Investing Unit

Personal Finance- Investing (Unit 3)

Stock

A partial ownership of a company

Why might a company sell public shares?

To raise money for a project or other funding

Issuing stock = “going___”

“going public”

What’s the best way to diversify stocks?

Invest in several companies > lower risk

IPO

Initial Public Offering

How to make $ from stock

1) Sell when the value increases

2) Dividend

How to minimize risk when investing

• diversify stocks, different companies

• invest in several things: bonds, stocks, mutual funds

Index

Measures the performance of a collection of stocks. Index's track how the overall market is performing.

Dow Jones Industrial Average

• market indicator (index)

• tracks 20 best/blue chip stocks in U.S

Standard and Poor’s 500 Index

• tracks top 500 stocks

• industrial, utility, transportation, financial

NASDAQ Composite Index

• tracks prices of all securities traded o NASDAQ stock market

• broader measure of market activity

• many computer biotechnology, and telecommunications

• Updates throughout trading day

The Russell 2000 Index

• published by Frank Russell Company of Tacoma, Washington

• tracks stock of 2,000 small American companies

• includes many IPO’s

• considered bench-mark index for small-cap investments

ESG

Environmental, Social, and Governance

• asses a company’s sustainability and ethic impact

• environmental impact, social practice, corporate governance

Sector

A broad group of stock, often in one industry

Market Capitalization (Market Cap)

the total dollar value of a company’s outstanding shares of stock

Risk level of large-cap/blue chip ($10b+)

Low

Risk level of Small cap ($300m-2b)

Risky

Risk level of mid-cap ($2-10b)

Variable low-high risk

Quoted Price

represented last traded prices someone paid for that stock. (stocks current market value)

Open

first trade price recorded for that market day

Close

last price the stock traded for in the previous trading session

Volume

number of shares that have been traded during the day. good iindication for how much interest a stock had

Market Cap

The total value of a company’s stock. can be used to decide if stock is risky or safe investment.

Price to Earning Ratio (P/E)

High PE typically signals that investors have high expectations for future growth

Low PE represents low growth expectations or a potential bargain

Dividend Yield

A ratio that shows the annual dividend payment as a percent of the stock’s price.

Dividend Rate

This represents the total annual dividend payout per share

Ex-Dividend Rate

The date by which an investor must own the stock to receive the upcoming dividend payment.