The Stock Market
An Introduction to the Equity
Markets
What is a Stock
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Stock
• Stock is a share or unit of ownership in a
company.
• Represents a claim on a company’s assets
and earnings
• Stock may be publicly traded or privately
held
• Being a shareholder gives you voting rights
attached to the stock
• Look up XOM on yahoo finance. Find the
top shareholders. Who owns Exxon Mobile?
Dividends
• Dividends are payments of company
profits to shareholders
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What is the current per share dividend for
AT&T? (Symbol: T)
What is the current yield?
What about Apple? (AAPL)
• Why would a company pay a dividend?
• Why would they choose not to pay one?
Limited Liability

Limited Liability.
• You as a shareholder are only on the
hook for your investment in the
company.
• It allows you, the shareholder, to be an
owner in a company without risking all
you own.
Different Types of stock

Common - shares represent ownership in a company and
a claim (dividends) on a portion of profits. Investors get
one vote per share to elect the board members, who
oversee the major decisions made by management.
• has variable dividends that are not guaranteed.
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Preferred - stock represents some degree of ownership in
a company but usually doesn't come with the same
voting rights. (This may vary depending on the
company.)
• investors are usually guaranteed a fixed dividend until the
stock is called.
• Preferred is ahead of common in liquidation of company
assets
• Preferred stock may also be callable, meaning the company
has the right to buy them back from you at a certain price.
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Different Classes – maybe issued with different levels of
voting rights.
Discussion Zone

What is a Stock?
• What does it represent?
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What is a dividend?
What is dividend yield?
What is limited liability? Why is it
important?
What are the 2 types of stock?
• Why are they different?
Stock Exchanges
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A Stock Exchange is a place where stocks are
traded.
The purpose of a stock exchange is to facilitate
the exchange of securities between buyers and
sellers, reducing the risks of investing.
• Imagine how difficult it would be to sell shares if you
had to call around the neighborhood trying to find a
buyer.
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Most famous – NYSE (New York), NASDAQ (over
the counter), American Exchange (AMEX)
• Over the Counter (OTC) – means no central location or
facility. Trades done electronically over the phone or
computer.
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Pink Sheets – Penny Stocks –
www.pinksheets.com
Primary Vs Secondary
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primary market - is where securities are
created (by means of an IPO).
secondary market -investors trade
previously-issued securities without the
involvement of the issuing-companies. The
secondary market is what people are
referring to when they talk about the stock
market. It is important to understand that
the trading of a company's stock does not
directly involve that company.
Bulls and Bears
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Bulls – Think the market or stock is
going up
• The buyers
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Bears – Think the market or stock is
going down
• The sellers
How Price is determined
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Bids – A bid is the price that a buyer
is willing to buy a stock.
Asks – An ask is the price that a
seller is willing to sell
The trade price is determined when
these to prices meet and a trade or
exchange occurs
Order Types
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Market – An order where you are willing to take
the best bid (if you are selling) or ask (if you
are buying). Your order is entitled to execution
but not a price.
Limit – An order where you set your bid(if you
are buying) or ask(if you are selling). You are
guaranteed a price, but not order execution
Stop – The lowest price (or highest if you are
buying) you are willing to let the stock drop to
before a market order is entered
Stop – Limit - The lowest price (or highest if
you are buying) you are willing to let the stock
drop to before a limit order is entered
Discussion Zone
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What is an stock exchange?
• The most popular?
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What is the difference between a
primary and secondary exchange?
Describe a Bull and a Bear.
How is price determined?
What are the 4 order types?
Account Types

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Non-Qualified – Regular Individual,
Joint, or Corporate Account
Qualified
• Traditional IRA
• Roth IRA

IRA – Individual Retirement Arrangement
Non-Qualified Accounts
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Fully Taxable
Money maybe withdrawn and deposited
without limits or penalties
Individual Account
• One Person

Joint Accounts
• 2 or more people
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UTMA – Universal Transfer to Minor Accounts
• Custodial accounts for Minors
• Must have an Adult as a custodian
• In Texas, adult does not have to give up control
until Minor is 21 years old
Qualified Accounts
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Tax benefits
Limits on contributions based on
income
Not available to everyone
Restrictions and penalties on
withdrawals
Generally used for retirement
purposes
IRA – Individual Retirement
Arrangement

Both require W2 wages to contribute
• Contribution limit lesser or 100% of income
or $5,000 ($6,000 if over 50)
• Penalties for withdrawals if done before age
59 ½. Some exemptions.
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Traditional IRA
• Tax-deferred
• Contributions may be tax deductible
• Pay taxes on growth when money withdrawn

Roth IRA
• Tax free – No taxes paid on growth
• Contributions are not tax deductible
Discussion
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What are the difference between
Qualified and non-Qualified?
What is an IRA and how is it helpful
for retirement?
At what age must a custodian give
up control of an account to the Minor
in Texas?