Intro to Stocks

Intro to Stocks

By LaCresha Walker

Intro to Stocks

​What are Stocks?

​ A stock is a share in the ownership of a company. Stock represents a claim on the company’s assets and earnings.

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As an owner (shareholder), you are entitled to your share of the company’s earnings as well as any voting rights attached to the stock.

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Intro to Stocks

​What does the stockholder get out of the deal?

​The shareholder gets the hope that the shares will be worth more in the future.

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If the company does well, the stock will probably increase in value. If the company does not do well, the shareholder may lose the money he or she invested.

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Multiple Choice

If the company does well, the stock will ______ in value?

• decrease

• increase

Intro to Stocks

​Why do companies issue stock?

At some point, every company needs to raise money. Companies can either borrow it from somebody or raise it by selling part of the company.​

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​By issuing stock, the company does not have to pay back the money or make interest payments.

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Intro to Stocks

​What's an IPO?

​IPO stands for Initial Public Offering. It’s the first time the stock is available to the public to purchase.​

​The stock exchange itself is a secondary market. The primary market is the brokers.

Broker- ​A broker is an individual or firm that acts as an intermediary between an investor and a securities exchange.

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Open Ended

What is the role of the broker?

Intro to Stocks

​What is a Dividend?

A dividend is money that a company pays to its stockholders from the profits it makes.​

​Not all companies pay dividends to their stockholders. The only way shareholders in these companies make money is to sell the stock at a higher amount than they bought it at on the open market.

Multiple Choice

The dividend is money that a company pays to?

• brokers

• board of directors

• stockholders

Intro to Stocks

​Common Stock vs. Preferred Stocks

Common stock is the type most people purchase. It represents ownership of a company and a claim on part of the profits. Investors get one vote per stock.

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​Preferred stocks don’t have the same voting rights, but investors are usually guaranteed a fixed dividend. If the company is liquidated, they are paid off first.

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Intro to Stocks

​How do stocks trade?

​Most stocks are traded on exchanges such as the New York Stock Exchange or NASDAQ. The NYSE is a physical location whereas NASDAQ is a virtual market.

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​Exchanges are simply places where buyers and sellers meet and decide on a price

for a stock. Think of it as a flea market where buyers and sellers come together and agree on a price for a product.

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​NYSE

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On the NYSE, orders come in through brokerage firms and flow down to the floor brokers who go to a specific spot on the floor where the stock trades.

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At this spot, there is a ‘specialist’ whose job is to match buyers and sellers. Prices are determined by the auction method. The current price is the highest price someone will pay and the lowest price someone is willing to sell for.

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Bull & Bear Market

The Bull – a bull market is when the economy is doing well, the GDP is growing and stock prices are rising. The bull market charges ahead.

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The Bear – a bear market is when the economy is bad, a recession is looming and stock prices are falling. A bear market hibernates and moves slowly.

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