HE-557
Consumer Economics
& Housing
Topics
INVESTING IN STOCKS
Before investing in the stock market you'll need a basic understanding of what stocks are and how to buy them. Begin by looking at newspaper stock tables. These contain a wealth of information regarding particular stocks. The following chart can help you understand these tables.
1. The composite, or consolidated, table for the New York Stock Exchange, which takes into account prices paid on that exchange and on others where a stock may have been traded that day.
2.	The highest price per share paid in the past 52 weeks. Most stock prices are quoted in terms of dollars and eighths of dollars (1215 cents) or in multiples of 1/8.
3. The lowest price paid in 52 weeks.
4.The company's name, usually abbreviated. In this case, Getty Corporation.
5. The regular annual dividend per share the company is paying based on the latest quarterly or semiannual amount.
6. The yield—the dividend divided by the current stock price, expressed as a percentage.
7. The PE ratio—the stock's price divided by the company's annual earnings per share of stock outstanding. The PE, or multiple, is one of the most widely used tools for analyzing stocks. Companies whose earnings per share are growing or expected to grow at a fast rate normally command higher multiples than corporations with slower growth.
8. The number of shares sold that day, in hundreds.
9. The highest price paid for the stock that day.
10. The lowest price paid that day.
11.The last price paid.
12.	The net change in the closing price from the previous day's closing price.
Stock in a nutshell:
Now that you feel fairly comfortable with reading stock tables, your next question probably is what really is a stock investment? Stock is ownership in a corporation. When a business incorporates, owners receive stock to indicate their holdings in the company. Usually, most stockholders only own a small fraction of a company. For examples, 100 shares of IBM represents only a .00002% ownership in the company. Because they represent ownership, stocks are often referred to as equities. A stock certificate shows the number of shares held. The certificate may be made out for one share or a number of shares. The owner's name appears on the stock certificate and is recorded on the stock books of the issuing corporation. These certificates are only evidence of stock ownership:	should they be lost or
destroyed, new ones can be obtained.
A company may issue two types of stock, common stock and preferred stock. Preferred stock, as the name implies, gives the owner superior rights on dividend distribution. Dividends must be paid to preferred stockholders before they are paid to common stockholders. Also, in cases of bankruptcy, preferred stockholders have a prior claim on a company's assets (if there is anything left) after all debts have been paid. Preferred stock has a fixed rate of return which is established when the stock is issued. Preferred and common stocks are similar in that their owners are entitled to one vote for each share they own in corporation elections.
The vast majority of stocks are common stocks and when people speak of stocks they are usually referring to common stocks. Common stock gives its owners a variable rate of return, depending on how well a company did in a given year. After a corporation has deducted all its expenses, paid its income taxes and preferred dividends the amount
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