The Stock Market

Why would a company go public?

To raise money to expand their business

Initial Public Offering (IPO)

The first time the stock is sold

Stock Exchange

Stock exchanges bring buyers and sellers together to buy and sell stocks

2 Biggest Stock Exchanges in the U.S.

• NYSE, NASDAQ

• 13 stock exchanges in the U.S.

• 60 major exchanges throughout the world

Stock Index

• Track the prices of a certain group of stocks

• Give you an idea of how the stock market is performing

• Basically the up/down trend graph

After IPO, what determines the price of a stock?

Supply and demand

Long Position on a Stock

Buy low, sell high

Short Position on a Stock

Buy high, sell low

What happens if tons of people buy tons of stock?

Prices go up really high for stock

Market Cap

Calculated by multiplying a company’s total number of shares by its current share price

• Shows how much the overall company is worth on the stock market

Small Market Cap

Between $250 million and $2 billion

Medium Market Cap

Between $2 billion and $10 billion

Large Market Cap

Typically $10 billion to $200 billion or more

Dividend

Shareholders receive a portion of the profits for every stock they own

Portfolio

All investments a person owns

• Could include stocks, bonds, mutual funds, etc.

Diversifying

Having a lot of different types of investments in your portfolio.

• Not all your eggs in one basket

Mutual Fund

• Between 50-100 different stocks

• Diversification without buying too many different stocks

• Price: value of all the stocks / number of shares outstanding

• Price only changes once at the end of the day

Exchange-Traded Fund (ETF)

Collection of securities that can be bought and sold on a stock exchange throughout the trading day, similar to stock

• Diversification

• Price: value of all the stocks / number of shares outstanding

• Price only changes once at the end of the day

Index Fund

A type of mutual fund or exchange-traded fund (ETF) designed to automatically track and match the performance of a specific market index, like:

• S&P 500

• Total Stock Market Index

Instead of hiring a manager to hand-pick individual stocks, and index fund simply buys a piece of every company listed on that index, offering you a low cost, instant way to diversify your investments

Stock Split

When the price of a stock gets too high or too low, the stock will often split to lower or higher prices

• 1 share of $1,000 becomes 100 shares of $10

• Can be the opposite

Bear Market

A downturn in the stock market

Bull Market

An upturn in the stock market

Stock Exchanges Open…?

ET: 9:30AM to 4PM

PT: 6:30AM to 1PM

How can you buy stocks today?

• Under 18 custodial account

• Buy fractions of shares (stockpile)

Is there a sure thing in the stock market?

No, its educated gambling