Stock Market Questions

Before we begin today, go ahead and check your stock portfolio at: http://www.marketwatch.com/game/khs2014

Don't forget to turn in your stock pick paper from Monday.

Define the following in your own words:
(Don't print yet -- we have more questions at the end)

• Stock
• Stock Market
• Stock Symbol
• Dividend
• Investing
• Diversifying

Now let's look at some of the basics of the Stock Market:

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

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:

• 1,000 shares owned
• 10,000 shares outstanding (total number of shares available)
• 10% ownership of the company

Remember, investing in individual stocks is not necessarily the best investment choice for most people.  I think you will find by watching our classroom stock challenge that investing is a difficult way to make a profit.  For most individuals who want to invest in the stock market, low priced index funds provide a low cost and more simple way to invest in a diversified portfolio of stocks.

Ownership of stock use to be represented by a stock certificate.  These days, when you buy a stock of a company, you usually do not get the actual stock certificates any more.  Instead, your ownership is tracked electronically, making it easier to buy and sell shares.

So when you have stock and ownership of a company, what can you do with it?  Not really very much.  You will benefit when the price of the stock goes up, or lose if the price goes down.  As a part-owner of the company, you are given the right to vote for the company's board of directors.

Another way you may benefit is if the company pays dividends.  Dividends represent a percent of the company's profits, and is paid to the shareholders.

Buying stock can be risky.  Although stock prices can go up, they can also go down.  And if the company goes bankrupt, you could potentially lose all of the money you invested in the stock.

If you are interested in learning more, The Wall Street Journal has a free booklet available to explain some of the basics of using the Stock Market: http://www.wsjclassroomedition.com/pdfs/stock_guide.pdf

While watching the Dave Ramsey video on Savings and Investing, answer the following questions:

• Never invest purely for _____________  _____________.
• Never invest using ______________ money.
• _______________ means to spread it around.
• Diversification ______________ risk.