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COMMON
INVESTING IN
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WHAT ARECOMMON
STOCKS?
RECAP
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DEFINITION
COMMON STOCKS
- shares entitling their holder to dividends
that vary in amount and may even be missed,
depending on the fortunes of the company
- equity investment and security that
represents ownership in a corporation
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WHAT STOCKS HAVE TO OFFER▸ Common Stocks enabes !n"esto#s$ common
stock%o&e#s$ to 'a#t!c!'ate !n t%e '#o(ts an& ca!mon )eat% c#eate& b* t%e t%e com'an*+
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COMMON STOCKHO,DERS▸ a#e #es!&-a o)ne#s o. t%e com'an*
no /-a#antee t%at t%e* )! #ece!"e an* #et-#n on t%e!# !n
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POP0,AR INVESTMENT CHOICE
APPEA, TO OFCOMMON STOCK ▸ '#o"!&es !n"esto#s )!t% 'e#!o&!c!ncome st#eam t%#o-/%
&!"!&en&s
▸ '#os'ect o. !nc#ease !n "a-eo"e# t!me t%at )! /ene#ate
s!/n!(cant ca'!ta /a!n
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RISK AND PRICE VO,ATI,IT1
THE ,0M2ERING 2EAR▸ Ro-t!n/ Dec!ne
3 45 o# mo#e
▸ Co##ect!on3 675 o# mo#e
▸ 2ea# Ma#ket3 875 o# mo#e
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FROM STOCK PRICES TO STOCK RET0RNS
STOCK PRICES3 t%e '#!ce o. a s!n/e s%a#e o. a n-mbe# o. saeabe stocks o. acom'an*$ &e#!"at!"e o# ot%e# (nanc!a asset+
!n a*man9s te#ms,
t%e stock '#!ce !s t%e %!/%est amo-nt someone !s )!!n/to 'a* .o# t%e stock$
Gene#a R-e:Strong Market
E;ce't!on :Price Drop
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PROFIT ON AN INVESTMENT
STOCK RET0RNS 3 !t com'#!ses an* c%an/e !n "a-e an& !nte#esto# &!"!&en&s o# ot%e# s-c% cas%
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PROS AND CONS OF STOCK OWNERSHIP
WH1 DO INVESTORSOWN STOCKS?▸ Potent!a .o# Ca'!ta Ga!ns
▸ C-##ent Income
▸ H!/% De/#ee o. Ma#ketab!!t*
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ADVAN
STOCKOWNERSHIP
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ADVANTAGES
S02STANTIA, RET0RN OPPORT0NITIES
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ADVANTAGES
PROTECTION FROM INF,ATION
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ADVANTAGES
EAS1 TO 201 AND SE,,
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ADVANTAGES
MODEST TRANSACTION COSTS
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ADVANTAGES
WIDE,1 DISSEMINATED PRICE ANDMARKET INFORMATION
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ADVANTAGES
WITHIN REACH 0NIT COST
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DISADVA
NTAGES
STOCKOWNERSHIP
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DISADVANTAGES
S02=ECT TO VARIO0S T1PES OF RISK
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DISADVANTAGE
S02=ECT TO GOVERNMENT CONTRO,
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DISADVANTAGE
S02=ECT TO FOREIGN COMPETITION
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DISADVANTAGE
S02=ECT TO STATE OF ECONOM1
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DISADVANTAGE
S02=ECT TO WIDE SWINGS
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DISADVANTAGE
SACRIFICE OF C0RRENT INCOME
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CHARACTE
RISTIC OF
ACOMMON
STOCK
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COMMON REFERENCE
E>0IT1 SEC0RITIES OR E>0IT1CAPITA,▸ eac% common stock #e'#esents o)ne#s%!' o# an&
e-!t* 'os!t!on !n a com'an* o# (#m
▸ ent!tes %o&e# o. e-a 'a#t!c!'at!on !n t%eco#'o#at!on9s ea#n!n/s an& &!"!&en&s$ an e-a "otean& e-a "o!ce !n mana/ement
▸ t%e mo#e t%e !n"esto# o)ns$ t%e b!//e# t%e o)ne#s%!'
'os!t!on an& "!ce "e#sa
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AS CORPORATE SEC0RIT1
P02,IC,1 TRADED ISS0ES
▸ t%e s%a#es t%at a#e #ea&!*a"a!abe to t%e /ene#a '-b!can& t%at a#e b#o-/%t an& so&
!n t%e o'en ma#ket
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ISS0ANCE
OF NEW
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ISS0ANCE OF SHARES
P02,IC OFFERING
▸ t%e most )!&e* -se& '#oce&-#e!n !ss-!n/ ne) s%a#es
▸ co#'o#at!on o@e#s t%e !n"est!n/'-b!c ce#ta!n n-mbe# o. s%a#eso. !ts stock at a ce#ta!n '#!ce
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ISS0ANCE OF SHARES
RIGHTS OFFERING
▸ !ss-ance o. a com'an*s%a#es to !ts e;!st!n/s%a#e%o&e#s
▸ e;!st!n/ stock%o&e#s a#e/!"en t%e (#st o''o#t-n!t* tob-* t%e ne) !ss-e
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ISS0ANCE OF SHARES
STOCK SPIN3OFFS
▸ one o. t%e most c#eat!"e )a*s o.b#!n/!n/ a ne) !ss-e to t%e ma#ket
▸ occ-#s )%en t%e com'an* /ets #!& o.!ts s-bs!&!a#!es o# &!"!s!ons to .o#m ane) com'an*
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ISS0ANCE OF SHARES
STOCK SP,ITS
▸ t%e (#ms anno-nces t%at !t )!!nc#ease t%e n-mbe# o. s%a#eso-tstan&!n/ b* e;c%an/!n/ a
s'ec!(c n-mbe# o. ne) s%a#es .o#eac% o-tstan&!n/ s%a#e o. stock
▸ -se& )%en com'an* a!ms toen%ance !ts stock t#a&!n/ a''ea
t%#o-/% o)e#!n/ !ts ma#ket '#!ce
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STOCK SP,IT OFF
EAMP,E▸ In 83.o#36 stock s'!t$ t)o ne)
s%a#es o. stock a#e e;c%an/e&.o# eac% o& s%a#e+
T%-s$ a stock%o&e#)%o o)ne& 877 s%a#eso. stock be.o#e 83.o#6s'!t becomes t%e
o)ne# o. B77 s%a#es+
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STOCK SP,IT
EAMP,E
▸ 0s!n/ t%e #at!o o. t%e n-mbe# o.o& s%a#es to ne)$ )e cane;'ect a 677 stock t#a&e at o#ose to 47 a s%a#e a.te# a 83
.o#6 s'!t
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ISS0ANCE OF SHARES
TREAS0R1 STOCK
▸ s!m'*$ s%a#es o. stock t%at%a"e been !ss-e& an&s-bse-ent* #e'-#c%ase&
b* t%e !ss-!n/ (#m
▸ somet!mes cae& as
b-*backs
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ISS0ANCE OF SHARES
C,ASSIFIED COMMON STOCK
▸ com'an* !ss-es &!@e#ent casses o.common stocks$ eac% o. )%!c%ent!tes %o&e# to &!@e#ent '#!"!e/es
an& bene(ts
▸ c-stoma#!* -se& to &enote e!t%e#&!@e#ent "ot!n/ #!/%ts o# &!@e#ent&!"!&en& ob!/at!ons
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201ING
AND
SE,,INGCommon Stocks
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201ING AND SE,,ING STOCKS
FAMI,IARIT1 WITH STOCK >0OTES
▸ W%et%e# b-*!n/ o# se!n/ stocks$ *o- s%o-& be.am!!a# )!t% %o) stocks a#e -ote& an& )!t% t%ecosts o. e;ec-t!n/ common stock t#ansact!ons
▸ C0RRENT PRICES !n an essent!a eement !n b-*3an&3se &ec!s!ons o. !n"esto#s
▸ TRANSACTION COSTS a#e !m'o#tant beca-se o. t%e
!m'act t%e* %a"e on !n"estment #et-#ns
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201ING AND SE,,ING STOCKS
READING THE>0OTES▸ In"esto#s !n t%e stock ma#ket
%a"e come to #e* on a %!/%*ec!ent !n.o#mat!on s*stemt%at -!ck* &!ssem!nates
ma#ket '#!ces to t%e '-b!c
▸ T%e stock -otes t%at a''ea#&a!* !n t%e (nanc!a '#ess a#e a"!ta 'a#t o. t%at !n.o#mat!on
s*stem
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COMMON
STOCK
VA,0ES
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COMMON STOCK VA,0ES▸ PAR VA,0E
#e.e#s to t%e state&$ o# .ace "a-e o. a stock
▸ 2OOK VA,0E#e'#esents t%e amo-nt o. stock%o&e#9s e-!t* !n (#m
▸ MARKET VA,0Et%e '#e"a!!n/ ma#ket '#!ce o. an !ss-eone o. t%e eas!est stock "a-es to &ete#m!ne
▸ INVESTMENTmost !m'o#tant meas-#e .o# stock%o&e#!n&!cates t%e )o#t% !n"esto#s 'ace on t%e stock !ne@ect$ )%at t%e* t%!nk t%e stock s%o-& be t#a&!n/ .o#
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COMMON STOCK
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HOW IS THE DIVIDEND DECISION MADE?
MARKET FACTORS
▸ Most !n"esto#s .ee t%at !. a com'an* !s /o!n/ to#eta!n ea#n!n/s #at%e# t%an 'a* t%em o-t !n&!"!&en&s$ !t s%o-& e;%!b!t '#o'o#t!onate*
HIGHER GROWTH PROFIT ,EVE,S
▸ D!"!&en& E;'ectat!ons o. S%a#e%o&e#s
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IMPORTANT DATES
▸ DATE OF DEC,ARATION3 &ate on )%!c% t%e 'a*ment o.&!"!&en& !s a''#o"e& b* t%e boa#& o.&!#ecto#s
▸ E3DIVIDEND DATE3 &!ctates )%et%e# *o- )e#e anoc!a s%a#e%o&e# an& t%e#e.o#e
e!/!be to #ece!"e t%e &eca#e&&!"!&en&
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IMPORTANT DATES
▸ DATE OF RECORD3 &ate on )%!c% t%e !n"esto# m-st bea #e/!ste#e& s%a#e%o&e# o. t%e (#mto be ent!te& o. &!"!&en&
▸ PA1MENT DATE3 .oo)s t%e &ate o. #eco#& b* a)eek o# t)o an& !s t%e act-a &ate
on )%!c% t%e com'an* )! ma!&!"!&en& c%ecks to %o&e#s o. #eco#&
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IMPORTANT DATES
EAMP,E▸ On Feb#-a#* $ t%e 2oa#& o. D!#ecto#s o. Cas% Fo)$ Inc+
&eca#es a -a#te#* &!"!&en& o. 47 cents a s%a#e o.#eco#& on Feb#-a#* 6+ C%eck )! be ma!e& o-t on t%e'a*ment &ate$ Feb#-a#* 6+ T%e caen&a# beo) s%o)st%ese &!"!&en& &ates
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T1PES OF DIVIDENDS▸ Cas% D!"!&en&s
▸ Stock D!"!&en&s
DIVIDEND REINVESTMENT P,ANS JDRIP
▸ In t%ese co#'o#ate3s'onso#e& '#o/#ams$s%a#e%o&e#s can %a"e t%e!# cas%
&!"!&en&s a-tomat!ca* #e!n"este& !ntoa&&!t!ona s%a#es o. t%e com'an*9scommon stock
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T1PES OF
STOCK S O S OC
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T1PES OF STOCK
2,0E3CHIP STOCKS
▸ t%e c#eam o. common stock c#o'
▸ stocks t%at a#e -ns-#'asse& !n -a!t* an& %a"e a
on/ stabe #eco#& o. ea#n!n/s as )e as &!"!&en&s▸ o.ten -se& .o# on/3te#m !n"estment '-#'oses an&
beca-se o. t%e* %a"e #eat!"e* o) #!sk$ t%e#e a#e)a*s o. obta!n!n/ mo&est b-t &e'en&abe #ates o.
#et-#n
T1PES OF STOCK
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T1PES OF STOCK
INCOME STOCKS
▸ a''ea!n/ beca-se o. t%e &!"!&en&s t%e* 'a*
▸ !&ea .#o t%ose )%o seek #eat!"e* sa.e an& %!/% e"eo. c-##ent !ncome .#om t%e!# !n"estment ca'!ta
▸ %o&e#s o. s-c% stocks can e;'ect t%e &!"!&en&s t%e*#ece!"e to !nc#ease #e/-a#* o"e#t!me
T1PES OF STOCK
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T1PES OF STOCK
GROWTH STOCKS▸ s%a#es t%at %a"e been e;'e#!ence&
▸ e;'ecte& to cont!n-e e;'e#!enc!n/
▸ cons!stent* %!/% #ates o. /#o)t% !n
o'e#at!ons an& ea#n!n/ as )e
▸ no#ma* 'a* !tte o# not%!n/ !n t%e)a* o. &!"!&en&s
▸ a o# most o. '#o(t a#e #e!n"este& !n
t%e com'an* an& -se& to %e'(nance #a'!& /#o)t%
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T1PES OF
COMMON T1PES OF COMMON STOCK
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T1PES OF COMMON STOCK
TECH STOCKS▸ #e'#esents t%e tec%noo/* secto# o. t%e ma#ket
S0ITA2,E FOR▸ mo#e #!sk3toe#ant !n"esto#s
T1PES OF COMMON STOCK
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T1PES OF COMMON STOCK
SPEC0,ATIVE STOCKS▸ s%a#es t%at ock s-sta!ne& #eco#&s o. s-ccess b-t st!
o@e# t%e 'otent!a .o# s-bstant!a '#!ce a''#ec!at!on
S0ITA2,E FOR▸ sma#t an& #!sk3toe#ant !n"esto#s
T1PES OF COMMON STOCK
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T1PES OF COMMON STOCK
C1C,ICA, STOCKS▸ !ss-e& b* com'an!es )%ose ea#n!n/s a#e cose*
!nke& to t%e /ene#a e"e o. b-s!ness act!"!t*
S0ITA2,E FOR▸ !n"esto#s
3 )!!n/ to t#a&e !n an& o-t o. !ss-es as t%e econom!c o-took &!ctates3 can toe#ate t%e accom'an*!n/ e;'os-#e to #!sk
T1PES OF COMMON STOCK
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T1PES OF COMMON STOCK
DEFENSIVE STOCKS▸ stocks )%ose '#!ces #ema!ns stabe o# e"en !nc#ease
)%en /ene#a econom!c act!"!t* !s ta'e#!n/ o@
S0ITA2,E FOR
▸ a//#ess!"e !n"esto#s )%o ten& to L'a#k t%e!# .-n&stem'o#a#!* )%!e t%e econom* #ema!ns so.t
T1PES OF COMMON STOCK
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T1PES OF COMMON STOCK
MID3CAP STOCK ▸ s%a#es )!t% a stock ma#ket ca' o. 8$777$777$777 -'
to 67$777$777$777
S0ITA2,E FOR
▸ !n"esto#s seek!n/ .o# -a!t* on/3te#m /#o)t%
T1PES OF COMMON STOCK
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T1PES OF COMMON STOCK
SMA,,3CAP STOCKS▸ stocks o. com'an!es %a"!n/ ann-a #e"en-e o. ess
t%an 847$777$777
S0ITA2,E FOR
▸ !n"esto#s seek!n/ .o# c%an/e !n '#!ce a''#ec!at!on
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FOREIGN
INVESTING IN
INVESTING IN FOREIGN STOCKS
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INVESTING IN FOREIGN STOCKS
DIRECT INVESTMENTS▸ b-*!n/ o. s%a#es &!#ect* !n .o#e!/n ma#ket
G,O2A, RET0RNS
AMERICAN DEPOSITOR1 RECEIPTS
▸ '!ck bot% t%e #!/%t stock an& t%e #!/%t ma#ket
▸ &oa# &enom!nate& !nst#-ments o# ce#t!(cates#e'#esent!n/ o)ne#s%!' o. a ce#ta!n n-mbe# o.s%a#es !n a s'ec!(c .o#e!/n com'an*
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FORM0,AS
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0SES
COMMON STOCK
0SES OF COMMON STOCKS
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0SES OF COMMON STOCKS
STOCKHO0SE OF VA,0E▸ .o# ma!nta!n!n/ an eno-/% amo-nt o. mone*
APP,ICA2,E INVESTMENT STRATEGIES
▸ b-*3an& %o&
▸ c-##ent !ncome
▸ ?-a!t* on/3te#m /#o)t%
0SES OF COMMON STOCKS
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0SES OF COMMON STOCKS
ACC0M0,ATION OF CAPITA,▸ /oa .o# t%ose )!t% on/3te#m !n"estment
%o#!ons to b-!&3-' )eat%
APP,ICA2,E INVESTMENT STRATEGIES
▸ an* !n"estment st#ate/* )!&o
0SES OF COMMON STOCKS
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0SES OF COMMON STOCKS
SO0RCE OF INCOME▸ .o# t%!s$
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STRATEGIE
INVESTMENT
INVESTMENT STRATEGIES
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INVESTMENT STRATEGIES
201 AND HO,D
▸ 'aces mone* !n a sec-#e !n"estmento-tet an& )atc% !t /#o) o"e#t!me
>0A,IT1 ,ONG3TERM GROWTH
C0RRENT INCOME▸ -ses common stock to seek
%!/% e"es o. c-##ent !ncome
▸ seeks ca'!ta /a!ns as t%e'#!ma#* so-#ce o. #et-#n
INVESTMENT STRATEGIES
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AGGRESSIVE STOCK MANAGEMENT
▸ seeks att#act!"e #ates o. #et-#nt%#o-/% a .-*3mana/e& 'o#t.o!o
SPEC0,ATION SHORT3TERM TRADING▸ soe obect!"e !s ca'!ta /a!ns
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THANK 1O0