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Introduction to Stock Market. Stock Exchange – Place where publicly held companies are bought and sold Nasdaq – an index based on stock prices of over 5000 companies traded on the market. Transactions take place on a virtual market place.

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Presentation Transcript
common vocabulary

Stock Exchange – Place where publicly held companies are bought and sold

  • Nasdaq – an index based on stock prices of over 5000 companies traded on the market. Transactions take place on a virtual market place.
  • Dow Jones Industrial – An index based on the stock prices of 30 actively traded large companies. This is the oldest and most widely followed index of stock market performance.
  • S&P 500 – An index based on the stock prices of the largest 500 firms traded on the New York Stock Exchange.
Common Vocabulary
common vocabulary3

Public Company – A company owned by investors who buy shares of stock. Shares of the company sold through one of the stock exchanges.

  • Private Company– Company that is owned by a person, family, or group and does not sell shares to public on stock market.
  • Interest– A Fee charged to use another’s money or credit.
    • Simple- Interest calculated at regular intervals on principal only.
    • Compound – Interest calculated at regular intervals on principal and interest added previously.
Common Vocabulary
stocks bonds mutual funds

Stocks– Ownership of shares in a business.

    • Common – shares do not guarantee dividend, higher risk – higher returns, includes voting power at annual meetings
    • Preferred – ownership that guarantees dividend if it occurs, is less risk with no voting rights.
  • Shares – A unit of ownership purchased in a corporation or Mutual Fund.
  • Dividends – part of the company earnings that pays as money to stockholders.
  • Bonds– When a company or the government needs to borrow money they sell bonds. Typically sold in certain increments, with a stated interest and maturity (life/term length )
  • Mutual Funds– company that sells stock in itself and uses the money to buy stocks and bonds issued by other companies. (Benefits include – large variety of investments with smaller risk)
Stocks/Bonds/Mutual Funds
risks

Risk – the chance of losing part or all of an investment.

    • Conservative – Preferred Stock
    • Moderate – Growing companies
  • Beta Number– A calculation that helps measure the level of risk ( higher than 1 provided higher risk and higher earnings potential)
  • Volatility – indicates how quickly the value changes
  • P/E Ratio – Price to earnings ratio- calculated by dividing the current price per share by current earnings per share.
Risks
retirement savings

401 K –Retirement savings funded by employee contributions often matched by employer. Tax free until money is withdrawn.

  • IRA’s – (Individual Retirement Accounts) –Long term, tax sheltered deposits that are set up as a retirement plan- has amount limitations ($3000 per year for tax sheltering benefits)
  • Money Market – Special savings account where money is loaned for less than 1 year – usually issued by financial institutions.
  • Certificate of Deposits – (CD’s)Special form of deposit offered by banks that generally pays compound interest for a fixed period of time.
Retirement & Savings
other basic information

Bull Market – Period during which stock market prices move up for several months or years in a row.

  • Bear Market – Period during which stock market prices move down for several months or years in a row.
  • IPO – Initial sale of stock to public by investment bankers.
  • Yield – Rate of the return of an investment paid in dividends or interest expressed as a percent
  • Savings bonds – low-denominations savings bonds sold by the government purchased at a discount and can take up to 18 years to mature at full price
Other Basic Information