What Exactly is the Stock Market?
I. Introduction to Stocks
A share of stock is a share of a business. Many people try to gain more money by investing their money in stocks. People who own stock are called stockholders. They are then a partial owner of the company that issues the stock and may share in a company's profits, if the company makes a profit during the year. This is paid in the form of dividends. The company's board of directors distributes the dividends proportionately by the number of shares outstanding.
Common stock is always issued by the corporation. It represents an ownership interest in the company. People owning common stock usually have the right to vote for the directors of the company.Preferred stock may also be issued by the corporation. This kind of stock is given certain preferential treatment over common stock. These stockholders may receive fixed dividends before the common stockholders are paid, along with other advantages. However, they generally have no voting privileges and cannot expect to receive more than their fixed dividend.
The prices of stock change often. Most active stocks change in value during a day's trading. A corporation only has a certain number of shares available to buy. The laws of supply and demand cause the prices to fluctuate. Prices depend on general business conditions, company earnings, and what people think is the future prospect of the corporation. When more people want to buy, the market in stocks will rise. When more people want to sell, prices go down. The trick is to try and guess correctly; buy when the price is low, sell when the price is as high as it is going to go.
Stockbrokers (or "brokers") are the people whose job it is to buy and sell stocks for the buyer. They also can give advice about which stocks might be good investments. The buyer pays the broker a small commission, or fee for services, each time stocks are bought and sold.
A stock exchange is the market place where brokers buy and sell stocks. The NYSE (New York Stock Exchange), AMEX (American Stock Exchange), and NASDAQ (National Association of Securities Dealers) are the three main U. S. stock exchanges. The current prices of many stocks are available on the net, along with a lot of other stock market information.
II. Reading and Understanding the Stocks
Current stock listings on the net are organized a little differently from source to source, but they all have the same basic information.
Go to USA Today to locate your stock.First you have to type in the abbreviation for the name of the company (also known as the 'SFN'). Once you have entered the correct SFN, go to charts. You will then see all of the information you need.
Last - The most recent trade of a stock.
Change - This shows the change in price from the previous day's closing price.
Currency - This shows the currency that is used, such as USD for U. S. dollar.
% Change - This calculates the percentage change in the price of a stock from the previous day's closing price.
Open - The price at which a stock opens the trading day.
Day Low- This is the lowest price that a stock has traded at during the day.
Day High - This is the highest price that a stock has traded at during the day.
Volume - This is the daily number of shares of a stock that changes hands between a buyer and a seller. Some sources give these listings in hundreds or thousands.
Dividend - The annual per share cash payout investors should expect.
P.E. - The Price-to-Earnings Ratio - The ratio of the market price per share to the earnings per share.
III. Practice
Once you have located the information on your stock, answer the following questions:
1. What was the highest price paid per share that day?
2. What was the lowest price paid that day?
3. What was the closing price paid that day?
4. Now figure the net change. This is the difference in price from the last price paid per share on the previous day. It can be positive or negative.
A share of stock is a share of a business. Many people try to gain more money by investing their money in stocks. People who own stock are called stockholders. They are then a partial owner of the company that issues the stock and may share in a company's profits, if the company makes a profit during the year. This is paid in the form of dividends. The company's board of directors distributes the dividends proportionately by the number of shares outstanding.
Common stock is always issued by the corporation. It represents an ownership interest in the company. People owning common stock usually have the right to vote for the directors of the company.Preferred stock may also be issued by the corporation. This kind of stock is given certain preferential treatment over common stock. These stockholders may receive fixed dividends before the common stockholders are paid, along with other advantages. However, they generally have no voting privileges and cannot expect to receive more than their fixed dividend.
The prices of stock change often. Most active stocks change in value during a day's trading. A corporation only has a certain number of shares available to buy. The laws of supply and demand cause the prices to fluctuate. Prices depend on general business conditions, company earnings, and what people think is the future prospect of the corporation. When more people want to buy, the market in stocks will rise. When more people want to sell, prices go down. The trick is to try and guess correctly; buy when the price is low, sell when the price is as high as it is going to go.
Stockbrokers (or "brokers") are the people whose job it is to buy and sell stocks for the buyer. They also can give advice about which stocks might be good investments. The buyer pays the broker a small commission, or fee for services, each time stocks are bought and sold.
A stock exchange is the market place where brokers buy and sell stocks. The NYSE (New York Stock Exchange), AMEX (American Stock Exchange), and NASDAQ (National Association of Securities Dealers) are the three main U. S. stock exchanges. The current prices of many stocks are available on the net, along with a lot of other stock market information.
II. Reading and Understanding the Stocks
Current stock listings on the net are organized a little differently from source to source, but they all have the same basic information.
Go to USA Today to locate your stock.First you have to type in the abbreviation for the name of the company (also known as the 'SFN'). Once you have entered the correct SFN, go to charts. You will then see all of the information you need.
Last - The most recent trade of a stock.
Change - This shows the change in price from the previous day's closing price.
Currency - This shows the currency that is used, such as USD for U. S. dollar.
% Change - This calculates the percentage change in the price of a stock from the previous day's closing price.
Open - The price at which a stock opens the trading day.
Day Low- This is the lowest price that a stock has traded at during the day.
Day High - This is the highest price that a stock has traded at during the day.
Volume - This is the daily number of shares of a stock that changes hands between a buyer and a seller. Some sources give these listings in hundreds or thousands.
Dividend - The annual per share cash payout investors should expect.
P.E. - The Price-to-Earnings Ratio - The ratio of the market price per share to the earnings per share.
III. Practice
Once you have located the information on your stock, answer the following questions:
1. What was the highest price paid per share that day?
2. What was the lowest price paid that day?
3. What was the closing price paid that day?
4. Now figure the net change. This is the difference in price from the last price paid per share on the previous day. It can be positive or negative.
"The Crash Heard Around the World"
"Throughout the twenties, people spent money much more freely than ever before. More products were available; more people had jobs, and wages were higher. People bought on credit. As stock prices steadily climbed throughout the decade, people often invested everything they had, mortgaged their homes, and even borrowed money to buy stocks. They thought the prosperity of the twenties would last forever.
In the fall of 1929, investors who had bought stocks on credit began to sell. As more stocks sold, prices fell. Investors panicked, especially those who had bought stocks on margin (bought at a lower price, promising to pay the rest later). Between Black Thursday (October 24, 1929) and Terrible Tuesday (October 29, 1929) so many shares of stock were sold that the market collapsed completely. In one day, stock vales dropped $10-15 billion.
Not all Americans had invested in the stock market, but almost everyone felt an immediate effect of the crash. Most Americans kept their savings in banks that had invested the funds in the stock market. When the stock market crashed, the banks could not return the money to investors. In one terrible week, rich, middle-class, and poor people lost everything.
Over 1,300 banks went broke in 1930. Another 2,300 failed the following year. The stock market crash brought the good times of the twenties to a screeching halt. Although no one yet realized the extent of the problem, the stock market crash began the Great Depression, which lasted until the mid 1940's.
Unemployment went from 3 percent in 1925 to 25 percent in 1932. Many people who still had jobs were required to take cuts in pay to keep their jobs."
Source: Mark Twain Media, Inc., Publishers
In the fall of 1929, investors who had bought stocks on credit began to sell. As more stocks sold, prices fell. Investors panicked, especially those who had bought stocks on margin (bought at a lower price, promising to pay the rest later). Between Black Thursday (October 24, 1929) and Terrible Tuesday (October 29, 1929) so many shares of stock were sold that the market collapsed completely. In one day, stock vales dropped $10-15 billion.
Not all Americans had invested in the stock market, but almost everyone felt an immediate effect of the crash. Most Americans kept their savings in banks that had invested the funds in the stock market. When the stock market crashed, the banks could not return the money to investors. In one terrible week, rich, middle-class, and poor people lost everything.
Over 1,300 banks went broke in 1930. Another 2,300 failed the following year. The stock market crash brought the good times of the twenties to a screeching halt. Although no one yet realized the extent of the problem, the stock market crash began the Great Depression, which lasted until the mid 1940's.
Unemployment went from 3 percent in 1925 to 25 percent in 1932. Many people who still had jobs were required to take cuts in pay to keep their jobs."
Source: Mark Twain Media, Inc., Publishers
Process:
-On a separate sheet of paper, answer the following questions:
1. What happened to people who had all of their savings in a bank that went broke?
a. What would you do if this happened to you?
b. Why can this not occur today? Click here to find out.
2. Use dictionary.com. What is the economic meaning of depression?
3. On your paper, draw an illustration that summarized the following paragraph:
"As more people lost their jobs, they had less money to spend. Less people spending money meant stores sold fewer products
and needed fewer workers. Since fewer products were purchased, factories produced less, and more people lost their jobs."
1. What happened to people who had all of their savings in a bank that went broke?
a. What would you do if this happened to you?
b. Why can this not occur today? Click here to find out.
2. Use dictionary.com. What is the economic meaning of depression?
3. On your paper, draw an illustration that summarized the following paragraph:
"As more people lost their jobs, they had less money to spend. Less people spending money meant stores sold fewer products
and needed fewer workers. Since fewer products were purchased, factories produced less, and more people lost their jobs."