(CHAPTER 2 ) INVESTING IN COMMON STOCK

1. Unit cost of a share of common stock is within the reach of most individual investors.

2. Price and market info is widely disseminated

3. INTRODUCTION

3.1. Common stock is a security that represents ownership in a corporation

4. TYPES

4.1. blue-chip stock

4.2. income stock

4.3. growth stock

4.4. technology stock

4.5. speculative stock

4.6. cyclical stock

4.7. defensive stock

4.8. mid-cap stock

4.9. small-cap stock

5. CHARACTERISTICS

5.1. residual claim

5.1.1. bondholder

5.1.2. preferred stockholder

5.1.3. common stockholder

5.2. voting rights

5.3. transaction costs are modest.

5.4. limited liability

5.5. pre-emptive right

6. ADVANTAGES

6.1. Easy to buy & sell

6.2. Attractive and highly competitive returns

7. DISADVANTAGES

7.1. Common stocks are subject to various types of risks.

7.2. Earnings and general performance of stocks are subject to wide swings

7.3. Sacifice in current income (dividend)

8. RISKS

8.1. Business risk

8.2. Financial risk

8.3. Purchasing power risk

8.4. Market risk

8.5. Event risk

8.6. Interest rate risk

8.7. Liquidity risk