Business and Personal Finance © 2007Chapter 9:
StocksChapter Summaries- Investors choose common stock because stocks provide a greater potential return than bank savings accounts and government bonds.
- Investors choose preferred stocks because they are less risky than common stocks and because they provide a steady income in the form of dividends.
- Types of stock investments include blue-chip stocks, income stocks, growth stocks, cyclical stocks, defensive stocks, large- and small-cap stocks, and penny stocks.
- Information about stocks' risk can be found in newspapers, stock advisory services, corporate reports, and on the Internet.
- Factors affecting stock prices include general attitudes about current economic conditions and corporate performance.
- Stocks are bought and sold in primary markets, such as in an initial public offering (IPO), and in secondary markets, such as securities exchanges and the over-the-counter (OTC) market.
- Long-term investors buy and hold stocks, use dollar-cost averaging to smooth out the prices they pay for stocks they buy regularly, and reinvest their dividends and buy more stock directly from companies in which they have already invested to avoid stockbroker commissions. Short-term speculators use techniques such as buying stock on margin and selling short.
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