Unit Two (Parsons) - Stocks Flashcards
why should you consider investing young?
Entering early makes a big difference → time on your side
cash sitting in the bank doesn’t make you money … stocks are smart
What is a Share of stock?
Volume of shares x the share price
What is an index?
collection of companies and their performance
What is a corporation?
A Buisness owned by stockholders who share in its profits but are not personally responsible for its debts
what are advantages of a corporation?
- limited liability (can’t touch you house, only loos the money invested in the stock)
- lots of minds to help solve problems
What is disadvantage of a corporation?
- lots of rules and restrictions
- government is involved
What is IPO
How many shares you want to offer x the perceived value of the company = the price of your stock
What is the main difference between a public and private corporation?
You can protect your assets by finding their own investors where as a public corporation uses IPO (initial public offering) and can sell shares in the company on the stock exchange
What is an advantage and disadvantage about a public corporation?
- gives up a lot of control (board of directors elected by the shareholders must approve all decisions)
- this can allow for bright minds to help find solutions
- makes sure CEOs are making smart choices for the company
- is safe
- has to disclose if selling the stocks of the company
what is a sole proprietorship or partnership?
sole proprietorship –> one sole owner of a Buisness
partnership –> multiple people own the Buisness
what are the pros of a sole proprietorship and partners ship?
- government won’t interfere
- huge tax advantages
- freedom and not restricted
what are the cons of a sole proprietorship and partners ship?
- unlimited liability (their personal assets are at risk)
- need cash flow (at the start generally negatives)
What is perceived value?
- a customers own perception of a product or service’s merit or desirability to them especially in comparison to a competitors product
- the more valuable a company the more expensive their stock may be
- as more people invest into a company they grown more and more which can lead to stock split
What is a stock split?
Brings down the value of a stock.
So more people buy it –> more investors –> more capital
adding more shares which in turn depletes the value
Eg. If one stock is 300$ and the split to cost 150$, two shares are now equivalent to 300$
What is reverse stock split?
Makes a stock more expensive and brings the value up
Eg. if a company is trading under a dollar they could be de listed, so they will reverse stock split to get the price above a dollar
what is diversification?
when you don’t rely on only one stock (this is risky)
What is a penny stock?
trading for 3-5$, companies don’t make a ton of money, a lot of volatility, short term
Eg. Blackberry stock had just tanked, supposed to have a new phone to save them, if you enter low, might catch the wave because of the hype
what is a blue chip stock?
- safe investments, long term over time will slowly increase
Eg. Apple
what is a large cap?
capitalization of the stocks of a company with market values greater than 10 billion dollars
what is a mid cap?
capitalization of the stocks of a company with market values between 3 to 10 billion
what is a small cap?
capitalization of the stocks of a company with market values less than 3 billion
why do politics impact stock?
They impact what people do or don’t invest in.
Eg. Biden was elected, many people invested into clean energy stock knowing he has trillions of dollars to spend into it.
what are dividends?
- low volatility ( not unpredictable)
- for owning some stocks they will pay you for holding the stock (incentive to buy in)
- yield
what are growth stocks?
- move with market news
- have the opportunity to grow really fast
- make a lot of money
- risky
- Eg. Vaccination pill he talked about, solar, hydrogen cars
What is TFSA?
Tax free savings account (won’t be taxed when you take money out of this account)
What is a RRSP?
Government provides a tax right off, giving a percentage of your investment - problem when you go to sell this investment the government will tax you (shouldn’t touch till you retire- as you have less income and tax)
What is a RESP?
RESP → Registered Education Savings Plan. This is an account registered with the federal government to help you save for a child’s post-secondary education. The person who opens the plan is the subscriber—usually, but not always, the parent. Government will contribute to it.
What was it like 1920s?
roaring 20s (times were good), the economy was growing fast creating lots of opportunities
What was the stock exchange like as it had just opened?
Stocks going up
New concept
No regulations → lots of corruption
what happened in the 1930s?
great depression caused a domino effect which impacted: families with lots of kids (lots of people to feed)
bank gave out more money unsure they could afford it - buying on margin
the bank wanted people to invest more saying they would get more, market was very volatile (late 1920s)
Edgar H. was president
What happened Wed, Oct. 23rd 1929?
During the last hour of trading on this day there was panic selling and the market closes.
What happened on black Thursday?
More panic
Someone high up organize a meeting
Take massive amounts of money and buy into big companies
Caused market to recover (becomes calmer)
what happened on Black Tuesday?
Market open and everyone sold
Loss of confidence in the market
What happened to banks after Black Tuesday?
People would go to the bank to get money back, and they would not have enough and have to claim bankruptcy. Leading to the saying “always keep money under your bed”
What happened to unemployment levels?
There was mass unemployment levels:
22-30% in major cities
17% in toronto
People living in extreme poverty
What did Roosevelt claim to restore when running for president?
claimed to restore:
Confidence in the government, the banking system, and the stock market
Ensure all banks by creating the federal reserves (bank has safety and security - storage savings)
Sets up the SEC - security exchange commission (like the FBI of the Stock Market) → makes sure trades are ethical and gets rid of corruption
*The differences that he implemented were very significant as his changes are what protect us now
What do people begin questioning in the late 1930s?
capitalists → is communism a better way of life, this brings tension and creates extreme political leaders leading to WWII
Why did Bin Laden target the twin towers?
It is a symbol of economic prosperity → hurting the economy would cause panic
What happened to the stock market when the twin towers were hit?
Market froze → first building hit
Market closed → second tower hit
what stocks increased after 9/11?
military and pharmacuticles
Why might stocks drop fast?
- Media
- Didn’t make their forecast earnings
- External changes → changes that affect the value of the investment such as interest rate increase
- changes to government policy
What is yield?
The percentage of the stock value that you receive.
