WHAT EXACTLY IS A STOCK?

• A stock is a share in the ownership of a company.• Often called shares or equities

• What exactly does it mean when you own a little piece of a company?• No you can’t have anything they produce for

free• No you can’t tell them how to run the business• No you can’t be sued if they do something

negligent (no liability; this is a good thing)

SO WHAT CAN YOU DO?

• You can cast one vote for every share of the stock you own in the election of the board of directors.

• You can receive dividends, or a share of the companies profits, in certain cases

• You can sell your share whenever you want• Hopefully it is worth more when you sell it

than when you bought it.

WHY DO COMPANIES SELL THEMSELVES?

•Companies need money to expand

Debt (borrowing $$$) vs.

Equity (using the value of what you have; in this case the value of the business)

WHAT ARE THE RISKS?

• If the company goes bankrupt, you as a shareholder are last in line to be paid, so essentially you could lose the entire value of the investment.• This is the worst case scenario and does not

typically happen.

• If the value of the company decreases than the value of your share in the company decreases• Of course the opposite is true as well• This is the point…

TWO STRATEGIES TO PICKING STOCKS

• Fundamental Analysis • Traditional approach, looks at the

performance and management practices of individual companies to predict their future success or failure.

• Technical Analysis• Increased popularity with rise of internet data

availability. Looks at past price trends to predict future price movements.