Stocks PDF

Securities: Securities are types of investments that you can buy to help grow your money or earn income. This includes a wide array of investments including equity securities, debt securities, and hybrid securities. Equity securities, like stocks, represent ownership in companies and may include div...

Securities: Securities are types of investments that you can buy to help grow your money or earn income. This includes a wide array of investments including equity securities, debt securities, and hybrid securities. Equity securities, like stocks, represent ownership in companies and may include dividends which are payments made by a company to shareholders. Debt securities, such as bonds, where you lend money out to the government or company for a certain amount of period and it's paid back with interest. Hybrid securities, like convertible bonds, are a mix of both equity and debt securities, offering steady income like bonds and potential ownership like stocks. Securities are traded in financial markets, allowing investors to buy and sell them to potentially make profits. The Securities and Exchange Commission (SEC) regulates these markets in the U.S. to ensure transparency and protect investors from fraud, deceptive practices, and misinformation. Companies use securities to raise capital, meaning they sell investments to get money, paying off debts and projects. Instead of borrowing from the banks, they get funds from investors who buy these securities. Understanding the different types of securities helps investors make informed choices that match their financial goals. Some people may want to invest in securities but avoid risks. With the right knowledge, they would understand that investing in stocks might be too risky for them, so choosing bonds instead could be a better option, as bonds provide lower but more predictable income. Overall, securities are different types of investments that allow people to buy to grow their money. Exchanges: An exchange refers to a stock exchange which is a marketplace where people buy and sell securities like stocks. It helps connect both buyers and sellers providing a place that they can easily sell. When a company sells its shares for the first time, it's called an initial public offering (IPO), after that, shares can be traded between investors on the exchange. Stock exchanges provide a middle ground between buyers and sellers, as well as helping set the price of shares based on supply and demand. The New York Stock Exchange (NYSE) and Nasdaq are two of the biggest exchanges in the world. Exchanges can be physical places, like the NYSE, or online, where trading happens. Additionally, exchanges allow fast and real time trading, which is important to the economy. They help companies raise funds and allow investors to gain profits. However, share prices can change quickly and are easily influenced based on external factors, like rumours, so investors must stay alert if they don't want to lose money. Exchanges also help prevent fraud and ensure fair trading by being regulated by organizations like the SEC (Securities and Exchange Commission), U.S. government agency that oversees and regulates the financial markets. Overall, the stock exchange is a place where people sell and buy shares of companies. Candle Sticks Candlesticks are charts that allow you to see growth or decline over a specific time period. A green candle means the closing price was higher than the opening, showing that buyers were stronger, while a red candle indicates the closing price was lower, showing sellers were in control. For example, if the opening price is at $50 and the closing is $60, $10 profit is made making the candle green. Each candlestick has a body and wicks, the body shows the open and close prices, while the wicks show the highest and lowest prices during the time period. One of the patterns are hammer candles, where sellers push the price down but buyers push it back up and win. The lower end of a green candle’s body is the opening price, and the upper end is the closing price. The opposite applies for a red candle, where the lower end is the closing price, and the upper end is the opening. In a bullish pin, a larger body means buyers are stronger, while a smaller body shows sellers were dominant yet buyers won in the end. A large wick above the body signals strong selling by sellers, while a large wick below the body means buyers are strongly pushing, and sellers need to overcome them to lower the price. Additionally, a bearish pin suggests that the price may go down, it has a small red body with a long upper wick, showing that buyers pushed the price up but then sellers took over. The long upper wick means there was strong selling pressure, and the small body at the bottom shows sellers closed the price below the open. Overall, candlesticks allow investors to understand the market and show patterns that minimize the risk if read properly. Selling Short: Selling short is when investors bet against a stock, it's a way to make money when stock prices go down. Unlike buying a stock which is considered going long, shorting means you expect the stock to go down. This process involves borrowing shares from a broker and selling them at the current price. The goal of this is to buy it back cheaper, and return the borrowed shares to the broker and keep the profit made from the price difference. For example, if the investor borrows and sells the share at $50 and buys it back at $30, they make a profit of $20. Additionally, the investor pays a small fee to the broker for borrowing the stock. Although short selling can be profitable when stock prices fall, it can be considerably risky because stock prices can go up unexpectedly. If the price rises, the investor has to buy the stock back at a higher price meaning they lose money. Unlike buying a stock (going long), where losses are limited to what you paid, short selling has potentially unlimited losses. So, short selling is more for experienced traders who understand the risks. Overall, selling short is when an investor borrows and sells a stock, hoping its price will drop so they can buy it back cheaper, return it, and keep the profit. Exchange Traded Fund (ETF): An exchange traded fund or ETF is a group of investments that includes stocks and bonds, and you can buy/sell it on the stock exchange. The ETF contains money from various investors, spreading it across multiple different sectors and investments. When you buy an ETF you essentially buy into a small piece of those investments. Each ETF has a goal like focusing on company stocks, government bonds, or specific industries. An example of an ETF is the S&P 500, which focuses on trying to match the performance of broad market indexes. The S&P 500 contains the top 500 companies in the U.S.A, meaning when you buy the S&P 500 you are investing in all 500 companies at once, which helps spread out your investment risk across a broad spectrum of industries. There are two ways to make money from ETFs. One, if the price of assets in the ETF goes up, the value of the ETF goes up as well. Second, you could sell your shares for a profit. Also, some ETFs pay dividends. Call Option: A call option is an agreement that allows the investor to buy a stock at a set price within a specific time frame, but they don't have to make a purchase if they decide not to. For example, if I wanted to buy a new laptop that's $300, but I don't buy it yet because they might be on sale soon so I talk to the owner. The owner offers a deal for $10, where I can buy the laptop at any time within a month, even if the price changes. I pay $10 and now two things could happen: 1. Price goes up: Now the laptop's price has increased to $350, but since I bought the call option, I can buy it at $300, saving $50. 2. Price goes down or stays the same: If the price goes to $280 or stays the same, I wouldn't use the call option as it's cheaper now. So I would lose $10. In this example, the $10 is the fee for the call option, it's called the premium. It allows the investor to purchase at a set price in the future. If the price raises you would use the call option within the timeframe given, if it drops you would lose the $10. Essentially, a call option is a contract that gives you the option to buy a stock at a specific price within a certain period, but you're not required to make the purchase. Volatility Index (Vix): The VIX is known as "fear index" because it measures how much the stock market might move in the next 30 days. It reflects market expectations of volatility based on options prices for the S & P 500 index. Furthermore, a high VIX means that investors expect large price swings, often showing fear or uncertainty in the market. Meanwhile, a low VIX shows stability with little price movement. Usually VIX above 30 is considered high and below 20 is low. Traders and investors use the VIX to assess market sentiments and prepare for risks. Although you can't buy VIX directly, there are exchange traded products like ETFs that track its movement. By monitoring the VIX, you can make informed decisions about investment. Overall, VIX measures how much the stock market is expected to move up or down in the next 30 days, settling either fear or calmness among investors. Registered Accounts: Registered accounts in Canada offer tax benefits to help people save up for specific things, such as education, retirement, and more. For example the RRSP (Registered Retirement Savings Plan) allows people to reduce taxable income and grow investment tax-free, until the individual decides to withdraw that money. Another account is TFSA (Tax-Free Savings Account), which allows you to save up money without paying taxes and you can withdraw it anytime. Unlike the RESP (Registered Education Savings Plan), which helps parents save for their child's secondary education with government input, however, the money can ONLY be used for education. All registered accounts have limits, for instance, the TFSA is $7,000 in 2024. If you go over the limit you can face penalties. Additionally, registered accounts grow savings faster because you don't pay taxes on investment income. Overall, registered accounts allow you to save money, free from tax, for specific goals. Dividend+Dividend Aristocrats: Dividends are payments from companies to make to their shareholders to share their profits. For example, if you own 100 shares and the company pays $2 dividend per share, you would receive $200. Most companies pay their shareholders in cash, but some pay with additional shares instead. These payments are typically made quarterly, but it varies based on the company. Also, not all company's pay dividends. Dividend aristocrats are special companies in the S&P 500 that have increased their dividend payments every year for at LEAST 25 years. These are typically large, well-known companies such as Coca-Cola, Johnson & Johnson, and Procter & Gamble. Investors like to invest in dividend aristocrats because they are sake and reliable, producing stable income. Overall, dividends are payments given to shareholders from companies and dividends aristocrats are companies in the S&P 500 that have increased their dividend profits for 25-years or more. Blue-Chip Stocks: The term Blue-Chip refers to the highest value of companies, so Blue-Chip Stocks refer to the shares of large, well-established companies. Typically, these companies have been in the industry for numerous years and have a global operation. For instance, Apple, Coca-Cola, and Johnson & Johnson. A common feature for blue-chip stocks is regular dividends. Additionally, blue-chip stocks are considered safer investment options since they tend to be more stable than smaller companies. These stocks are often included in market indexes like the S & P 500, which shows their importance. Although they offer more stability, they have slower growth. Overall, blue-chip stocks are the shares of major companies that allow for slow but stable income.