objective the objective is – to learn and understand basic investing principles and how the stock...

Objective

• the objective is– to learn and understand basic investing principles

and how the stock market works– current events, – the basics of how the economy works, – money management skills, – basic math and reading comprehension, – writing skills

Investing

• One way you can save/make money is to invest:

• Savings Account at a bank• Buying stocks• Building Wealth

Savings Account

• Money invested is insured—never will lose the principle-up to $250,000 per institution

• Ready access to your money• Small minimum amount required• Very Low Risk-Low return on investment

Return on Investment

• Return on investment (ROI) is a popular financial metric for evaluating the financial consequences of individual investments and actions.

What is a Stock

• A stock represent a share in the ownership of a company. If you own a company's stock, then you are a owner, or shareholder, of the company. A stock represents a claim on the company's assets and profits. A stock is also known as equity.

• ROI greater because of risk

How Much Ownership?

• The ownership percent, of a company that you own is calculated by dividing the number of shares a person owns by the number of shares of stock outstanding.

For example:

1000 shares owned10,000 shares outstanding

= 10% ownership.

Stock Certificate

• Ownership of stock is represented by a stock certificate.

• These days, when you buy stock of a company, you usually do not get the actual stock certificates. Instead, your ownership is tracked electronically, making it easier to buy and sell shares.

Stock & Ownership

• As part owner, what can you do? • Not really very much. • You will benefit when the price of the stock

goes up, or lose if the price goes down. • As an part-owner of the company, you are

given the right to vote for company's board of directors.

Dividends

• Dividends represent a percent of the company's profit, paid to the shareholders.

Cost/Benefit Analysis

• Buying stock can be risky, since while the price of the stock may go up, it may also go down.

• If the company goes bankrupt, then you could potentially lose all the money you invested in the stock.

• However, that is what investing is all about. Taking risks, in the hope of making money on your investment, with no guarantee that you will make money.

Commission

• is a service charge assessed by a broker or investment adviser in return for providing investment advice and/or handling the purchase or sale of a security/stock

• How Brokerage companies make money• Commission can be a flat fee (E*Trade is $5 per

transaction)• Percentage of sale/purchase (some charge 3% -

5%)

Stock Simulation

• Begin with $10,000• Must invest in 5 stocks-can switch stocks-always 5• A 3% commission is to be paid for every stock

transaction (buying or selling a stock)• Transaction history of all buys and sells. • Responsible for keeping track of the current portfolio's

market value (plus the cash in the checking account).• On the last day (end of semester) students will sell

their stocks and report on their portfolio's value and what they learned during the activity

What Company?

• Pick companies you are familiar• What do they sell? What is their

product/service?• Do they pay a dividend?• Is it an up market or down market for

company? (look at chart for answers)

$10,000 1 year @.11% =$11

Current interest rate

$10,000 1 year @ 18.5 = $1850

Current Dow Jones Industrial Average

comparison

$10000 IN APPLE STOCK IN 2005

Apple was trading at $64.40 on 1/1/2005$10,000 would have purchased 155 SharesShares split 2-1 on 2/28/2005Now there are 310 sharesShares split 7-1 on 6-9-2014Now there are 2170 shares @ 109.00 per shareToday’s value of Apple would be $236,530

Figuring ROI

• The formula for return on investment, sometimes referred to as ROI or rate of return, measures the percentage return on a particular investment. ROI is used to measure profitability for a given amount of time.