Paddles Ready

Stock Market

Content
1. Local Market
2. Trading floor, stock exchange
3. Securities. Categories of shares
3.1 The growth stocks
3.2 cyclical stocks
3.3 Special Situations
4. Preferred
4.1 Obligations of the company
4.2 Obligations of government USA
4.3-Municipal Bonds
4.4 convertible securities
4.5 Option
4.6 Rights
4.7 Warrants
4.8 Commodities and futures financial
5. The scholarship average prices of newspaper reading
5.1 The price / earnings ratio
6. European stock markets trend General
6.1 New ways for old
6.2 Europe, known electronic
7. New issues
8. Investment funds. A different approach
8.1 Advantages of investment funds
8.2 Load vs. no load
8.3 Common stock funds
8.4 Other types of mutual funds
8.5 The Daily Mutual fund prices
8.6 Choosing a Mutual Fund

1. MARKET PLACE

The stock market. For some, is an enigma. For others it is a source of profit and endless fascination. The market is the financial center of any country. It reflects any change in the economy. It sensitive to interest rates, inflation and political events. In a very real sense, has its fingers on the pulse of the world.
Taken in its broadest sense, the market stock is also a control center. It is the market where firms and governments have to raise money so they can continue their operations and spend. It is the market where companies and institutions have been making giant and change their financial commitments. The stock market is also a place of opportunity individual.
The phrase "stock market" means many things. Strictly speaking, a stock market is a place where actions are traded – that is bought and sold. The phrase "stock market" is often used to refer to the largest and most important market in the world, New York Stock Exchange, which is much older than the U.S.. It was founded in 1792. NYSE is located at 11 Wall Street in New York. It is also known as the Big Board and the Exchange. In mid the decade of 1980 shares listed on the NYSE composite of approximately 60% of the total shares traded on organized national exchanges in the United States.
AMEX represents the American Stock Exchange. He has the second highest volume of trading in the U.S.. Located at 86 Trinity Place in downtown Manhattan, the AMEX was known until 1921 as changing the brake, and is still referred to today as the brake. early traders gathered near Wall Street. Nothing can stop overseas brokers. Even in the rain and snow they put up lists of actions for sale. The venue was known as the outdoor curb market, hence the name of the brake. In 1921, the Curb finally moved indoors. For the most part, the stocks and bonds traded on the AMEX are those of small to medium businesses, as con-trasted with the large companies whose shares are traded New York Stock Exchange.
The exchange is a nonprofit corporation run by a board of directors. His member firm are subject to a rigorous and self-regulatory code of detail. Self-regulation is a matter of self-interest to members of stock exchanges. It was built public confidence Exchange. It is also required by law. The U.S. Securities and Exchange Commission (SEC) administers federal securities laws and oversees all stock exchanges in country-try. Where self-regulation does not do the job, the SEC is likely to step in directly. The Exchange does not buy, sell or hold any values securities or set stock prices. The exchange is the only market where the public through brokers members can buy and sell prices determined by supply and demand.
It costs money, become a member of the Exchange. There are about 650 associations, or "seats" on the NYSE, owned by large and small companies and in some cases by individuals. These seats can be bought and sold in 1986, the price of a seat on average about $ 600,000. Before you be allowed to buy a seat you must pass a test that strictly scrutinizes your knowledge of securities markets, as well as a background check and character.
NYSE and AMEX addition there is also the exchange of "regional" in the U.S., of which the best known are the Pacific, Midwest, Boston and Philadelphia exchange.
Is there a place more for the market where the trading volume of common stock begins to approach the NYSE. It is negotiating common shares over-the-counter "or" counter "that is not organized in any ex change. Most securities other than common shares are traded on the OTC market. For example, the vast market of government securities is a U.S. OTC market. So is the money market in the market where all kinds of short-term debt obligations are traded daily in huge quantities. Like-wise the market for loans over and short term by the state and local governments. And most of the trading of corporate bonds also is accomplished over-the-counter.
While the majority of shares traded in the OTC market are smaller companies, many firms are still fairly large found in the "counter" the list, including a large number of banks and insurance companies-businesses.
As there is no physical trading floor, counter trade is done through the wide telephone and other electronic networks that link traders as close as if they were sitting in the same room. With the help of computers, quotations from dealers, Seattle, San Diego, Atlanta and Philadelphia can be displayed on one screen. Dedicated telephone lines link the more active traders. Confirmations are delivered electronically and not via email. Dealers thousands of miles away who are complete strangers trades exe-cute in the thousands or even millions of dollars based on thirty seconds of telephone conversation and the knowledge that each is a distribution of securities registered with the Association National of Securities Dealers (NASD), the organization of industry self-regulation, which oversees the OTC. Never mind that the prices market for transportation, subsequently, each knows that the trade will be honored.
2. NEGOTIATION ON THE FLOOR OF THE STOCK EXCHANGE
When a person wants to place an order to buy or sell stocks, it contacts a broker who is a member of the Exchange. A registered representative or "RR" will its end. He or she is a vocational training, which has passed an examination on many issues, including exchange rules and producers.
The individual order is is relayed to a phone clerk on the floor of the Exchange and by telephone with Secretary of the floor broker. The floor broker who actually executes the order on the floor ing job has a high exhaust pressure. The trading day is greater than half the size of a football field. It is dotted with mul-tiple locations called "factories". The floor broker continues the post where this or that particular stock is traded and brokers have discovered that other client orders to buy or sell the stock, and that prices. If the order that the individual is placed a "Market Order", which means an order to buy or sell without delay at the best price available the size of the broker market, decides to negotiate for better prices or accept orders of one being shown, and executes the trade, all this happens in question seconds. Usually shares are traded in round on stock exchanges. A lot is generally 100 shares, called a bargaining unit, nothing less is called a strange.
When you see the floor, you can assume all brokers are the same, but they are not. There are five categories of professionals active market trading.
Commission brokers, dealers in general ground work for member firms. They use their experience, trial-ment implementation and ability to buy and sell to the enterprise customer a commission.
Independent Brokers floor are sole proprietors who act out a variety of clients. They execute orders for other floor brokers who have more volume than they can handle, or for firms whose exchange members are not on the floor.
Registered competitive market, manufacturers have specific obligations to trade for their own accounts or your company, when called by an exchange official to make a bid or offer that will reduce the spread existing listing or improve the depth of an existing budget.
Competitive operators trade for their own accounts, under strict rules to ensure that its activi-ties contribute to market liquidity.

And last but not least, comes Stock Experts. Exchange tries to preserve the continuity of prices, which means that if a stock was trading at, say, 35, the next buyer or seller must be able to order one within a fraction of that price. But what if a buyer comes in when no other broker wants to sell by the last price? Or vice versa for a seller? How is price continuity preserved? At this point enters the expert. The specialist is charged with a special function, to maintain continuity the price of specific actions. The specialist does this by being ready to buy shares at a price reasonably close to the last reported sale price, when someone wants to sell and there is a lack of buyers, and sell when there is a lack of sellers and someone wants to buy. For each action listed, there are one or more specialist firms assigned to perform this stabilization function. The specialist also acts as a broker, executing public orders for stock, and keep track of limit orders to be executed if the stock price reaches a specified level. Some of the specialist firms are large and assigned to different actions. The Exchange and the SEC are particularly interested in the spe-cialist and negotiation function is monitored by specialists closely to make sure they are giving prayer-law orders public and helping to stabilize the markets, not just trying to make profits for themselves. A Since a specialist may at any time be called upon to buy and hold substantial amounts of stock, the specialist must be well capitalized.
In markets today, where multi-million dollar business by financial institutions (banks, pension funds, mutual funds, etc.) have become common, the specialist can no longer absorb all the large blocks of shares for sale, nor supply the large blocks being sought by institutional buyers. Over the past years, there has been a rapid growth in trade block by large brokerage firms and other companies in the securities industry. If an institution wants to sell a large block of shares, these companies will hold an expert and rapid search for potential buyers, if there is not enough buying interest is found, the company's trade block will fill the gap of buying shares in itself, at the risk of owning stocks and be able to delete them later with profit. If the institu-tion not want to buy and sell, the process is reversed. In a sense, these firms are fulfilling the same function as an expert, but in a much larger scale. They are stepping in to buy and own unavailable when supply exceeds demand and vice versa.
Thus, experts and traders Block perform similar functions of stabilization, though the block traders have no official role and no other reason than to make a profit.
3. TITLES. CATEGORIES OF COMMON SHARES

There is much to be said about securities. Safety is a instrument means (1) a property of heading a corporation (Photography), (2) a creditor relationship with a company or government agency (A link), or (3) property rights, such as those represented by an option, right and subsription subsription warrant.
People who have Stocks and bonds are called investors or, respectively, investors (shareholders, ERS) and bondholders. In other words, a part of the stock is a part of a deal. When you hold a stock of a cor-poration you are part owner of the corporation. As proof of ownership you can ask a certificate with your name and number of shares held. By law, anyone under 21 can buy or sell stocks. But the smallest actions can have if kept in trust for them by an adult. A bond represents a promise of the enterprise or government to repay a loan over a certain amount of interest during a defined time period.
We said shares are shares traded property companies. The corporation is a legal entity separately it is responsible for their own debts and obligations. The individual owners of the companies are not responsible for the obligations the corporation. This concept, known as limited liability, has allowed the growth of large corporations. He has allowed millions of investors to feel secure in his position rate as owners of the Body. All they have is risky what they paid for their actions.
A shareholder (owner) a corporation has certain basic rights in proportion to the number of shares he or she owns. A shareholder has the right to vote for the election directors, who control the company and management of point-AP. If the company makes profits and the directors decide to pay a portion of those profits to shareholders as dividends, the shareholder is entitled to receive its proportionate share. And if the company is sold or liquidated, he is entitled to its proportionate share of the profits.
What kind of actions can be found in bags values? The question can be answered in different ways. One way is by industry groupings. There are companies in all sectors, from aerospace to wholesale dis-tributers. Oil companies and gas, with ¬ sas phone, computer companies, electric utilities and autocompanies are among the largest groups in terms of total earnings and market value. Perhaps a more useful way to distinguish the shares is in accordance with the qualities and values, investors want.
3.1 The growth stock.
The phrase "growth stock" is extensively used as a term to describe what many investors are looking for. People who are willing to take higher risks than average tend to invest in what is often called "high growth" stocks-stocks companies that are clearly growing much faster than average and where the stock with mands a price premium in the market. The reasoning is that company profits will continue to grow rap-nothing, at least a few more years at a level that justifies the premium price. An investor should keep in mind that only a small minority of companies actually to make profits grow rapidly and consistently over a long period. The potential rewards are high, but stocks can fall in price at incredible rates when you win-tions do not grow as expected. For example, companies in the video game industry grew in 1980 when it seemed the world was about to turn into a big playroom. But when the public interest shifted to personal computers, companies have found themselves stuck with hundreds of millions of dollars in stocks video games, and shares collapsed.
There are less glamorous, but also lower risk, in which we will call for lack of better words "growth moderate "stocks. Typically, these actions can not be sold at premium, but when we see that company profits will grow at a faster rate than the average for their industry. The trick, of course, is in the forecast-ing that companies really will have a better growth than the average, but even Forecasting is wrong, the risk should not be large, assuming that the price was just for starters.
There is a broad category of actions that have no specific name, but that is attractive to many investors, especially those who prefer to stay on the conservative side. These are stocks of companies that are not glam-Orous but growing in line with the economy. Some examples are food companies, beverage manufacturers, pa-per, and packaging manufacturers, shops, and many companies in various areas of consumption.
While the economy is healthy and growing, these companies are perfectly reasonable investments and in certain moments, when everyone is interested in "Glamor" stocks, these "glamorous" non-issues can be overlooked and available at bargain prices. Their growth can not be rapid, but usually is fairly consistent. Moreover, since these companies usually do not need to plow all their earnings to the business, they tend to yield handsome dividends to its shareholders. Besides the actual growth of these businesses to reach, their values should adjust upward over time in accordance with the advantage of inflation of shares worth repeating.
3.2 cyclical stocks.
These are stocks of companies they do not show any clear trend of growth, but where the stocks fluctuate according to the business cycle (prosperity and recession) or some other recognizable pattern. Obviously, you can make money if he buys those near the end of a price cycle and sell near the top. But the funds and tops can be difficult to recognize when they occur and sometimes, when you think a stock is near the bottom of a cycle, which can also be a process of long-term decline.
3.3 Situations Special.
There is a type of investment that professionals usually refer to as "special situations". These are cases where some companies particular development, perhaps a merger, change of control, sale of property, etc. – that may raise the value of a stock. special situation investments may be less affected by movements in the stock market in general than the average stock investment, but if the expected development does not occur, a specific in- investors may suffer a loss, sometimes considerably. Here, the investor has the chance to judge the expected development really come to pass.
4. SHARES PREFERRED
The preferred stock is a stock that has some similarities with a title (see below). The preferred stock holder entitled to dividends at a specified rate, and those dividends must be paid before any dividends can be paid in shares of the company. In most cases, the preferred dividend is cumulative, meaning that if not paid in a given year, the company is due to preferred shareholders. If the company is sold or liquidates, preferred shareholders have a claim on a certain portion of the assets before common stockholders. But when a link is scheduled to be rescued date by the company in a "mature" right, a preferred share is usually a permanent part of the capital structure of companies. In exchange for receiving a guaranteed dividend, the preferred shareholder, generally do not participate in the company's progress, the preferred shares are entitled only to a fixed dividend and no more (except in a small minority of cases in which the preferred stock is "participating" and receive higher dividends based on some earnings as the company to grow).
Many preferred shares are traded on the NYSE and other exchanges, but they are generally not a very attractive price to individual buyers. The reason is that for companies wishing to invest in fixed income, preferred shares carry a tax advantage over bonds. As a result, companies usually offer as the prices of preferred shares above the price that would be paid by a bond providing the same income. For the buyer, a requirement may often be the best buy.
Corporate Bonds-4.1
Unlike a photograph, a bond that is not proof of ownership, but a loan to a company (or a government, or some other organization). It is a debt obligation. When you buy a corporate bond, you bought a piece of a large loan, and your rights are as a creditor. Entitled to payment of interest at a specified rate, and reimbursement the "face value" of the full deposit on a specified date. The fixed interest payments are usually made semiannually. The quality of an obligation business depends on the financial ability of the issuing company.
Bonds are usually issued in units of $ 1,000 or $ 5,000, but bond prices are quoted based on the value of 100 as "par". The bond price of 96 means that a bond par value $ 1,000 is actually selling U.S. $ 960 and so on.
Many corporate bonds are traded on the NYSE, and newspapers carry a separate table showing daily trading of securities. The major trading in corporate bonds, however, occurs in large blocks of $ 100,000 or more stock market traded by brokers and dealers acting as principals or for institutions.
4.2 Bonds-US Government
U.S. Treasury bonds (long term), notes (medium term) and bills (short term), and the obligations of various U.S. government agencies, are traded outside of exchanges in a broader professional market, where the unit basic trade is often $ 1 million face value in quantity. However, business is also done in smaller quantities, and you can buy Treasuries in lots of $ 5,000 or $ 10,000 through a regular broker. U.S. Government bonds are regarded as providing investors maximum security.
4.3-Municipal Bonds
Securities issued by state and local governments and governmental units are generally referred to as "mu-nicipals" or "tax free", since the income from these bonds is largely exempt from federal income tax.
tax exemption bonds are attractive to individuals in higher tax brackets and certain institutions. There are many issues different newspapers and generally list only a few municipalities actively traded. The trading occurs in a vast and specialized OTC. As a compensation for the tax benefit, the rates of inter-est of these securities are generally lower than in the U.S. government or corporate bonds. Quality is usually high, but it varies according to the financial soundness of the various states and communities.
4.4 convertible securities
A convertible bond (or convertible debenture) is a business relationship that can be converted into common shares COMPANY, under certain conditions. convertible preferred stock carries a "conversion privilege similar." These securities are intended to combine the reduced risk of a bond or preferred stock, with the advantage of conversion into common shares if the company is successful. The market price of a convertible bond generally represents a combination of a pure bond price (or price of preferred shares pure) plus a premium for the privilege of conversion. Many convertible issues are listed on the NYSE and other exchanges, and many others are traded over-the-counter
4.5 Options
One option is a piece of paper that entitles you to buy or sell a title given to a particular price for a specified period of time. The "call" is an option to purchase a "put" is an option to sell. In order simpler, they have become an extremely popular way to speculate on the expectation that the price of a stock will rise or fall. In recent years, a new type option has become extremely popular, the options related to the averages of several stock market, which permit speculation about the meaning of the whole market, instead of individual stocks. Many trading techniques used by expert investors are built around options, some of these techniques are in-tended to reduce the risks and not for speculation.
4.6 Rights
When a company wants to sell new securities to raise capital further, that often gives its stockholders rights to buy new titles (mostly additional shares of stock) at an attractive price. The law has the nature of a call option, with a very short life. The holder can use ("year"), right, or can sell it to someone else. When rights are issued, they are traded (During the short period until its end) on the exchange even if the stock or other security to which they apply.

4.7 Warrants
A warrant is like a law in that it is issued by a company and gives the holder the option to purchase stock (or security) of the company from the company itself at a specified price. But a warrant has a longer life, often several years, sometimes without any limit and rights, warrants are negotiable (which means it can be sold by the owner to another person), and several warrants are traded on major exchanges.
4.8 Commodities and Financial Futures
Commodity markets, where food and industrial products are sold in large quantities, are outside the scope of this text. But because the commodity markets deal of "future", ie, contracts de-livery of a given asset at a specified future date, they also became the center of trade in "futures", which by definition logic, are not goods at all.
Financial futures are relatively new, but they have expanded rapidly in importance and commercial activity. As options, the future can be used for protection, as well as speculation. Making the head-lines have been stock-index futures, that allow investors to speculate on the future direction of stock market averages. Two other types of financial futures are also of great importance: the interest rate futures, which are mainly based on the prices of U.S. Treasury bonds, bills and invoices, and which vary according to the level of interest rates and futures in foreign currencies, which are based on exchange rates between foreign currencies and the U.S. dollar. While futures may be used for protection, they are usually a highly speculative area for professionals and other experts Stors ¬ inve.
5. Medium STOCK market read the cited JOURNAL

The financial pages of newspapers are mystery to many people. But dramatic movements in the stock market often make the front page. In newspaper headlines, news summaries TV and elsewhere, almost everyone was exposed to an average of the stock market.
In a brokerage firm office, it is common to hear the question "How's the market?" and answer: "Up to five dollars," or "Below a dollar. "With 1,500 shares listed on the NYSE, which has to be some easy way to express the price trend of the day. market averages are a way of summarizing the information.
Despite all the competition, the popularity crown still does mean that one has some qualities of an antique store, Dow Jones Industrial Average, an average of 30 shares outstanding dating back to the 1890s. This average is named for Charles Dow, one of the first theoretical the stock market, and a founder of Dow Jones & Company, a financial news service and publisher of The Wall Street Journal.
In the days before computers, a average of 30 stocks was perhaps as much as any one could calculate in practice at intervals during the day. Now, Standard & Poor's 500 Stock Index (500 leading stocks on) and the New York Stock Exchange Composite Index (all stocks on the NYSE) provides a much better picture of the total market. Professionals are likely to focus their attention on these "big" index market. But old habits die slowly, and someone yells, "How is the market? "And someone answers anymore," up to five dollars, "or" Up five ", yet the Dow Jones Industrial Average ("Dow" for short), they are talking about.
The importance of daily changes in the mean will become clear if you view them in percentage terms. When the market is not changing rapidly, the normal daily variation is less than ½ of 1%. A change of ½% is still moderate; 1% is large but not extraordinary, with 2% is dramatic. From the market averages, it is a small step for thousands of detailed listings of prices actions and related data that you find in the daily newspaper financial tables. These tables include complete reports on the previous trading day the NYSE and other exchanges of leadership. They can also give you an amazing amount of information.
Some newspapers provide more extensive tables, other less. Since the Wall Street Journal is available worldwide, we will use it as a convenient source of examples. You'll find a prominent page, titled New York Stock Exchange Composite Transactions. " This table covers the trading days for all stocks listed on the NYSE. "Composite" means that also includes operations in those same stocks on certain other exchanges (Pa-cas, Midwest, etc.), where actions are "doubly listed. "Here are some sample entries:
52 Weeks PE YLD Net Sales
High Low Ratio Stock Div% 100s High Low Close Chg.
52 7.8 37 5.8 Cons D 2.68 5.4 12 909 49 08/03 48 08/07 49 04/01 1 / 4
91 8.1 66 1.2 El Gen 2.52 11.924 17 2.8 91 8.3 89 8.5 90 -1
41 8.3 26 4.1 5.4 2.20 Mobil 15.713 10 41 40 1 / 2 40 7 / 8 +5 / 8
Some of the abbreviated company names in the listings can be a considerable puzzle, but you'll get used to them.
Although some of the columns contain the long-term information about the actions and companies, let's first look at the columns that actually report on the trading the day. Near the center of the table, you'll see a column headed "Sales 100s". Stock trading usually occurs in units of 100 shares and is classified thus the numbers mean, for example, 90.900 shares of Consolidated Edison, 1,192,400 shares of General Electric, and 1,571,300 shares of Mobil traded on January 8. (Mobil actually was the 12th "most active" stock on the NYSE that day, meaning that it ranked 12th in the number of shares traded.)
The next three columns show the highest price for the day, the lowest and the last or "closing" price. The "Net Chg." (Net) right column shows how the closing price differed from the next day before, in this case, January 7.
Prices are traditionally calibrated eighths of a dollar. If you are not familiar with the equivalents, they are:
1 / 8 = $ 0.125
1 / 4 $ = .25
3 / 8 $ = .375
1 / 2 = $ .50
5 / 8 $ = .625
3 / 4 $ = .75
7 / 8 $ = .875
Con Edison traded on January 8 high of $ 49.375 per action and a low of $ 48 875, closed at $ 49.25, which was a gain of $ 0.25 the previous day. General Electric closed down $ 1.00 per share at $ 90 00, but earned a "u" rating during the trading day at $ 91 375, which was a new high price for the shares during the last 52 week (a new low price would have been indicated by a "d").
The two columns to the far left show the high and low prices reported in the past 52 weeks, not including the last day. (Note that the high for General Electric in 1991 is shown as 1.8, not 3.8 in 1991). You note that while neither Con Edison nor Mobil set a new record on January 8, each one was near the top of its "price range" for the past 52 weeks. (Individual actions price charts, which are published by various financial ser-vices, will show the price history of each unit in detail.)
The other three columns of the table to give you useful information in making decisions about stocks as investments. Just to the right of the name, "Divinity." column (Dividend) shows the rate of current annual dividend on the stock – or, if there is no clear regular rate, then the actual dividend total maximum of 12 months. Rates dividends shown here are $ 2.68 annually for Con Edison, $ 2.52 for GE and $ 2.20 for Mobil. (Most com-panies that pay regular dividends pay them quarterly: it's actually $ 0.67 quarterly for Con Edison, etc.) The "Yid." (Yield) column refers tie annual dividend for the last stock price. In the case of Con Edison, for example, $ 2.68 (annual dividend) / $ 49.25 (stock price) == 5.4%, which represents the current yield on the stock.
5.1 Price-Earnings ratio
Finally, we have the "P / E ratio, or ratio price / earnings ratio, which represents a key figure in trial of the value of a stock. The price-earnings ratio, also known as the "price-earnings multiple," or sometimes simply as the "multiple" is the ratio between the price of a share to earnings per share behind the actions.
This concept is important. In simplest terms (and without take into account possible complicating factors), "earnings per share" of a company are calculated by taking net income of the company for the year and dividing by the number of shares outstanding. The result is a very real sense, what each share earned in the business for years – not to be confused with dividends that the company may or may not have paid. The board of directors of the company may decide to plow profits back into the business, or pay them to shareholders as dividends, or (more likely) a combination of both, but in any case, is the wages that are generally regarded as the primary measure of success and the company's stock value.
The price / earnings ratio tells a lot about how investors view a photo. Investors will offer a stock price a higher multiple to the earnings of a company must grow quickly in the future. The multiple may seem very high compared to the current salary, but not in relation to expected future earnings. On the other hand, if the future of a company seems uninteresting, and earnings are not expected to grow substantially, the price market falls to a point where the multiple is low.
Multiples also change with the cycles of the broad stock market, investors become willing to pay more or less for certain values and potentials. Between 1966 and 1972, a period of enthusiasm and speculation, the average multiple was usually 15 or higher. At the end of 1970, as investors were cautious and skeptical in general, the average multiple was below 10. However, note that these figures refer to mean any multi- which is the average multiple is at any given time, the multiple individual actions will vary above and be low it.
Now we can return to the table. The P / E ratio for each share is based on the latest stock prices and earnings for the latest reported 12 months. The multiple, as you can see, were 12 for Con Edison, for 17 and 10 GE for Mobil. In January 1987, the average multiple for all stocks was around 15 too. Con Edison is seen by investors as an operating company of relatively good quality, but by nature, if your company can not grow much faster than the economy as a whole. GE, on the other hand, is usually given a premium rating as a company that exceed the economy.
You can not buy a stock on the PE ratio alone, but reason tells you much that is useful. For stocks that no PE ratio is shown, often means the company reported a loss for the last 12 months, and that no PE ratio can be calculated. Somewhere near the main NYSE table, you will find some small tables, which also relate to the NYSE Composite trading day. There is the framework of 15 stocks that traded the greatest number of shares for the day (the "most active" list), a schedule of actions that had the largest percentage gains or decreases (generally low-priced stocks dominate here), and one of the reserves who made the new price high or low in relation to the past 52 weeks.
You'll find a big table of "American Stock Exchange Composite Transactions ", which does for stocks listed on AMEX just what the NYSE Composite table to shares on the NYSE. There are smaller ta-mite covering Pacific Stock Exchange, Boston Exchange, and other regional exchanges.
The tables of stock trading over the counter are generally divided into two or three sections. For the largest stocks covered by OTC NASDAQ quotation and reporting system, actual sales of the day are reported and tabulated as well as shares on the NYSE and AMEX. For less active over-the-counter stocks, the paper lists only "bid" and "asked" prices, as reported by dealers to the NASD.
It is worthwhile to become familiar with the daily price chart of U.S. Treasuries and agency. The Treasury issues are shown not only in terms of price but in terms of revenue represented by the current price. This is the simplest way to gain insight overview of the current interest rate you can see at a glance the current rates on long-term bonds Treasury notes, medium term and short-term bills.
Elsewhere in the paper you will also find a large table showing prices of corporate bonds traded on the NYSE, and a small table of some tax-exempt bonds (traded OTC). But if you have a specific interest ¬ tions in any of these questions, the table of Treasury prices is the best way following the bond market.
There are other tables listed. These are usually for more experiences ¬ enced and interested investors to take risks larger. For example, there are tables showing the various exchanges in trading listed options, especially options to buy or sell shares shares (stock options and selling options). There are future prices of commodities futures and also interest rate futures, foreign currency futures, and futures on stock indexes. There are also options related to interest rates and options on the stock index futures.
6. EUROPEAN Stockmarkets GENERAL TREND
Competition between stock exchanges in Europe is fierce. However, most investors and companies prefer less, markets larger. If the trade does not provide them stay together, electronic usurpers.
How many stock exchanges is a need for Europe with a single capital market? Nobody knows. But a part of the answer is clear: less than it has today. America has eight stock exchanges, and seven of futures and options. Of these, only the New York Stock Exchange, American Stock Exchange, Nasdaq (OTC), and the two Chicago futures exchanges, have turnover intentions and considerable scope national-sions.
The 12 member countries of the European Community (EC), in contrast, have 32 and 23 stock futures and options exchange. Of these, the market London, Frankfurt, Paris and Amsterdam, Milan and Madrid, at least, aspire to play significant roles in European and world stages. And the number of scholarships is growing. more recent arrivals include exchanges in Italy and Spain. In eastern Germany, Leipzig wants to reopen the bag which was closed in 1945.
Admittedly, the EC is not as integrated as the United States. Most brokers, investors and enter-prises are still national rather than pan-European character. So is the regulatory work of securities markets and there is no European equivalent of the Securities and Exchange (SEC). Taxes, laws and practices of the company accounting vary widely. Several regulatory barriers to cross-border investment, for example, pension funds, remain in site. recent turbulence on the mechanics of Europe's exchange rate cross0border reminded investors about the risk of currency. Although the Maastricht treaty, talk of a currency joint is little more than
However, local loyalties that sustain so many European exchanges look increasingly out-of-date. Countries that already have regional actions exchanges have seen them merged into one. A single European market in financial services is underway. EC's investment services directive, which should enter into force in 1996, will allow stockbroking border without the need to establish local subsidiaries. Jean-Francois Theodore, president of the Paris Stock Exchange, says that this will lead to another Big Bang European. And funding is the multinational business excellence pair: Electronics and the end of most capital controls mean that securities traders do not stray just Europe but the world in search of better returns.
This affects more than just the stock market. Investors want financial markets, which are cheap, accessible and high liquidity (ability to buy or sell shares without moving the price). Businesses, large and small, need a capital market where they can obtain financing at the lowest possible cost If European exchanges do not meet these requirements, the European economy suffers.
In recent years, the favored way to shake the stock has been competition. The event, which trig-gered this was London's Big Bang in October 1986, which opened its purse to banks and foreigners, and introduced a screen telephone system-plus securities trading known as SEAQ. Within weeks, the auction had been abandoned. At the time, other European bourses saw the Big Bang as a British eccentricity. Their combined market of buying and selling orders (order-driven trading), while London is a market in which dealers quote firm prices for trade (trade quote-driven). However, many mainland markets soon found themselves forced to copy London's example.
This was because the Big Bang had strengthened grip of London in international equity trading. arm in international SEAQ to pick up the pieces quickly ¬ bed of European companies. Today, the London Stock Exchange estimates that handle about 95% of the total border trade shares of European claims to handle three quarters trading in shares of blue-chip based in Holland, half of France and Italy and a quarter of them in Germany, although, as will be clear, there is some controversy over these figures.
tradition in the London market and make the presence of many international fund managers helped win the business. So I made three other factors. One was the stamp duty on share deals made in their home countries, who normally avoided SEAQ. Another was the lack of trading hours in the pockets of the continent. The third was the ability to SEAQ, with market makers quoting two-way prices for businesses in large quantities to deal with big business blocks of shares that can be fed through the international order directed only at counter-parts.
The dispute similar to the deal was seen between the ex ¬ changes that trade futures and options. Here, the first market that sells a given product tends to monopolize the business in it. The European Options Ex-change (EOE) in Amsterdam was the first European derivatives exchange, today, is the only one to trade an index option of European capital. LIFFE London, which opened in 1982 and is now Europe's largest exchange-derived, maintained a lead of two to one in the future German government bonds-(Contract more active) on DTB in Frankfurt, which opened in 1990. LIFFE competes with several other European exchanges, not always successfully: it lost the futures market securities ecu-MATIF to Paris.
European stock tanks for this battle in three ways. The first was to ward off foreign competition with the rules. In three years of discussions on investment of EC services directive, several member states pushed for rules that require securities to be traded only on a recognized exchange. They also demanded rules for the dissemination of business and prices have curtailed trading system SEAQ quote-driven. They were defeated in any compromise, partly because governments realized that they risked driving business outside the EC. But attempts to stifle competition residual stand. Italy passed a law in 1991 requiring businesses shares in Italian to be performed by a company based in Italy. Under pressure from the European Commission, which may have to withdraw it.
6,1 New Ways of Old
The second response to competition has been frantic efforts of grants to modernize their systems, improve services and reduce costs. This meant investing in new trading systems, improve the way business is being liquidated and pressure governments to scrap stamp duty. He also has increasingly meant trying to beat London at his own game, for example, seeking ways of matching the feat of London in the trade bloc.
Paris, galvanized in 1988, is a good example. His scholarship is open to outsiders. It has a computerized trading system based on continuous auctions, and liquidation the majority of its business is the computer-tion. Efforts to establish a trading mechanism of the block, continue, albeit slowly. Meanwhile, MATIF, the French futures exchange, has become the largest on the continent. It is especially proud of his contract link ecu, which is expected to grow in importance, if and when the monetary union looms.
Frankfurt, the largest mainland stock market has moved more heavily, in part because the federal system of Germany retained the regional stock exchange in being, and left much the regulation of their markets in the Land (state) level. Since January 1, 1993 all German exchanges (including DTB) were grouped un-der a company called Deutsche Börse AG, chaired by Rolf Breuer, a member of the board of Deutsche Bank. But there is still some way to go to centralize German shares negotiation. German floor brokers continue to resist the in-roads made by the system based on commercial bank screen IBIS. A law to establish a securities regulator federal (and make insider, illegal trade) is still calm in Bonn.
Other scholarships are also moving. Milan is taking forward the negotiation based on screen and speeding up settlement. Spain and Belgium are reforming their stock markets and launching new futures exchanges. Am Amsterdam plans an attack on SEAQ specially determined. It is running a report from McKinsey recommended that a screen-based system for promotions wholesale, a special mechanism to trade in large block and a greater role for market-making to brokers.
Ironically, in London is now a laggard in some respects. The populace shares prehistoric remains, the project to modernize computer has just been scrapped. The trading system is falling SEAQ to pieces, only recently changing belatedly approving the plans prepared by Arthur Andersen for replacement, and there is plenty of skepticism in the City on its ability to deliver. However, the change of numbers of requests for their share of trading in mainland stock suggest that London is holding up well against your competition.
Are these values correct? Not necessarily: this is done through an agent based in London often get treated as business SEAQ even when the contribution is based elsewhere and order was enforced by a mainland stock exchange. In today's electronic era, with many members of the majority of companies European ex-changes, the true location of a business may be impossible to define. Continental grants credit, anyway, to regain lost business London.
Funders London, agrees that the glory days of SEAQ international arm, when other European ex-changes were dying, gone. Trading London is now more often a complement rather than substitute for-tute, treating at home. Large blocks of stock can be bought or sold in London, but divided, as through stock-mined site. Prices tend to be derived from the national exchange; It is remarkable that trad-ing on SEAQ drops when they are closed. Baron van Ittersum, chairman of the Amsterdam Stock Exchange, called "Queen birthday effect" of this: the Dutch trade in shares in London shrinking in Dutch public holi-days.
This competition has encouraged diversity by European exchanges to cut red tape that protected its members pro- from foreign competition, to embrace electronics, and adapt to the desires of investors and issuers. However, diversity can also be less costly liquidity. The investors, especially from outside Europe, are discouraged if liquidity remains divided between the different purses. Companies also suffer: they grumble about the costs the quotation in several different markets.
Thus, the third response of stocks in Europe to combat it has been pan-European cooperative ventures that could anticipate a large European market. There is more here than wishful words acts. Work on two projects joint EC gather market information, and tubes Euroquote was abandoned due mainly to the hostility of Frankfurt and London. Eurolist, under which a company meeting the listing requirements for a stock exchange shall have one listing on everything is going forward, but this is hardly a single market. How do you put Paris Theodore, "is not a compelling business case for the exchange of large European construction-regulated European market of tomorrow "-Sir Andrew Hugh Smith, chairman of the ex ¬ change London also has a long ad-European market for a dedicated professional to professional investors ¬
One reason little has been done is that the markets have been dealing with so many reforms at home. Many wanted to push these through before thinking about Europe. But there is also the atavistic nationalism. London, for example, is not willing to give up the role leadership it gained in cross-border trade between institutions, and other exchanges are willing to accept that maintains it. Mr. Theodore says no future for European stocks if forced to paddle a Boat with a coxswain. Baron van Ittersum Amsterdam also emphasizes that a common European market should not be one under the control of London.
Hence the notion newer, less exciting exchanges in Europe: bilateral or multilateral relations. The futures exchanges have shown the path. Last year, four smaller bags and led by Amsterdam EOE MO, an exchange of op-tions based in Sweden and London, joined in a federation FEX call in January this year, the continent's two largest exchanges, and MATIF DTB, said that a connection was clearly aimed at toppling LIFFE London from its position dominant Pfauwadel Gerard, president of MATIF, trumpets the deal as a precedent for other European exchanges. Mr Breuer, chairman of Deutsche Börse, the estimates that a network European exchange is the way forward, although he admits that London will not warm to the idea. The stock markets of France and Germany can be expected to MATIF monitor / lead DTB.
It is unclear how these links will work, however. The idea is that members of an exchange must be able to trade products listed elsewhere. So, a Frenchman who want to buy future German government bonds, could make it through a reseller in MATIF, although the contract is actually traded in Frankfurt. This is easy to arrange through negotiation based on screen: everything that is needed is the local terminals. But the connection of an electronic market as an audiobook market floorbased with the session open as MATIF is more difficult, not having thought exchange through an efficient way to meet their settlement systems
In any case, the links and networks will do nothing to reduce the plethora of European stock exchanges, or to create a single European market for key blue chips. For a greater effort is necessary not mean the death of national exchanges, since there is always useful to individual investors, and if locally-curities issued Mr Breuer notes that ultimately is that all local businesses. Retail investors undoubtedly will worry about currency
risk unless and until that happens the monetary union. However, the big investors wholesale are already used to protect against it. For them, investing in big European blue-chip securities would be much simpler in a single market European wholesale, probably under a single regulator
More to the point, if investors and issuers that want to market that will emerge from today the former changes provide or not. What, after all, is an exchange? Not more than one system to gather as many buyers and sellers as possible, preferably under a set of rules. Which is used to mean a physically supervised auction. But computers have made it possible to replicate the characteristics of a physically exchanged electronically. And they make the disclosure of prices and the work of applying rules for an easy market.
Most users exchanges do not know or care that they are using exchange: they deal through brokers or dealers. His concern is dealing with a reputable company, as SG Warburg, Gold-man Sachs and Deutsche Bank, and not an exchange of trust. Since large firms are now members of most plants, they can choose where trade and where use of off-exchange deal, which is why there is so much dispute over market shares in Europe This fluidity creates many possibilities for new rivals to undermine the scholarships established values.
6.2 Europe, Meet Electronics
Consider the experience of the New York Stock Exchange, which remained faithful to its stalwartly session. Has been losing business steadily for two decades, even in its own listed stocks. Winners have included NASDAQ exchange and cheaper regional. trading in New York also has migrated to electro ¬ nic trading systems, as Jeffries & Co's Posit, Reuters Instinct and Wunsch (A computer grandly renamed the Arizona Stock Exchange).
Something similar could happen in Europe. OM, the Swedish options exchange, has an electronic system negotiation that calls Click. She recently renamed the London Securities and Derivatives Exchange. Its former chief executive appointed Lynton Jones, dreams of offering customers side by side on a screen of choice for products in cash, options and futures, some of them tailored to meet specific customers Chicago futures exchanges, concerned, as all exchanges established with the loss of market share, recently launched "flex" contracts that have come to combine homogeneous product Exchange traded with tailor-made over-the-counter.
American electronic trading systems are trying to break into European markets with other products in the same so imagine Instinet and Posit-tion are already active, although they have had limited success so far. Nasdaq has an international branch in Europe. And there are systems developed internally, too. Tradepoint, a new e-commerce system controller in order for the shares in Britain, is about to open in London. Even bond-dealers could play a role. Their trade association, ISMA, is recognized British exchange for trading in Eurobonds, has a computerized communication system known as TRAX, the majority of its members use the international clearing house Euroclear and Cedel settlement of trade. It would be difficult for ISMA to enlarge its scope to include equities or futures and options. The association recently announced a link with the Amsterdam Stock Exchange.
Electronics represents a threat to established exchanges that they will never find when you try to go it alone. A single European market of securities (or derivatives market) need not resemble a stock exchange established at all. It could be a network of several trade and settlement systems that already exists, with computer terminals necessary dispersed throughout the EC. He will have to be regulated at European level to provide reports unilaterally an audit trail to allow deals to be retrieved from seller to buyer, and a way to ensure that investors can achieve market makers offering the best prices. Existing national regulators who prefer to all this through cooperation, but some financiers already speaks of the need for a European SEC. An analogy is the European civil aviation is reluctant to advance for a European system of air traffic control.
Since the European market with the agreed rules is in place, the window of the competition winners and losers among the states grants, based on services and costs, or rival the charms of the immediacy and size of the quote-driven trading range with prices more Acute order-driven trading. Not a pleasant prospect, but if the EC trading arrangements are not subject to this European framework, other artists will intervene to deny them the adventure.
7. NEW TOPICS

Up now we have talked about the role of stock markets securities, trading markets, where an inves-tor who wants out of a particular investment, they can easily sell to another investor who wants to buy. We do not talk about another function of securities markets, which is to raise new capital for corpora-tions and the federal government and state and local governments.
When buying shares in a trade, you are not buying a "new topic". In the case of an old established company, the stock may have been issued for decades, and the company has no direct interest in the now-in their trade, except to record the change in ownership of his books. You have assumed investment from another investor, and you know when you're ready to sell, another investor will buy from you at any price.
New issues are different. You may have noticed the ads on the pages of financial newspaper for new share issues or advertising headlines that because of tight restrictions on ad-vertising new issues, the state virtually nothing except the name of security, the amount being offered, and the names firms that are underwriting the security or bring it to market.
Sometimes there is only one subscriber, more often, especially if supply is high, many companies participate in the underwriting group. Subscribers to plan and manage the offering. They negotiate with the company offering to reach an agreement on the price will be high enough to satisfy the company, but low enough to bring buyers. For companies not been tested, the underwriters may work for a fee-Prearo varied. In the case of established companies, underwriters usually take a risk function because of the company buying the securities at a specified price and reoffering them to the public at a price slightly higher the difference, which is usually between 1% and 7% is the profit of subscribers. Typically, the underwriting-ers be very careful sounded demand is disappointing, or the market generally takes a turn for the worse, when the offer is ongoing, the underwriters may be left with securities that can not be sold at the offer price programmed. In this case, the subscription of "union" is dissolved and the underwriters sell the securities to what they can get, sometimes with substantial losses.
The new issue process is critical to the economy. It is important that both old and new companies have the ability to raise additional capital to meet the needs of business expansion. For you, the individual investor, the area can be dangerous. If a property private enterprise is "going public" for the first time, offering securities in the public market, it usually does at a time when their earnings have been rising and everything looks particularly rosy. The offer also comes at a time when the market is generally upbeat and the prices are relatively high. Even investors may have experienced great difficulty in assessing the real value of a new offering under these conditions.
Moreover, it can be hard for your broker to give you impartial advice. If the broker is in the under-writing or "selling group" of dealers that complements the insurance group, has invested in an in terest Watch the securities sold. In addition, a committee may be substantially higher than in ordi-nary action. On the other hand, if the stock is a "subject hot "in high demand, may be sold only through small individual allocations to preferred customers (who will benefit if the stock in then the operations on the open market at a price well above the offer price fixed)
If you're thinking of buying a new edition, a step of protection that you can take is to read the prospectus, the prospectus is a legal document that describes the company and offering guarantees to the public. Unless of cause- interference is very small, it can not be done without going through an SEC registration process. The SEC can not attest to the value of the offer, but does not act to make sure that the essential facts about the COMPANY and the offer are disclosed in the prospectus.
This requirement of full disclosure was part of the securities laws of the decade 1930 and has been a great boon to investors and securities markets. It works because both subscribers and supply of prey know that if any information relevant is omitted or incorrect in the listing, the path is open to law-suits from investors who bought securities.
In a typical new offering, the final prospectus not ready until the day the securities are offered. But if face-to date you can get a "preliminary prospectus" or "false" in so na med ¬ red because it carries a warning letter-ing that the prospectus has not yet been cleared by the SEC as meeting disclosure require ¬ ments
The red herring will not contain the offering price and underwriting arrangements But the end will give you a description of the business, and demonstrations financial showing only what the company's growth and profitability has been over the last few years he will also tell you something about the man-agement. If the management group is taking the opportunity to sell any large percentage of its shares to the public, be more cautious.
It's very different case when a company established public is to sell additional shares to raise new capital. Here the company and the shares have reputations you can study, and is not as difficult to estimate what could be a reasonable price for the stock price for the offer has to be near the current market price and margin subscribers income will usually be smaller, but you still need to be careful. While the SEC has strict rules against promoting any new offering, the securities industry, can often create an aura of excitement about a company when the offer is on the way On the other hand, knowledge that a large supply is coming may depress the price market action, and there are times when the price of causing interference, turns out to have been a good deal
New bond offerings is an animal completely different. The securities markets are highly professional, and there's nothing glamorous about a new bond offering. Everyone knows that an A-rated corporate
link is very similar to all the old A-rated bonds. In fact, to sell the new problem effectively, it usually costs a little higher "income effective "than the current market more comparable securities, whether an interest rate slightly higher or slightly lower price in U.S. dollars, or both. Thus, for a buyer securities, new issues often-fer a slight price advantage.
What is true of corporate bonds also apply to matters U.S. government and municipal authorities. When the treas Ury, comes to market with a new issue of bonds or notes (a very frequent occurrence), the new edition has a market price close to the amount outstanding (existing) of the Treasury, but the new edition usually brings a slight price concession that makes it a good buy. The same is true of bonds and brought to market by state and local governments, if you are a buyer, municipalities, the new offerings can provide you with price reductions mod-Est. If quality is what you want, there's no reason you should not buy them, even if your broker makes a little extra money in the business.
8. MUTUAL FUNDS. A DIFFERENT APPROACH

Up until now, describe the ways in which the securities are purchased directly, and we discussed how you can make such investments through a brokerage account.
But a brokerage account is not the only way to invest. For many investors, the brokerage has disadvan-tages, the difficulty of selecting an individual broker, the costs committees (especially in small transactions), and the need to be involved in decisions that many would rather leave to professionals. For people who feel thus there is an excellent alternative to mutual funds available.
It's not easy running a small investment account effectively. A background Mutual gets around this problem by pooling money from many investors so it can be managed efficiently and economically as a single large unit. The most known mutual fund is probably the money market fund, where the pool is invested in comprehensive security for investments in the short term, income-producing. Another large group of mutual funds invest in shares, and still others invest in long-term bonds, tax-exempt bonds, and more types special ized investments.
The principle of mutual funds has been so successful that the funds now manage over $ 400 billion of investors' money Non-including more than $ 250 billion in money market funds.
8.1 Advantages of Investment Funds
Investment funds have several advantages. The first is professional management. Decisions like the one-curities to buy, when to buy and when to sell are made for you by professionals. The size of the pool makes it possible to pay for quality management, and About the Author

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