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Chapter 3: Introduction to Stocks

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    “Don’t gamble! Take all your savings and buy some good stock and hold it till it goes up. If it don’t go up, don’t buy it.” -- Will Rogers

    Question: How do you make a small fortune in the stock market?

    Answer: Start with a large fortune!

    Learning Objectives

    In this chapter, you will

    By the end of this chapter, you should be able to

    Stocks are exciting! Stocks are sexy! Stocks are risky!

    Yes, Dear Students, stocks are where the action is in the investment world, especially for those with a long-term time horizon. We are going to spend the six weeks immersing ourselves in the world of stocks.

    Remember that you are Rising Investment Gurus for your family, friends, and co-workers. They are counting on you to cut through all the hype and hoopla and show them the good news of prudent, long-term investments. So let's get started on our journey. All of us at Southwestern are very proud of you!

    • 3.1: What Are Stocks?
      Stocks are exciting! Stocks are sexy! Stocks are risky! Let's get started on the long march. What are stocks? What are the rewards of investing in stocks? What kind of investment returns can we expect from stocks over the long term? And just what do professionals mean when they say, "Stocks are volatile"?
    • 3.2: The Stock Market
      What exactly are we referring to when we say, "the stock market?" What is it? Where is it? Actually, the stock market is not just one entity. It is composed of many competing elements. Let's explore.
    • 3.3: Stock Transactions, Transaction Costs, and Stock Quotes
      What are the basic types of stock transactions? How much does it cost to buy and sell stocks? (No, Dear Students, it is not free to buy and sell stocks, no matter what Robinhood tells you.) Where can we find stock quotes? We will answer these burning questions in this section.
    • 3.4: Stock Market Averages and Indexes; Volatility Reexamined
      How can we say that, "the stock market has returned 10% over the last 80 years?" The industry uses various benchmarks measures called averages and indexes. It is time to take a close look at these tools.
    • 3.5: Stock Characteristics and Measurements
      It is time to start peeling away the first layers of research and exploration of our potential stock investments and their corresponding businesses. "Show me the numbers!" exclaimed Benjamin Graham, author of The Intelligent Investor and Warren Buffett's mentor.
    • 3.6: Types of Stocks, Growth versus Value, and Market Capitalization
      Although people tend to lump all stocks together, the truth is no two stocks are exactly alike because no two businesses are exactly alike. However, there are certain broad categories that are discernable. Let's take a look at them.
    • 3.7: Stock Investment Strategies
      There are various stock investment strategies. A few are worthwhile. Some others, not so much. You decide!
    • 3.S: Summary
      Congratulations ‒ You Have Finished Chapter 3 ‒ Introduction to Stocks

    Thumbnail: Pennsylvania Power and Light Stock Certificate, public domain, Wikimedia Commons

    This page titled Chapter 3: Introduction to Stocks is shared under a CC BY-NC-SA 4.0 license and was authored, remixed, and/or curated by Frank Paiano.

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