resources: Chapters in the Ryan text (p. 239) Yahoo Finance - Google Finance - Investopedia - The Street - Morningstar -

10 Financial Literacy Curtis Carroll Financial literacy isn t a skill - it s a lifestyle

11 Curtis Carroll Personal Finance made simple Financial Literacy is not a skill it s a lifestyle - Curtis Carroll

12 What is a stock? Stock: Ownership in a corporation either private or public You own a % of the company Also known as a Financial Security But. You have no say in business operations of a public company You make or lose money based on the increase / decrease in the stock price Influenced by performance profits, growth The laws of supply and demand apply to stocks

13 Where Stocks are Traded: Exchanges Public Co. can either hire NYSE or Nasdaq to be in charge of their trades The New York Stock Exchange: NYSE Wall Street, in NYC It is the largest stock exchange in the world by dollar volume Nasdaq: National Association of Securities Dealers Automated Quotations It is the largest electronic screen-based equity securities trading market in the United States

14 Stock Market Indictors/Indices: If the DJ and the S&P is UP on average, then overall, the economy is considered to be doing well If the DJ and the S&P is DOWN on average, then overall, the economy is considered to be doing poorly The Dow Jones It is the oldest continuing U.S. market index Today, the averages consists of 30 of the largest and most widely held public companies in the United States. The S & P is a stock index that tracks 500 prominent companies

15 The S & P 500 Standard & Poor's breaks stocks into 10 sectors Best performers within those 10 sectors and dozens of industries. Generally speaking, different sectors are affected by different things. So at any given time, some are doing well while others are not. In most cases health care, and technology tend to be the fastest growing sectors While consumer staples and utilities offer stability with moderate growth The other sectors tend to be cyclical, expanding quickly in good times and contracting during recessions

16 You will definitely run into these terms Volume how many shares are bought in a day/ sold in a day trading activity! EPS Earnings Per Share On average, how much $$ (profit) each share of the companies stock earns Example Walmart earns $13 Billion Walmart has 500,000,000 shares owned by the public They are earning $26/share WARNING That is not the stock price, just a measure of how they are doing

17 Buying Stocks on Margin In the Stock Market Game, as in real life, you can borrow against the value of your stock and invest that money. Example: - You have a $100,000 portfolio - In the SMG, you can borrow $50,000 more and invest that amount - You pay interest (7%) on what you borrow - You are basically betting that your stocks will increase more than the interest you pay - In real life when your investments do badly, this increases the BADNESS

18 How is the Market doing.? Bull Market Bear Market

19 Stocks and Stock Market - things to know Ticker Symbol Every name (stock) on the market has its own unique symbol: Apple AAPL Alphabet (Google) GOOG McDonalds MCD Prices are always stated in $/share

20 Information to check There are many places company performance, like EPS is published A company s recent results are an important indicator on how they might do in the future Net Income (profitability) Analyzes their Revenue (Sales) and Expenses (Bills) This is found on their Income Statement