These notes should help with your project. CNNFN.COM Yahoo.com Finance

1. These notes should help with your project. CNNFN.COMYahoo.comFinance

2. Corporations can raise funds by selling stocks in the form of a share. When you own a share you own a piece of a company. • Why would they want to raise money? • To perform Ig • Why not borrow from a bank? • It may be cheaper to sell stock rather than pay interest

3. You can make money on stocks in two basic ways: • The corporation may pay out some of their profits to each shareholder in the form of a dividend. • If the stock goes up, and you sell, you earn the difference in the price.

4. Types of stock: • Income stock: pays dividends regularly. • Example: AT&T (T), McDonald’s (MCD), Merck (MRK) • Growth stock: pays few or no dividends and instead invests the profit back into the business. • Often times these companies put this money into R&D • Google (GOOG), Amazon (AMZN), eBay (EBAY)

5. Stocks are risky b/c they may go down. If the company goes bankrupt, you get paid only if there’s money left after many other people have been paid.

6. Stock Exchanges: • New York Stock Exchange and NASDAQ are the two biggest. The NYSE is the biggest and oldest and has all sorts of companies on it. • The NASDAQ focuses more on technology stocks.

7. A stock exchange is a market. NYSE is a market where you can find all sorts of “goods” • The NASDAQ is very “tech” heavy • NASDAQ stands for National Association of Securities Dealers AutomatedQuotations

8. Index (indices) • An index is a group of stocks. Some are a large list of stocks, some small. • An index is a way to track stock prices, industries, and the economy on the whole • The Dow Jones Index is a list of 30 stocks. • McDonald’s, Wal-Mart, Microsoft, Boeing • The S&P 500 Index is a list of 500 stocks. • Same as DJIA but with more “detail”/smaller companies

9. Why buy certain stocks, and not others? • Price, future expectations, dividends paid, and stability amongst others.

10. One strategy in buying stocks is called dollar cost averaging. • Every month you invest a pre-set amount of money. • The technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. • More shares are purchased when prices are low, and fewer shares are bought when prices are high. (Courtesy of Investopedia.com)

11. Market Capitalization=price of stock * number of shares outstanding • Sizing Up A Stock Category Market Cap • Nano cap below $50 million • Micro-cap less than $250 million • Small-cap $250 million to $2 billion • Mid-cap $2 billion to $10 billion • Large-cap $10 billion to $200 billion • Mega-cap $200 billion or more

12. Price to earnings ratio—shows the relationship between a stock’s price and its earnings per share. • Lower means stock has a low price in relation to its earnings per share (value) • Higher means stock has a high price in relation to its earnings per share (more speculative and risky)

13. 52 week high/low • Shows the range of the stock’s price in the past 52 week period (not calendar year). As of the current date to one year ago. • If stock is close to its 52 week high it may be “too” high OR it may have more room to run. Depends on how you look at it • If stock is close to its 52 week low it may be a “value” pick OR it may have more room to go down. Depends on how you look at it

14. Right now the DJIA is at (or close to an all time high) • Some say it has hit its peak and you should sell • Other say it has more room to run Take into account AT LEAST the following: Time horizon Risk tolerance As you save for something with a long time horizon remember that time is on your side.