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?
- If you were buying a lemonade stand
- 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
- It is not too different from a flea market, except it is stocks
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,…?
- What products do your friends
and family use?
- 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
- Type “Who owns [brand name or
product name]” into your browser and hit ‘enter.’
- 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