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
