Transcript Stock market

13.1 Investing Strategies.
 Saving : short term goals:
 examples:?
 Investing: long term goals
 Examples?
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http://video.cnbc.com/gallery/?video=828664867
How do you know you are
ready to invest?
When are you ready to
invest?
 Have a wellplanned
budget
 Emergency
savings
 Credit card
debt under
control.
People invest in many
ways:
 What to consider before
investing:
 Types of RETURNS Paid at regular times?
 Sell for profit?
 Tax advantages?
Do you want LIQUIDITY in
your investments?
 Which is more liquid?
Consider how much
VOLATILTY you can handle.
EVERY INVESTMENT
INVOLVES RISK:
 Conservative risk--- lower returns.
 Greater risk for potential for bigger
returns…
 Risk LIQUIDITY-not being able to
sell at higher price?
 RISK INFLATION- increases faster
than your investment value.
What are your objectives?
*Purpose for the money?
*How much can you afford to
invest? $$$
*What’s your timeline?
less time= more conservative
more time= more agressive
3 Strategies:
 1) Generate INCOME.
 2) Growth: likely to grow in value
with time.
 3) Tax Reduction: Reduce
amount of taxes owed to
government.
Diversify: Use a variety to
reduce risk.
Investing in the Stock
Market
 For Long Term goals.
 Higher Risk for potential higher Return.
13.3 Stock Market Basics
 If a company needs money, instead of
borrowing from a bank, they may raise
money by selling SHARES of STOCK.
(units of ownership)
 A person that buys Shares is a
SHAREHOLDER or partial owner of
company.
When Ashton joined 2.5 menThere was a major issue,
What was all the talk about?
PUBLIC VS PRIVATE
 Public companies: can buy stock in them.
 Ex: American Eagle, Walmart, Microsoft,
Apple, YUM, McDonalds.
 PRIVATE companies: owned by privately
held companies. Can not buy share of
stock.
 Ex: M&M Mars, Menards, Hallmark,Subway
 http://www.forbes.com/lists/2011/21/private-companies-11_land.html
When a private company
goes “public”
 IPO- Initial public offering. Way for company to
raise money. Investors buy shares directly
from the company.
 Twitter went public Nov 15th on NYSE
 http://www.forbes.com/sites/briansolomon/2014
/03/24/is-your-takeout-worth-1-7-billiongrubhubs-ipo-thinks-so/
http://money.cnn.com/gallery/pf/2012/12/26/best-worst-ipos.fortune/2.html
U.S. Stock Exchanges:
where stocks are traded.
 NYSE- Wall Street, Manhattan, NY
regular trading hours are 9:30 a.m. to 4 p.m.
Eastern time
 AMEX: New York City, New York
 NASDAQ: Largest network of exchanges
Electronically traded.
 Trading Sessions (Eastern Time)
Pre-Market Trading Hours from 4:00 a.m. to 9:30 a.m.
Market Hours from 9:30 a.m. to 4:00 p.m.
After-Market Hours from 4:00 p.m. to 8:00 p.m.
All markets are closed on holidays, Saturday and Sunday.
 What other times did the markets close???
Why is the Stock Market
considered RISKY?
 Do you expect to have money
invested in stocks in your
lifetime?
 Do you already have $ in stocks?
Calculated Guess???
If I had bought shares of Microsoft in
college…how much would I have today?
It's Thursday, March 13,
1986:
 Microsoft, founded more than a decade
earlier and already a powerhouse in the
world of personal computer software,
executes an IPO- initial public stock
offering that will raise $61 million for the
company and leave 30-year-old cofounder Bill Gates unfathomably wealthy.
$2100 investment…
 100 shares at the $21 ea. offering price that day and
sat on the investment for 25 years, it would have
mushroomed into 28,800 shares over the course of
nine stock splits and be worth about three quarters of a
million dollars today.
 That's the good news. Here's the disheartening caveat:
Had you instead sold your stash on Dec. 1, 1999, when
Microsoft's stock price reached its peak, you would
have reaped
$2100 investment = $1.4 million.
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http://finance.yahoo.com/echarts?s=MSFT+Interactive#chart2:symbol=msft;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;l
ogscale=on;source=undefined
History of MSFT stock
(ticker symbol)
STOCK SPLITS: 1 share
splits into 2 shares. (Shown by
black triangles) Price of share is now half. More affordable.
“The Dow was up today…”
The Dow was down today..
What does that mean?
The DJIA consists of 30 major
American companies:
Ex: Coca Cola, Home Depot, AT&T,
McD, MSFT,VZ, WMT, DIS.
http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average
It is an index that shows how 30 large publicly
owned companies based in the United States
have traded during a standard trading session
in the stock market.
*created in 1896, Named after Charles Dow and
Edward Jones.
Investing in the Stock Market
Dow Jones Industrial Average 120 years
averages.
Stock market
DJIA are Blue Chip Stocks
 large, financially sound company that has proved it can
weather downturns in the market.
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3M Company;
AT&T;
Boeing Co.;
Chevron Corp.;
Coca-Cola Co.;
General Electric Co.;
Home Depot Inc.;
Johnson & Johnson;
Kraft Foods Inc.;
Merck & Co.;
Proctor & Gamble Co.;
United Technologies Corp.;
Wal-Mart Stores Inc.;
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Also in DOW JONES INDUSTRIAL AVG.
$$$ more expensive shares. Less risk.
American Express;
Bank of America;
Caterpillar Inc.;
Cisco Systems Inc.;
Du Pont; Exxon Mobil Corp.;
Hewlett-Packard Co.;
IBM; Intel Corp.;
JP Morgan Chase & Co.;
McDonald's Corp.;
Microsoft Corp.; Pfizer Inc.;
Travelers Cos.;
Verizon Communications Inc.;
Walt Disney Co.
Bull Market: trend of
rising market prices.
Bear Market: trend of
falling prices.
SEC: Security and
Exchange Commission
 Protects investors by:
 Requiring companies to
disclose honest accurate
information about financial
health.
 Oversees activities of
stock exchange and
anyone else involved in
buying /selling stocks.
First Chairman of SEC:
 Started in 1934After the crash of
’29.
 FDR appointed
 This man to head
the SEC.
 Very controversial
move. Why???
Joe Kennedy:
 Kennedy had thrived on
Wall Street. Made millions
in ways that are now
considered Illegal.
 Created a scandal. Many
people did not trust him.
 FDR said- “It takes a thief
to catch a thief.”
INSIDER TRADING
 “INSIDER TRADING”illegal.
 profitable trading in
securities that is done
using access to
privileged (private)
information.
Think about companies
that you help support…
 What is their ticker symbol?
 Is the company Privately held?
 Or PUBLIC?
So what if….
 you decided to never invest in the
markets after experiencing the
Crash of 1929?
Expect RISK…
 Let’s look at history of stock
market….
What makes prices go up
or down?
 Price of shares is determined by
demand.
 Lots of people selling shares- price goes
down.
 Lots of people wanting to buy- share price
goes up.
What was life like in the
1920’s?
 Unemployment 5.2%
 Life expectancy: Male 53.6 Female
54.6
 343.000 in military (down from
1,172,601 in 1919)
 Average annual earnings $1236;
Teacher's salary $970
 More educated-Illiteracy rate
reached a new low of 6% of the
population. More people went to
college.
* women could vote.
* prohibition increased
crime/gangster activity.
Prohibition
 restriction of the
production, sale,
transportation,
importation, and
exportation of alcoholic
beverages,
 Having an Income Tax
established created
enough revenue that it
made Prohibition possible.
Prohibition
 Eighteenth
Amendment to the
Constitutionﾊwent
into effect on
January 16, 1920.
 Social experiment
that just didn’t work.
So why did the market
CRASH?
 Many people helped
businesses grow by
purchasing stocks
1920’s .
 hopeful of becoming
rich…many bought
shares on credit.
 While investors wealth
was growing, workers
wages were not and
economy became
unbalanced.
 Business growth
slowed, stocks started
to fall.
September ‘29
 Investors began to
realize that prices of
stocks were
becoming very
inflated.
 Stock values began
to decline.
Black Tuesday
 Most people that
invested in stocks
panicked and began
selling shares.
 When everyone sells at
once, price plummets
 Crowds outside wall
street waiting for news.
Effects of the crash:
 Banks closed without
warning
 Fortunes were wiped
out.
 Some investors killed
themselves.
 Millions of people from
all over the world who
owned stocks waited
helplessly as stock values
crashed.
Hoovervilles
 Many families lost their
homes because they
could not pay their
mortgages.
 These people had no
choice but to seek
alternative forms of
shelter.
 Hoovervilles, named
after President Hoover,
who was blamed for the
problems that led to the
depression, sprung up
throughout the United
States.
Farm foreclosures after
crash
 Families were often
thrown off their
farms and lost
everything.
 Penny auctions
occurred as
backlash.
Meanwhile, in
Europe….
A former house painter and
decorator started using the poor
economy to influence people and
getting people to rally behind
him…
Hitler’s became
successful-  won over the bulk of
the German middleclass,
 hard hit by the
inflation of the 1920s
 unemployment of the
Depression.
 Farmers and war
veterans were other
groups who supported
the Nazis.
 Who did he blame
for the poor
economy?
The Great Depression
QuickTime™ and a
TIFF (Uncompressed) decompressor
are needed to see this picture.
Al Capone’s Soup kitchen
 As 1930 major publicity
campaign.
 He opened a free soup
kitchen for the people
who had been thrown out
of work by the deepening
Depression.
 "The soup kitchen was
carefully calculated to
rehabilitate his image and
to ingratiate himself with
the workingman.
Elected FDR in 1932
 Promised to deliver
“New Deal” for
Americans.
 Repealed Prohibition
because revenue from
income taxes had
decreased sharply.
 Put Americans back to
work with several
programs.
Delivery to White House
 When the freedom of
brewing was finally
released once again in
1933, the Budweiser
Clydesdales eight-horse
hitch-and-wagon took
the first case of postprohibition beer along
Pennsylvania Avenue to
President Roosevelt.
Civilian conservation
corps
 Building bridges,
planted forests,took
care of public land,
 Paid by food, place
to sleep, $30/month-$25 of which was
sent home to
families.
 Women were not
allowed to join.
WPA
 Work Progress
Administration Put men to work
building and
improving highways,
bridges, dams
 Women also worked
in other types of jobs.
Jewel Box
 Historic WPA
funded Art Deco
styled greenhouse
located in St.
Louis' Forest Park.
The depression lasted 10
years…..
 The economy did not
experience a boon
until World War 2.
 Need to prepare for
war boosted
economy.
 Factories
 supplies
Exit Slip:
 1)Two things you SAVE for?
 2)Two things you INVEST for?
 3) At what age will you be
ready to invest? Explain.
 4) How was the depression
different from today’s
Recession? 3 ways. How was
it similar?