Stock
Market
* Stocks
- shares of ownership in a company
-> companies that are publicly owned issue stock
-> only a certain amount of stock is issued
- control of anything over 50% of stock controls company
- large holders 5%+ have a big say in companies
- shareholders meet regularly, big decisions made by election
-> board of directors elected
-> Chief
Executive Officer chosen by elected board
- since control over companies is a big deal, stock price
should generally follow success of company
-> Who
wants a lame company? Its stock goes down.
->
Profitable companies might be bought or increase dividends.
Prices go up.
- many stocks pay dividends
-> an amount of $ paid per share annually or quarterly
- at worst, stocks lose all value and your shares worthless
-> can’t
come after you for more money
* Buying Stocks
- stock brokers work the markets for you
-> need
a license to trade
-> someone who has a seat on stock exchanges
=>
increasingly a "seat" is purely virtual
- hard to pick one great stock
-> buy a
wide variety in case one goes bad
-> mutual funds also handy
=>
a share in a pool of stocks run by a pro
=>
one mutual fund share buys sub-shares of other stocks
=>
presumably the pro will do better than you
=> they take a cut of the earnings in fees
- need to figure
out how much of savings to risk
* Stock Markets (securities exchanges)
- a company where stocks are listed and traded
- companies issuing stock pay to list their stocks on
exchanges
- brokers buy seats to trade their
- the exchanges
->
=>
on Wall Street
=>
huge (1,900 companies’ stocks) and prestigious
=>
NYSE has standards on profitability and size
=>
many stocks pay dividends
-> NYSE Amex Equities - previously American
Stock Exchange (AMEX)
=>
small, riskier companies and stocks
->
National Association of Securities Dealers Automated
Quotation
(NASDAQ)
=>
a computerized exchange
=>
cheap to list, few standards
=>
small start-up stocks start here
=>
few stocks pay dividends
-> most other countries have stock exchanges
=>
* the averages/indexes
- ways of seeing how the market is doing
- Dow Jones
Industrial Average
-> an average of 30 big, key companies
-> a long-term benchmark
-> tracks economic bedrock
-> tells
nothing about stocks not in the average
- Standard &
Poor's 500
-> 500
representative stocks
-> tracks broader companies’ performances
- various other indexes exist
-> transportation, technology, consumer goods, etc.
* Dow Jones
Industrial Average (2/12/2010) =
Bank of
Chevron
Cisco Systems
IBM
Johnson &
Johnson
Kraft Foods
Pfizer
Travelers
Verizon