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GUTIC Edward Thomson 27th September 2012
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[Subject of presentation]
[Your name][Date]
Introduction to the stock marketEdward Thomson
www.gutic.co.uk
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GUTIC Edward Thomson 27th September 2012
Before we start…
Stocks (American) = Shares (British)
Please like our new Facebook page:
www.facebook.com/guticnow
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GUTIC Edward Thomson 27th September 2012
I. Introduction - What are shares?- Why invest?
II. Market Dynamicss- What drives the market?
III. Strategies- Fundamental vs technical
IV. Getting started- Using Google finance
V. Conclusion
Content
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GUTIC Edward Thomson 27th September 2012
I. Introduction
II. Market Dynamics
III. Strategies
IV. Getting started
V. Conclusion
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GUTIC Edward Thomson 27th September 2012
What are shares?
Share market (eg London Stock Exchange)
— Companies looking to raise money (capital)
— Company sells part ownership:
Investor becomes an owner of the company
— Different from a loan (corporate bond): money paid back with interest.
— You may never get your money back with shares (risky?)
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GUTIC Edward Thomson 27th September 2012
Why invest?
Rewards
— Dividends: a share of the companies profits
— similar to interest in a bank account
— superior returns to a savings account
— Growth: appreciation of asset price
— price could collapse to zero
— Voting rights – determine how company is run
Riskier than bonds or cash but potentially greater rewards
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GUTIC Edward Thomson 27th September 2012
Chasing wiggles
Wiggles are noise – short term thinking
Long term – stock market is up
Long term view
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GUTIC Edward Thomson 27th September 2012
I. Introduction
II. Market Dynamics
III. Strategies
IV. Getting started
V. Conclusion
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GUTIC Edward Thomson 27th September 2012
Market Dynamics --- What drives prices?
Supply vs Demand
— Low demand: lower price Low supply: higher price
— High demand: higher price High supply: lower price
— Supply:
— How many shares are there in existence? (millions)
— Are there many sellers? (market conditions)
— Is there easy access? (stockbroker availability)
The supply side is probably easier to understand.
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GUTIC Edward Thomson 27th September 2012
Market Dynamics
— Demand:
— How popular is the company? (hot tech stock)
— Are there many buyers? (crowded market place)
— What drives popularity?
— How do we determine a fair price for the company?
— Are we willing to pay a premium in order to get a great company?
— What about sentiment? (good news and bad news)
Decision making in the market place is like a virus.
An idea spreads as it gains popularity.
Irrationality can take over.
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GUTIC Edward Thomson 27th September 2012
Example – GGP (AIM listed)
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Slow moving – very few trades
More trades – faster price movement
Popularity (sentiment) drives short term price
volume
Share pricedoesn’t necessarilyreflect value
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GUTIC Edward Thomson 27th September 2012
I. Introduction
II. Market Dynamics
III. Strategies
IV. Getting started
V. Conclusion
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GUTIC Edward Thomson 27th September 2012
Analysis strategies
Fundamental vs Technical
— Fundamental analysis
judge company value and determine fair price
— long term investment (years)
— short term price movement irrelevant
— want good history of dividends
— Technical analysis
determine how price will change
— short term focus (weeks/days/seconds)
— trading not investing
— fundamentals not important
— use technical indicators / complex models
Would you pay £10 for an apple?
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GUTIC Edward Thomson 27th September 2012
Analysis strategies
Passive vs Active
— Passive funds
Buy & hold the market – follows an index
— long term investment (years)
— growth through volume and dividends
— low cost, few transactions / taxes
— Active funds
Try to beat the market, or perform a specialist role
—Tries to pick the best stocks in the market
—Can have many transactions (costs)
—Can engage in shorting and hedging
—Time horizon varies
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GUTIC Edward Thomson 27th September 2012
I. Introduction
II. Market Dynamics
III. Strategies
IV. Getting started
V. Conclusion
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GUTIC Edward Thomson 27th September 2012
Getting started – example using Google finance: Tesco
Price (pence) Day’s movement Company news‘value’ numbers
Similarcompanies
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GUTIC Edward Thomson 27th September 2012
I. Introduction
II. Market Dynamics
III. Strategies
IV. Getting started
V. Conclusion
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GUTIC Edward Thomson 27th September 2012
Conclusion
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— Investing in stocks should give good returns
— Has risks
— Supply and Demand drive price
— The demand side can be very complicated
— Price does not reflect true value
— Sentiment affects price but value
— Stocks can become over valued (or under valued)
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