1. Only rich people invest money in the stock market.

Fiction: anyone that has money can invest.2. Stocks & bonds are always risky places to

put your money.Fiction: some are riskier than others.3. People generally begin saving for

retirement around the age of 50.FACT: that is too long to wait

4. Social Security was designed to be a primary source of retirement income.

Fiction: only used as a supplement.5. Before investing, you should follow the

progress of the stocks to determine how successful your investment will be.

FACT6. Today, many companies already enroll

employees in retirement plans.FACT – ask before you accept a job.

Is an investment in the ownership of a corporation, usually

represented by shares of the business

A company’s profits are paid to its stockholders in the form of dividends

If value of company goes up – the value of its stock goes up as well

If value decreases so does the value of your stock

If you sell your stock at a higher price, the amount of your profit is

called a capital gain

If you sell your stock at a lower price, the difference between

what you paid for it & your selling price is called a capital loss

Owners of common stock receive dividends based on the company's earnings

They also have voting rights in electing company's board of directors & deciding important matters

Each share of stock is a vote

Owners of preferred stock receive a fixed dividend

The same no matter what kind of profit the company is making – no matter how poorly the company is doing

No voting rights either

Largest exchange in the world & oldest

Since 1790sMost transactions are now done electronically, but NYSE still has floor traders who conduct transactions face to face

Largest US stock marketAll trades done electronically through a network of computers

National Association of Securities Dealers Automated Questions system

-Safe investments-Ownership of large respected corporations that have been established for many years

-Ex. Disney

The DowQuotes the number of points a stock

has risen or dropped, not actual stock prices

Each point is equal to one dollar per share

Dow indicates the overall performance of the stock market

Also called a stock index

Market that exists if investors are generally optimistic about the economy & the market

goes up

Exists if investors are more pessimistic about the economy & the market goes

down

Standard & Poor’sA dividend of publisher McGraw –HillBased on performance of top 500 US

companies in terms of price per share & number of shares owned by the public

More companies than DOW represented

Fortune MagazineList of top 500 companies in terms of how much they have earned

Not a stock index

Futures: contracts to buy or sell a commodity, stock, or other financial instrument for a set price, at a specific date in the future

Commodities: bulk items ex. Livestock, corn

Options: similar to futures, has right but not obligation to buy or sell – an optional contract

Penny Stocks: low-priced stocks, $1 or less a share, usually for start-up companies – high risk

Are like an IOU, ex. sold by a company that might need to build more facilities – a promise to pay a certain amount on a certain day – companies are borrowing the money

2 types:Corporate bond:

sold by corporations

Municipal bond: sold by cities, towns, & countries

People pool their money to buy stocks, bonds or other assets – this collection is called a portfolio

A manager receives a fee from investors to maintain the portfolio for the group

This allows investors to diversify their investments /put money into many things instead of just one

Real estateCollectablesPension: company retirement plan401 (k): tax-deferment plan funded by

regular contributions from the worker (employee) – these contributions come out of pay check before any taxes are taken

IRA: individual retirement account – make annual contributions – no taxes taken