STOCKS and MUTUAL FUNDS

WHAT YOU SHOULD KNOW

What are stocks?• Shares of ownership of a company

• If a company has 100 shares outstanding and you own 10 shares, you own10% of the company

How do people make money off of stocks?

• As a shareholder, you may be entitled to dividends– Sharing company profits with

shareholders

• the price of the stock goes up– “Buy Low, Sell High”

Why Stocks?

• Traditionally they are the highest returning investment

• Since 1926, about 12% a year• Since 1987, they’ve exploded

THE STOCK MARKET- A PRETTY GOOD

HISTORY

STOCK EXCHANGES

• Are places where stocks are sold• Common stock exchanges are the

– NASDAQ(National Association of Securities Dealers Automated Quotation System)

– NYSE (You guess. . .)– AMEX

SOME BIG WINNERS. . .STOCK FROM INGAIN

• Jupiter National $3 1/2 to $27 1991-93 671%

• Mid-AtlanticMedical Services $2 3/8 to $27 1991-94 1,078%

• Linear Technology $2 1/8 to $38 1989-95 1,688%

• Micron Technology $3 to $95 1992-95 3,066%

• Fastenal $7/8 to $38 1987-95 4,242%

SOME TYPES OF STOCK

• GROWTH STOCKS– Any stock that has a good chance of

growing faster than the market

• BLUE-CHIP STOCKS– Companies with good financial

records that are pretty safe investments (Coca-Cola, GE, Disney are Blue Chip Stocks)

SOME TYPES OF STOCK

• Income Stocks– Pay high dividends, but don’t grow much

• Cyclical Stocks– Do real well in a good economy, but bad

in a bad economy(automotive, airlines, etc)

• Defensive Stocks– Recession proof stocks (food, beverage,

tobacco)

SOME TYPES OF STOCK

• Speculative Stocks– Big gambles– Risky but could be good

THE DOW

• “HOW’S THE MARKET DOING?”• The DJIA is the Dow Jones Industrial

Average commonly referred to as the Dow

• An average of only 30 of the big stocks (blue-chips)

• Together they represent the U.S.economy as a whole.

THE DOW IS MADE UP OF. . .

AlcoaMining Non Ferrous AA

American Express Financial Services AXP

AT&T Telecommunication TBoeing Aerospace BACaterpillar Machinery Const. CATCitigroup Inc. Financial Services CCoca-Cola Beverages Soft KODu Pont Chemical DD

Eastman Kodak Photo Equipment EK

Exxon Mobil Corp. Oil International XOMGeneral Electric Diversified GEGeneral Motors Auto Domestic GMHewlett-Packard Computer Mini HWP

Home DepotBuilding and Construction Retail HD

HoneywellIndustry: Conglomerates HON

IBMComputer Mainframe IBM

Intel

Electrical Components - Semiconductors INTC

International PaperPaper & Forest Products IP

Johnson & Johnson Medical Supplies JNJ

McDonald's Retail Restaurant MCDMicrosoft Computer Software MSFTMerck Drugs MRKMinnesota Mining Diversified MMMJ.P. Morgan Bank JPM

OTHER INDEXES INCLUDE

• S & P 500 • NYSE INDEX• NASDAQ INDEX• RUSSELL 2000• WILSHIRE 5000

Make Sure You Know. . .

• What is the DJIA?• What are Exchanges?• What is the S & P 500?• What are blue-chip stocks?• What are dividends?