Why are Company Reports important?

Cheat Sheet:

  • Public companies are required to file written reports with the Securities and Exchange Commission (SEC).
  • The SEC protects investors by regulating companies and the stock market.

You know how you get report cards when you’re in school? If you’re a public company, you have to file a written report with the SEC every quarter.  It’s called a 10-Q, and here’s what one looks like: 

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Shareholder Meetings

Cheat Sheet:

  • Every year, companies hold a meeting for their shareholders.
  • Investors get to ask questions and vote on things like board members.

Most companies hold an annual shareholders meeting. If you’re a shareholder, you can attend and actually see the CEO in person!

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What is cost basis?

Cheat Sheet:

  • Cost basis is a fancy name for the price you originally paid for your stock.
  • It is used to calculate the money you made or lost for tax purposes.

The cost basis is the original value you paid for any investment, adjusted for stock splits and dividends. So if you buy 10 shares of AAPL at $150 per share and pay an $8 trading commission, your cost basis is 10 x $150 + $8 = $1508.

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What is stock?

Cheat Sheet:

    • Stock is ownership in a company.
    • Stock is sold in units called shares.
    • A person who owns stock is called a stockholder or shareholder.

When you own stock, you own a small piece of a company. Stock comes in units that are called shares. A person who owns shares of stock is called a stockholder or a shareholder. Companies are typically divided into millions, tens of millions, or even billions of shares. For example, Facebook (FB) is divided up into 2.35 billion shares.

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Why own stock?

Cheat Sheet:

  • To own a piece of a company you believe in
  • To make money

When you own stock, you own a piece of the company. This means you own a share of the company’s profits and assets. It also means you have a special relationship with the company that other people don’t have. You even have a say in how it’s run because you can vote, attend shareholder meetings, and more.

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How do I buy stock?

Cheat Sheet:

  • You buy and sell stock through a brokerage firm.
  • Most people use online/discount brokerages.
  • You can buy stock in whole or fractional shares.

A brokerage firm is a company that is licensed to buy and sell stocks. Brokerages provide you with a connection to the stock market and charge a commission when you make a stock trade.  Some brokerages charge you just to have a brokerage account.  A broker is a stock salesperson.

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When should I start investing?

Cheat Sheet:

  • Start as early as you possibly can
  • Invest for the long haul
  • Don’t wait until you can afford whole shares.  Fractional shares make it easy to start with only a few dollars.

You’ve heard the saying, “Buy low, sell high,” right?  People on Wall Street would love to be able to say, “I’ll buy this stock today because it’s going up tomorrow.”  Unfortunately, that crystal ball doesn’t exist.  No one can time the market, so don’t bother trying!

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What is an IPO?

Cheat Sheet:

  • IPO stands for initial public offering.
  • It is when a company first sells its stock to the general public.
  • In an IPO, a stock begins trading on a stock exchange like the NYSE or Nasdaq.

When a company is young, its owners are usually a small group of people that have a connection to the company (founders, employees, and investors).  The company’s stock is  “privately held.”  Most companies stay that way, but some grow to the point where they sell shares in the company to the general public.  This is called an IPO, or initial public offering.

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What is the stock market?

Cheat Sheet:

  • After the IPO, shares get traded (bought and sold) directly between investors on the stock market.
  • The stock market is where stocks are traded. 
  • Stock isn’t sold at a fixed price.  The stock market is a giant auction with prices constantly changing due to supply and demand.

When you buy stock on the stock market, you aren’t buying it from the company – you’re buying it from an existing shareholder. Likewise, when you sell your shares, you’re not selling them back to the company – you’re selling them to some other investor.

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