Understanding Stocks

What is a stock? A share in the ownership of a

company

When you own stock, you are automatically an “owner”/”shareholder” in that particular company

Funds –stocks that are bundled together*

*other types of investments can be in funds

How much do I actually own? Ownership percentage

divide number of shares you have by the total number of shares outstanding/offered by the company

Apple 908 million shares Own 10 shares

10/908 million .01%...

Do all companies offer stock? NO!!!

Only incorporated companies (go public) Google inc.

Can stay private & ask venture capitalists to invest (risky)

Why would a company incorporate?

Raise revenue Take out a loan (debt financing) OR Sell shares (equity financing)

Limited Liability

What it means for the company?

“Owners” are not the only owners any more might not even own a majority of stock… Warren Buffet could become a majority share

holder & make decisions!

Board of Directors – chosen by shareholders Share in decision making process

What determines a stock’s price? Initial Public Offering – first time

(Facebook) Price determined by owners & investment

bank

Supply & demand P/E Ratio Current events

Benefits of stock ownership Making Money!!

Capital Gains Stock price higher than when you bought it

Dividend Percentage of companies profits paid to

shareholders, usually each quarter

No liability

Risks of Stock Ownership Bankruptcy – you are the last to be paid Stock price can go down Only really gain if you sell

What does this tell you? Wall Street firms and employees have

given the most campaign contributions to Jeb Bush and Hillary Clinton

Market Terms Bull market

All going up

Bear marketAll going down

What makes the stock market go up and down?

When do you buy? When do you sell? Capital gains tax considerations

versus ordinary income tax

How do you buy stock??

The Stock Market

Buy from brokerage firm, investment firm, mutual fund company

A market/exchange where stocks are bought and sold

Computerized really NYSE – people running around AMEX NASDAQ

Technology companies

Now, the real question….

What stocks should you buy???