Introduction to the Stock Market

The Basics of Stock Investing

Stocks

• Investors buy shares (stock) in a company and then become part owners– A company sells stock to raise money to expand their business– Some companies pay dividends on their stock (similar to interest on a bond)

Key Stock Indices

• S&P 500 Index

– Largest 500 companies by $ value

• Dow Jones Index

– 30 very large American companies

• Nasdaq Index

– primarily technology stocks

WHY INDICES:

There are over 5,000 stocks!

A stock index provides the average return of a basket of stocks

ETF’s = exchange traded funds• a way to invest in various stock indices by purchasing 1 stock•Example: SPY = SP500 index MDY = midcap index IWM = smallcap index

BULL or BEAR MARKET?

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A Stock Market goes through the business cycles too

Recent Stock Market History

• Stock market hit a high in March of 2000– 3 years of negative returns followed [2000,2001,2002]

• 2003 SP500 +28.6%

• 2004 SP500 +10.8%

• 2005 SP500 +4.9%

• 2006 SP500 +15.7%

• 2007 SP500 +5.5%

• 2008 -37.0%

• 2009 +26.0%

• 2010 +15.0%

• 2011 +0.0 %

• 2012 +13.0%

• 2013 +29.6%

Market recovery

Great Recession

Market recovery

Sectors of Stock Market• Technology• Transportation• Retail• Financials• Energy• Health Care• Defense• New Industries (looking to the future…)

Industry Type

2 Goals of a Company

1) Maximize Profits (each year)

2) Grow Profits (over time)

have the best stock performance

Companies that grow PROFITS the fastest

Building a 100,000 Portfolio

• How many shares?– Depends on how many dollars you want to invest

• What types of companies?– Many sectors to choose from

• Do I spend all of my $100,000– No more than $20,000 in one stock!

Graphing Stocks

COMPANYNAME

3M Co.

Alcoa Inc.

Altria Group Inc.

American Express Co.

American International Group Inc.

AT&T Inc.

Boeing Co.

Caterpillar Inc.

Citigroup Inc.

Coca-Cola Co.

E.I. DuPont de Nemours & Co.

Exxon Mobil Corp.

General Electric Co.

General Motors Corp.

Hewlett-Packard Co.

Home Depot Inc.

Honeywell International Inc.

Intel Corp.

International Business Machines Corp.

Johnson & Johnson

JPMorgan Chase & Co.

McDonald's Corp.

Merck & Co. Inc.

Microsoft Corp.

Pfizer Inc.

Procter & Gamble Co.

United Technologies Corp.

Verizon Communications Inc.

Wal-Mart Stores Inc.

Walt Disney Co.

Stocks in

Dow Jones Index

Stocks in

Dow Jones Index