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Student Investment Association
“The path to financial freedom”
Steven Savickas & Panos Grivakis
Announcements:
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Sign in on the attendance sheet
Paid members (39$) receive copies
Check Websites for updates.
Next meeting Wednesday February 25th
7:15 pm 119 Eppley
E-board meeting Sunday 11:30 am
Business Library
How do stocks work?
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Market price
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Bid price
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Ask price
What is the single most important
thing an investor should know?
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“Loeb was a highly successful investor and
preached cutting all your losses short. And for
me, this is rule #1. You must always protect
your investment account. Particularly if you
invest on marginm(use borrowed money)
cutting losses is absolutely essential. Whether
you’re a new or experience investor, the
hardest lesson to learn is that you’re simply
not going to be right all the time.” ~William J.
O'Neil
Loeb it was 10%
Keys to success
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As a new investor, be prepared to take
some small loses.
Always cut your losses 8% below
purchase price.
Persistence is the key when learning to
investing. Don’t get discouraged
Learning to invest doesn’t happen
overnight. It takes time and effort to
become successful at it.
Websites
www.aaii.com
 www.investors.com
 www.fool.com
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The average person generally
falls into one of two categories.
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The first believe investing is a form of
gambling; they are certain that if you invest,
you will more than likely end up losing your
money. Often these fears are driven by the
personal experiences of family members and
friends who suffered similar fates or lived
through the Great Depression. These feelings
are not ground in facts and are the result of
personal experience. Someone who believes
along this line of thinking simply does not
understand what the stock market is or why it
exists.
Stock market
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The second category consists of those who
know they should invest for the long-run, but
don’t know where to begin. Many feel like
investing is some sort of black-magic that only
a few people hold the key to. More often than
not, they leave their financial decisions up to
professionals, and cannot tell you why they
own a particular stock or mutual fund. Their
investment style is blind faith or limited to “this
stock is going up. We should buy it.” This
group is in far more danger than the first. They
invest like the masses and then wonder why
their results are mediocre (or in some cases,
devastating).
Return in the stock market
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Over the last 50 years, stocks have
produced returns that average 13%
annually
long-term bonds have averaged 5%
annually
short-term Treasury bills have averaged
4.5% annually. These returns reflect the
risk/return trade-off.
Investing….
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There are four basic aspects that compose
your personal investment profile:
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Your personal tolerance for risk
Your return needs and whether you need to
emphasize current income or future growth
Your time horizon
Your tax exposure
Each aspect of your personal investment
profile will affect the trade-offs you are willing
to make and your ability to reduce risk.
Two types of investors
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Growth – seek companies with strong
earnings and sales growth, profit
margins and ROE of 17%
Value – search for stocks that are
undervalued and have low P/E ratios.
Conservative (lower risk, lower return)
Aggressive (Higher risk, higher return)
What is the Dow Jones
Industrial Average (DJIA)?
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It contains 30 stocks that trade on the New
York Stock Exchange (NYSE). The Dow is a
barometer of how shares of the largest U.S.
companies are performing. It is believed that
by looking at the companies on the list, a
person can get a general picture of how the
market as a whole is performing. The Dow is
perhaps the most quoted and followed index
in the world.
Ex. WMT MSFT GE INTC BA C AA GM KO
What is the NASDAQ?
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The NASDAQ is an electronic exchange where
stocks are traded through an automated
network. It stands for National Association of
Securities Dealers Automated Quotations
System. As a general rule of thumb, it is
where most technology stocks are traded.
A quick way to tell if a company is listed on
the NASDAQ is to check out the ticker
symbol... those made up of four letters are
listed here (e.g. Dell Computers = DELL,
Cisco = CSCO).
Standard and Poor's 500 (S&P 500)
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Index of 500, of the largest U.S. stock
companies.
It serves as an indicator of how the U.S.
economy is performing. Often these stocks
are referred to as "the market"
The S&P 500 is the benchmark of the overall
market, and frequently used as the standard
of comparison in terms of investment
performance.
Stocks and market
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3 out of 4 stocks regardless of how
“good” they are, will eventually follow
the trend of the general market.
crash course in investing
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Stock: Stock is ownership. A business is divided up into shares of
stock and parts of the company (the shares) are sold to investors
to raise money.
Blue Chip: A company that has a history of solid earnings, regular
and increasing dividends, and an impeccable balance sheet.
Examples: Coca-Cola, Berkshire Hathaway, & Gillette.
Broker: A person that buys or sells an investment vehicle for you
(securities, bonds, commodities, etc.,) in exchange for a fee which
is called a commission.
Bear: An investor who believes the market as a whole or a
particular stock will decline. A bear is the opposite of a Bull.
Bull: An investor who believes the general market or a particular
stock is going to increase in price.
Investor words…
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Market Capitalization: A company's market capitalization
(or "market cap" as it s frequently called) is calculated
by taking the number of outstanding shares of stock
multiplied by the current price-per-share.
P/E Ratio: A measure of growth potential, earnings
stability, and management capabilities. Computed by
dividing market price per share by earnings per share.
Dividend: A portion of a company's income that is paid
out to shareholders on a quarterly or annual basis.
Dividends are declared by the Board of Directors.
Volume
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Is the actual number of shares traded
Stocks never go up by accident
There must be large buying, typically from
big investors such as mutual funds and
pension funds
IBD’s “Volume Percent Change column track
the average daily volume of every stock over
the past fifty trading days shows you how
much a stock traded above or below its
average.
How do you find the big winners?
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Strong sales and earnings were two
most important fundamentals
You’re looking for strong increase in
quarterly sales earnings compared to
the same quarter before.
Look for accelerations
Home Depot Example
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1982 six months after Home Depot’s
IPO( Initial Public offering)
Earnings were up 140%
Sales in the 3 quarters accelerated from
+104% to 158% to 191%
Home Depot up 912% in less than 1.5
years form 1982
Rules For Stock Market Success
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Avoid cheap stocks. Buy higher quality stocks
selling $15 a share and higher.
Don’t try to bottom guess or buy on the way
down. Never argue with the market. Forget your
pride and ego.
Pick companies with management ownership of
stock.
Don’t buy because of dividends or P-E ratios. Buy
the #1 company in an industry in earnings and
sales growth, R.O.E., profit margins and product
quality.
Rules For Stock Market Success
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Fundamental and chart analysis is
essential to picking winning stocks
Buy stocks coming out of price
consolidation area or base is crucial in
making large gains.
Daily Graphs
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What stocks would you like to see?
What's the ticker (stock symbol)?
Why should I join the SIA?
For $39 you get plenty of benefits…
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Free investment book!
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If you sign up 3 of your friends, your membership is free!
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Access to IBD $1000+ professional level research which offers
technical chart and stock analysis
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Investment library of books, Audio CD’s, Cassette Tapes for you
to check out!
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Access to state of the art trading room!
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Learn about investing and the stock market!
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Your own Scottrade online account
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Professional Guest speakers from top firms.
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Great resume builder
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Meet new friends
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Plan your way to financial freedom!
About Us:
NEXT MEETING
WEDNESDAY, FEBUARY 25
7:15 PM 119 EPPLEY
Student Inve$tment Association
Steven Savickas & Panos Grivakis
MSU_SIA@hotmail.com
http://www.msu.edu/~investor
Q & A and Suggestions
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Answers to questions
Suggestions or feedback