Elementary Assignment 1: Get Started

What is a stock?

  • Part ownership of a business, like you and a friend having a lemonade stand. You would each own half of the stand and split the income.

What determines a stock price?

  • Stock prices are based on how much money investors think the company will make.
    • If you were buying a lemonade stand
      • Would you pay $20 for a lemonade stand you thought would only make $5? Or,
      • Would pay $5 for a lemonade stand you thought would make $100?
  • Stocks are sold on stock exchanges, markets where buyers and sellers congregate to trade stocks.
    • It is not too different from a flea market, except it is stocks
      • Buyers and sellers come together to buy and sell stocks
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You have $100,000 in your account. Let’s buy about $5000 or $6000 worth of 5 or 6 stocks. That’s about $30,000 worth of stocks.

  • Make a “watch list.”
    • What products do your friends and family use?
      • Brands of shoes, clothes, food, cars, cleaning supplies
      • Where do you shop?
      • What other companies do you know? Apple, Samsung, airline companies,…?
  • Do you want to know what company makes a product?
    • Type “Who owns [brand name or product name]” into your browser and hit ‘enter.’
      • Try “who owns Funyuns.” You should see that Pepsi makes Funyuns
  • Order you companies by the industry they are in.
    •  Clothing, food, electronics, sports, or car industry, etc.
    • Choose five or six companies in different sectors and industries.
      • This is diversification. That’s a fancy way of saying you do not want to put all your eggs in one basket.
      • Another way to diversify is to invest in different asset classes
        • Stocks, bonds, real estate, gold, and cash are all different asset classes

Pop Quiz

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