Stocks

By: Stephen Comeau

What are Stocks?

• A stock is a share in the ownership of the company.

• Stocks are claims on a companies earnings and assets.

• If you buy more stocks you have more ownership in a company.

• Shares, Equity and stock are all the same thing.• http://www.investopedia.com/university/stocks/

stocks1.asp

Shareholders

• When you buy a stock you become a shareholder or a person who has a partial claim to a company.

• This means that you own a very minute piece of a company.

• You also have a very small (very very small) percentage of influence over the stock.

• http://www.investopedia.com/university/stocks/stocks1.asp

Stocks Certificates

• Stocks are represented by Stock Certificates.

• This is a piece of paper that proves that you have ownership of a company.

• Today these are not handed out anymore in paper form, but are handed out electronically to your brokerage.

• http://www.investopedia.com/university/stocks/stocks1.asp

Stock Brokers

Being a Stock Broker is on of the higher paid jobs in the financial services. This job has no limit to income, their income just depends how hardworking they are and if they are extremely lazy or not. Earning money as a stock broker depends on how many consumers you have in your portfolio and it also depends on how you set up your contract with the customer. If you set up a contract with a customer that wants to buy a $100 dollar stock, you can set up the contract to earn a certain percentage of that. Normally if your a stock broker you don't want to set up and extremely high percentage because the customer has to earn money as well and you want to attract more customers. Brokers make more money when they sell packaged products, which is a package of what they will do for you for a certain price.  http://www.ehow.com/about_5515783_much-average-stockbrokers-commission.html

Board of Directors and Stocks

• The Board of Directors are people that are elected by a corporation's shareholders.

• They look over the management of the corporation.

• The board is normally paid in cash or STOCK. • They are responsible for legal activities of the

corporation.• http://www.investorwords.com/511/

Board_of_Directors.html

Stocks Insured?• Stocks are not insured by the government. • Stocks are insured by the SIPC (Securities Investor Protection Corporation) to a

limited extent.• When a company collapses and you are stuck with the stocks that you bought the

SIPC will step and try to return some of the money you have lost. • However the SIPC isn’t able to help everyone, but it does cover up to 99% of people

(but not for total loss of money).• When a brokerage firm fails owing customers cash and securities that are missing

from customer accounts, SIPC usually asks a federal court to appoint a trustee to liquidate the firm and protect its customers. With smaller brokerage firm failures, SIPC sometimes deals directly with customers.

• The SIPC covers stocks and bonds held at a brokerage firm. However, It does not cover Commodity future contracts (unless defined as customer property under the Securities Investor Protection Act), currency and Fixed annuity contracts. 

• http://www.sipc.org/who/sipcmission.cfm

More SIPC

 This Company also provides Brokerage Identity theft so if a broker steals your identity and buys stocks with your money you will be protected by the SIPC.The SIPC is composed of brokers and Dealers who are registered under the Securities Exchange Act of 1934, and all members of the NASD.The SIPC is a non-profit membership corporation established by Congress that insures securities and cash in customer accounts up to $500,000 (up to $100,000 in cash) in the event of brokerage bankruptcy.

Why Do Companies Issue Stocks

• Companies issue stocks in order to raise large amounts of capital quickly.

• Other sources of income have restrictions and some companies need money fast.

• http://www.ehow.com/about_4571014_why-does-company-issue-stocks.html

Do all Companies Issue Stocks?

• No, not all companies issue stocks because they choose not to.

• Companies are not forced to issue stocks to the public and they never have to if they don’t want to.

• Some companies don’t have the expanding power to release stocks and those that do probably want to keep the power within the company because when you issue stocks you have to release a certain percentage of power to the public.

• http://www.qwoter.com/college/Trading-Basics/why_do_companies_issue_stock.html

Risks of Stocks

• Risks can be very dangerous when it comes to stocks because there are no “guarantees when it comes to individual stock.”

• Companies do not always pay out dividends.• All stocks are vulnerable to bankruptcy as well.• If you take a huge risk in stocks you may loose

all you had put into those stocks.• http://www.investopedia.com/university/stocks/

stocks1.asp

How Can you buy Stocks?• Before you even consider buying stocks you need to educated

yourself about them. • In order to buy a stock you are going to need knowledge of the

company and you are going to need a broker to handle your transactions.

• Then you are going to need to know what you want in your brokerage account.

• After that you have to open your account and once your account is open you may research the stocks you are looking at and proceed to buy them through the broker.

• One way is to set up an on-line brokerage account. It’s cheap and simple to do, plus you’ll learn about investing first hand. Another way is to buy stocks directly from a company through a direct purchase plan. Investing your money in stocks has never gotten easier.

•  http://www.ehow.com/how_2321903_buy-stocks-broker.html• http://www.ehow.com/how_544_buy-stocks.html

Types of Different Stocks

• There are two types of stock, which are Common Stock and Preferred Stock.

• Common Stock- This type of stock is the type of stock everyone refers to when talking about stocks. Stocks are almost always issued as a Common Stock.Common stockholders are on the bottom of the priority ladder for ownership structure. In the event of liquidation, common shareholders have rights to a company's assets only after bondholders, preferred shareholders and other debtholders have been paid in full.

• Preferred Stock- These type of stocks are somewhat like common stocks except, when you buy these types of stocks they don’t come with the same voting rights. These types of stocks also come with a fixed dividend. Also the company who issued this type of stock can buy the stock from the shareholder at any time.

• Common Stock and Preferred Stock are normally the two type of stocks that you will see. However, companies can modify different classes of stock. Companies will do this when they want voting power to remain with a certain group.

• http://www.investopedia.com/university/stocks/stocks2.asp

How are Stocks Traded?

• Stocks are traded through a stock exchange. This is where people meet up to debate the prices of the stock and then sell them.

• These exchanges can be made physically or over the internet.

• http://www.investopedia.com/university/stocks/stocks3.asp

Stock market affecting the Financial world

• When people buy stocks this affects how companies are doing. If a company is getting a lot of investors then their stock will stay high, but once that stock starts to drop a little bit and everyone sells at once then the stock will drop like a stone.

• If people drop all their stocks like crazy it will cause the market to drop and also the US dollar.

• With the dollar dropping we cannot buy goods from other countries because they have a stronger currency.

• If the stock market does extremely well then the dollar will rise and make our goods harder for other countries to purchase which then lowers our profit from exports.

• This cycle happens over and over and over with every fluxuation of the stock market.

• http://www.economicshelp.org/blog/stock-market/how-does-the-stock-market-effect-the-economy/

Fees when buying and selling stocks

• The fees of buying a stock are the fees you have to pay a brokerage to allow you to buy that stock. This is called Dividend Reinvestment Plans.

• There is also maintenance fees on accounts that are inactive for a period of time. Also there is order-handling fees and higher rates for limit orders.

• All of these fees contribute to just staying in the stock market game.• When you sell there is a transaction fee from your broker that is the same

as buying stock. After you pay this fee the rest of the money is yours.• Other Fees can also range from $1- $250 depending on what you need to

do. Fees such as Transferring in and out cost $60, while another fee Depositing cost $250. Also there is a high commission charges.

• http://www.usatoday.com/money/perfi/columnist/block/2002-09-30-brokerage-services_x.htm• http://en.wikipedia.org/wiki/Stock#Selling• http://www.scottrade.com/online_trading_commissions/investment_fees.asp

How to Read a Stock Table

• A stock table will look something like this.• A stock table is fairly easy to read once you have

researched these tables. The First and Second Column stand for the 52 week high and low for a company.

• The Third column is the name of the stock.• The 4th column is the ticker or stock symbol.• The 5th column is for dividends that some companies

pay. If the column is blank the company does not pay dividends.

• The 6th Column is the % yield of the dividend.• The 7th column is the price/earnings ratio. • Column 8 is the Trading volume which list how many

stocks were sold that day, but they are listed in the hundreds so to get an actual figure you have to add two zero’s to the end.

• The 9th and 10th columns are the high and low points of the day for the stock.

• The 11th column is the closing price of the stock for the day.

• Finally the 12th column is the net change in the stock. This means that this number is the change in price from today’s closing price compared to yesterdays.

• http://www.investopedia.com/university/stocks/stocks6.asp

What causes stock prices to change?

• The consumers cause the prices of stock to change.

• When people buy more of a stock than people are selling the stock it causes the stock price to rise.

• When people sell more than buy the price of the stock falls.

• This is called supply and demand.• http://www.investopedia.com/university/stocks/

stocks4.asp

Where are stocks traded and what are Stock Indexes?

• Stocks are traded on exchanges. • These exchanges can happen in person at a trading floor or online.• The purpose of exchanges are so people can agree on a stock price

and then make the transaction. • The largest exchange room is the New York Stock Exchange.• The NYSE is not the only stock exchange in the world, actually the

NYSE is just one stock exhcange in the thousands more that are out there. There are about 51,000 stock exchanges that are active.

• A stock index is measuring a part of the stock market.• These are found normally being cited by news and financial services

firms.• These news and financial service firms use these indexes to point

out the performance of the stock portfolio.•  http://en.wikipedia.org/wiki/List_of_stock_exchanges

 http://www.investopedia.com/university/stocks/stocks3.asp• http://www.google.com/search?

hl=en&rlz=1T4GGLD_enUS387US387&defl=en&q=define:Stock+indexes&sa=X&ei=bL0lTbSREIWdlgfjyMX4AQ&ved=0CBsQkAE

What is the NASDAQ?

The NASDAQ, also known as the NASDAQ Stock Exchange, is an American Stock Exchange.NASDAQ stands for National Association of Securities Dealers Automated Quotation.The NASDAQ is the largest electronic screen based equity securites trading market in the united states. The NASDAQ was found in 1971 by the NASD.People buy stocks from this exchange online instead of in person. The only stock exchange that is larger than the NASDAQ is the New York Stock Exchange which is abbreviated to NYSE.

Why do companies sell stocks of their company?

• Companies sell stocks of themselves in order to raise more money for the company.

• Stocks represent a portion of ownership of the company.

• When companies need extra income the normally go to the stock market and sell stocks to gain profit.

• Companies do this to stay afloat and keep revenue coming in.

• http://www.ehow.com/facts_5149719_do-companies-sell-stocks.html

Liquidity

• Liquidity is the degree of which security can be bought for your stock, without altering the price.

• You normally want to invest in a liquid stock because with a liquid stock you can get your money out of the deal easier.

• http://www.investopedia.com/terms/l/liquidity.asp

Preferred Stock and Common Stock

• Common stock is the stock almost every one buys and talks about on a daily basis.

• This type of stock you get a partial ownership of the company and some voting rights.

• Common stock has also been proven to have a greater income than all other forms of stock.

• Common Stock, however, has variable dividends which don’t stay the same normally.

• Preferred stock on the other hand only allows you to own shares of the company, but you don’t get the voting privileges.

• Preferred stock has a fixed dividend that stays the same forever.• Also people who own a preferred stock are paid off sooner than

common stock shareholders when liquidation comes into effect.• http://www.investopedia.com/university/stocks/stocks2.asp

Dividends and how they work

• Dividends are the payments a corporation makes to the shareholders. This is its portion of the profits that go to shareholders.

• When a company finishes of a quarter they have an amount that they had made that quarter. The Board of Directors for that stock then decides the dividend for the stock.

• Either the company chooses to issue this dividend or decides to reinvest into the company in hopes to earn even more next quarter.

• http://www.investopedia.com/articles/02/010902.asp

Different Share Types

• Different share types offer different bonuses from the company when you buy them.

• Common stock offers you 1 vote in the company while another share type could offer you 10 votes for 1 stock.

• A company can modify their stock to their liking and can add extra bonuses to stock that cost more.

• Different share types are used to attract new investors to buy these different things.

• http://www.internettradebureau.com/article/different-types-of-stock-a1146.html

Quiz

• What is a Stock?• Who are the shareholders?• Who elects the Board of Directors?• Why do Companies issue stock?• What is Liquidity?• What is Common Stock?• How are Stocks traded and where are they

traded?• What is the most prestigious trading center for

stocks?• What causes stock prices to change?• How do stocks affect the US dollar?

Answers

• A stock is a share in the ownership of the company.• A person who has a partial claim to a company. A.K.A. You the Consumer.• The Board of Directors are people that are elected by a corporation's

shareholders.• Companies issue stocks in order to raise large amounts of capital quickly.• Liquidity is the degree of which security can be bought for your stock,

without altering the price.• This type of stock is the type of stock everyone refers to when talking about

stocks. Stocks are almost always issued as a Common Stock.• Stocks are traded on exchanges. These exchanges can happen in person

at a trading floor or online.• The largest exchange room is the New York Stock Exchange.• The consumers cause the prices of stock to change.• If people drop all their stocks like crazy it will cause the market to drop and

also the US dollar. With the dollar dropping we cannot buy goods from other countries because they have a stronger currency. If the stock market does extremely well then the dollar will rise and make our goods harder for other countries to purchase which then lowers our profit from exports.