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STOCKS and MUTUAL FUNDS
WHAT YOU SHOULD KNOW
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What are stocks?• Shares of ownership of a company
• If a company has 100 shares outstanding and you own 10 shares, you own10% of the company
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How do people make money off of stocks?
• As a shareholder, you may be entitled to dividends– Sharing company profits with
shareholders
• the price of the stock goes up– “Buy Low, Sell High”
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Why Stocks?
• Traditionally they are the highest returning investment
• Since 1926, about 12% a year• Since 1987, they’ve exploded
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THE STOCK MARKET- A PRETTY GOOD
HISTORY
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STOCK EXCHANGES
• Are places where stocks are sold• Common stock exchanges are the
– NASDAQ(National Association of Securities Dealers Automated Quotation System)
– NYSE (You guess. . .)– AMEX
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SOME BIG WINNERS. . .STOCK FROM INGAIN
• Jupiter National $3 1/2 to $27 1991-93 671%
• Mid-AtlanticMedical Services $2 3/8 to $27 1991-94 1,078%
• Linear Technology $2 1/8 to $38 1989-95 1,688%
• Micron Technology $3 to $95 1992-95 3,066%
• Fastenal $7/8 to $38 1987-95 4,242%
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SOME TYPES OF STOCK
• GROWTH STOCKS– Any stock that has a good chance of
growing faster than the market
• BLUE-CHIP STOCKS– Companies with good financial
records that are pretty safe investments (Coca-Cola, GE, Disney are Blue Chip Stocks)
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SOME TYPES OF STOCK
• Income Stocks– Pay high dividends, but don’t grow much
• Cyclical Stocks– Do real well in a good economy, but bad
in a bad economy(automotive, airlines, etc)
• Defensive Stocks– Recession proof stocks (food, beverage,
tobacco)
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SOME TYPES OF STOCK
• Speculative Stocks– Big gambles– Risky but could be good
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THE DOW
• “HOW’S THE MARKET DOING?”• The DJIA is the Dow Jones Industrial
Average commonly referred to as the Dow
• An average of only 30 of the big stocks (blue-chips)
• Together they represent the U.S.economy as a whole.
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THE DOW IS MADE UP OF. . .
AlcoaMining Non Ferrous AA
American Express Financial Services AXP
AT&T Telecommunication TBoeing Aerospace BACaterpillar Machinery Const. CATCitigroup Inc. Financial Services CCoca-Cola Beverages Soft KODu Pont Chemical DD
Eastman Kodak Photo Equipment EK
Exxon Mobil Corp. Oil International XOMGeneral Electric Diversified GEGeneral Motors Auto Domestic GMHewlett-Packard Computer Mini HWP
Home DepotBuilding and Construction Retail HD
HoneywellIndustry: Conglomerates HON
IBMComputer Mainframe IBM
Intel
Electrical Components - Semiconductors INTC
International PaperPaper & Forest Products IP
Johnson & Johnson Medical Supplies JNJ
McDonald's Retail Restaurant MCDMicrosoft Computer Software MSFTMerck Drugs MRKMinnesota Mining Diversified MMMJ.P. Morgan Bank JPM
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OTHER INDEXES INCLUDE
• S & P 500 • NYSE INDEX• NASDAQ INDEX• RUSSELL 2000• WILSHIRE 5000
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Make Sure You Know. . .
• What is the DJIA?• What are Exchanges?• What is the S & P 500?• What are blue-chip stocks?• What are dividends?
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