Financial Literacy: Buying and Selling Investments

Chapter 12: Buying and Selling Investments Sources of Investing Information -Magazines – Forbes, Business Week, Fortune – News Magazines: Time, Newsweek, US News & World Report -Newspapers -Wall Street Journal and Barron’s -Investor Newsletters -Standard & Poor’s Stock Reports, Moody Investors Service, and Value Line Investment Survey -Company Reports -Annual Report -Prospectus -Internet – Bloomberg, CNN Money, Kiplinger, Morningstar, Reuters Key Figures Current Stock Price- amount investors are willing to pay for a share of ownership in the company -Number of Employees – Increases in the number of employees can reflect growth or downsizing -Market Cap – The total value of a company in the stock market -Revenue – amount of money received from business activities -Net Income or Profit – amount of money earned after deducting all the business’s expenses -Profit Margin- profit shown as a percentage P/E Ratio – price-earning ratio compares the selling price of common stock to the annual profits per share -Current Ratio – measure of a company’s ability to pay its current debts from current assets Stockbrokers Full Service Brokers – qualified stock broker who provides advice about what securities to buy and sell. Discount Brokers – qualified stock broker who buys and sells securities at a reduced rate but only provides advice for a fee sometimes. Online Brokers – brokers that charge low fees with the least amount of service; no investment advice or management of assets and only sometimes research reports. Financial Planners an adviser who helps people make investment decisions to stated goals How are Financial Markets Designed? Primary Market – where IPOs or new issues of securities are sold usually directly from the company Secondary Market – where previously issued securities are sold Securities Exchange – are places for brokers to buy and sell securities for their clients Over the Counter Market – is a network of dealers and brokers who buy and sell securities not listed on an exchange Direct Investing – involves buying securities directly from a corporation Reinvesting – involves getting stock dividends instead of cash dividends
How are Stocks Bought and Sold? Set up an account Choose your venue (full-service, discount, online, bank, etc. ). Provide ID. Access your account online. Make minimum or regular monthly deposit Place Transactions A market order is a request to buy or sell a stock at the current market price. A limit order is a request to buy or sell a stock at a specific price. A stop order is a request to sell a stock when it reaches a certain price. A discretionary order allows the broker to buy or sell a stock to get the best price.

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