Understanding The
Stock Market
Things to
Consider
Before you invest
Website
Before you invest you need to make sure that you have
at least 6 months of your annual income saved no matter https://www.capitalgroup.com/retirement/participant/t
what it is. anything you earn after that can be invested. ools/calculators/investing-results.htm
For example, if you make 10000 a year you would need
to have 5000 in your savings before you begin putting
your money into investments.
What are
Stocks?
An investment that represents ownership Why People Buy
in a company or corporation Stocks
When you buy a stock, you own a small
Dividends
part of the company
Potential Profit
Value of your stock rises or falls
Depends on company performance and
market conditions
Stock Indices
Collection of selected stocks that
represent a part of the market or
the whole market.
What is a Stock
Exchange? Stock
Exchanges
Marketplace where stocks are bought and sold,
exactly like a store
Platform for companies to raise capital and for
investors to trade shares
Major Stock Purpose of Stock
Exchanges Exchanges
New York Stock Exchange (NYSE): The largest Facilitate trading and ensure
and oldest stock exchange in the U.S. transparency in transactions
NASDAQ: Known for technology stocks, it Help investors determine the
operates as a digital exchange. price of stocks based on
Other Examples: London Stock Exchange (LSE), supply and demand.
Tokyo Stock Exchange (TSE)
Investment
Strategies
Long-Term Assets (Buy-and-Hold Strategy) Day Trading
Purchasing stocks with the intention of holding them for an Short-term strategy where traders buy and
extended period (often years or decades) sell stocks within one trading day to capitalize
Investors typically focus on stocks they believe will grow on small price fluctuations
steadily over time Ex. you buy a stock at 9 am at $1 per share
Ex. well-established companies, dividend-paying stocks, and it goes up to $1.25 by 2 pm when you sell
and other assets that show potential for long-term Why it’s good: Has the potential for quick
appreciation profits (though usually small profits)
Why it’s good: minimizes the impact of short-term market Why it’s bad: High risk of losses. You must be
fluctuations because your money sits in the stocks for very well aware of market trends and how to
years, and isn't long-term affected by a recession or navigate them (do you sell @ 2 pm at $1.25
otherwise per share or do you wait until 4 pm to see if it
Why it’s bad: you cannot access your profits for a long goes up more?)
time, there is no quick reward
Investment
Strategies
1. Look for companies with strong 2. Look for companies that pay 3. Look for stocks at a lower
growth potential dividends price point/undervalued
Do they have the capacity to Companies that pay regular dividends Will allow you to purchase for
become large companies or will provide a source of steady income cheaper and watch your money
they fail as a business? Generate income alongside capital grow!
Often found in tech or emerging appreciation; common for retirement or Focusing on the values of a
industries income-focused portfolios company and thus its potential as
Example: Investing in early-stage Example: Companies in sectors like opposed to where its at in the
tech companies with potential for utilities or consumer goods, which short term fluctuations of the
high revenue growth have stable cash flows and pay stock market.
dividends consistently. Buying companies temporarily
low prices (like new ones or ones
going through a rough period)
Types of Common vs.
Stocks 1. Preferred Stocks
Common Stocks Preferred Stocks
When you buy common stock, you own a small part
of the company, called a "share." Often pay fixed dividends, and these shareholders
Common stockholders often get Voting Rights on get paid first, even before common stockholders
major company decisions, like electing the board of Stockholders don’t have voting rights
directors
Less risky but also offer less potential for big gains
They may receive dividends, but these are not
compared to common stocks
guaranteed and can vary based on company
performance
Risk and Reward: Common stocks have higher risk
but can bring high rewards if the company does well,
as their value can rise over time
Types of Growth vs. Value
Stocks 2. Stocks
Growth Stocks Value Stocks
These are stocks from companies expected Value stocks come from companies that are
to grow faster than average undervalued in the market, meaning their stock price
They may not pay dividends, as profits are is low compared to their earnings or assets
reinvested to fuel more growth Investors buy value stocks hoping the market will
Examples: Tech companies like those recognize their true worth, causing the stock price to
developing new apps, or green energy rise
companies Examples: Companies in industries that may have
slowed down, like certain manufacturing or
consumer goods
Types of Other Types of Stocks
Stocks 3.
Blue-Chip Stocks Penny Stocks
These are stocks from well-established, financially Shares from smaller companies and trade at a low price
stable companies with a history of consistent per share (often under $5)
performance High risk-high reward
They are generally less risky and often pay dividends Examples: Small startup companies or companies going
Examples: Big names like Coca-Cola, Microsoft, and through financial struggles
Procter & Gamble
Income Stocks
Stocks from companies that regularly pay high dividends, providing
steady income for investors
These stocks are usually from stable, established companies
Examples: Utility companies (water or electricity providers) and some
real estate companies
Risks of
Investing
1. Volatility 2. Internal Issues 3. Emotional Risks
The stocks people make big Companies are not always moral and Communities or CEO can make
money off of short term do not always publicize their internal unpredictable emotional
Meme stocks like GameStop went functions decisions
from $17 to $300 because of Wells Fargo admitted employees were Bitcoin 2018 when everyone panic
reddit in 2021 making millions of fake accounts to sold and dropped the value from
Covid Market Crash meet sales targets 20,000 to 3,200 which is an 80%
Tesla’s prices swinging up and Volkswagen cheated emissions tests drop
down due to Elons tweets for their diesel engines, millions in fines Zoom during covid FOMO
and recall of millions of vehicles
Rewards
of
Investing
Income
Protection
Capital Gains which is just the profit earned from
selling the stock at a higher price when you Diversification of portfolio is an important thing to
purchased it consider as having your money in multiple sectors
Dividends is when the company you invested in gives protects you from any significant losses
you a small portion of its income, not all companies
Protection from inflation because stocks are finite
give out dividends
and regular currencies are not
Thank You
