FA-5.4-5.6: Investing Review

Which of these statements about stocks is FALSE?

• Owning a stock means you own part of a company

• Companies sell stocks to raise money for their business

• Stocks are guaranteed to increase in value over time

• Stock prices can be affected by things like the news and false rumors

Davis is interested in starting to invest and asks their family and friends for tips. Who is providing sound advice on how to invest?

• Mom: “You’ve got to time the market. That’s how most people make money investing.”

• Franklin: “Trends are hard to predict, and that makes timing the market difficult.”

• Grandpa Joe: “You can look at a past trend in a stock and know how it’ll behave in the future.”

• Jane: “Always follow market trends - buy in a bull market and sell in a bear market.”

If the price of the share grows as the company grows, how does buying shares in a company benefit an investor?

• An investor will be able to decide what the company sells and set the price

• An investor will be able to sell these shares for a higher price and make a profit

• An investor will be able to enjoy free services from the company they bought shares from

• An investor will be able to put the company on their resume

What is the difference between a bear and a bull market?

• A BULL market is when the stock market is rising and the economy is booming, while a BEAR market describes a declining market and a receding economy.

• A BULL market is when there is a decline in the stock market and the economy is receding, while a BEAR market describes a rising market and a booming economy.

Which adjective would best describe a BEARish investor attitude?

• Optimistic/Positive

• Pessimistic/Negative

True or False: It is easy to predict trends in the stock market.

• True

• False

What were the overall returns during the bull market from 1970 to 1973?

If you invested $100 at the beginning of that market, how much would you have had in 1973?

Imagine you invested $1000 at the beginning of the bull market in 1988 and got out right before the dot-com bubble burst in 2000 causing a recession. How much would your portfolio have been worth at that time?

Tori bought one share of Macy's stock on Nov 1, 2016 for $33.38. Four years later, she sold it and the closing price for that day was $5.09.

What is her rate of return?