I. Choose one company that is a member of the S&P/TSX 60 Index (you can find a list here by scrolling to the bottom of the page and clicking on Constituents S&P/TSX 60 Index (CAD)). Using the types of risk, research and clearly explain the various sources of risk related to this company.

Part II: Stocks in the News

Find one recent news story (from the past month) about one equity trading anywhere in the world and explain both the story and how the lessons from the text apply to help understand the story. Be sure to include a link to the appropriate web page.

Your submission should be no more than 750 words total (including both questions), plus an appropriate references section. Review the Assignment Rubric so you can see how marks will be awarded.

When you own stock in a company, you own an actual part—however small—of that company and all the profits that it makes after paying all of its costs and paying debt holders. That’s pretty exciting by itself! But the main reason that people choose to invest in (buy) stocks is the hope of having more money in the future than they have today—they want to receive dividends through time and for the stock price to increase. Historically, this has been a good plan. While stocks don’t do better every year, over time they have outperformed most standard asset classes like bonds or cash. This doesn’t come without risk. There can be considerable variability and there is always a potential for loss—even over the long term. For example, stock prices in Japan are still at about half the level of their peak in 1989.

In this Unit, you will look not only at how stock returns compare through time and around the world, but also make sure that you understand the different features of stocks and different types of stocks. First, it is important to understand just what a stock is and some of the different types that you will hear about and read about. 

If you decide that you want to buy a specific stock, how much will you pay? It is now easy to find stock prices on the internet, but how do you read the details of the stock quotes? 

How much will your broker charge you to execute the transaction? 

Even when talking about the ‘value’ of a stock, that isn’t necessarily what you will pay. There are many different versions of ‘value’ that investors talk about, and since it is your money you want to make sure that you are paying the right one!

One way that shareholders are compensated for investing their money is through dividends. When a company earns money every year (and sometimes even if they don’t), they will retain some of that money to help to grow the business (such as R&D, new machinery, or a new IT system) and some of that money will be paid to the owners of the business—he shareholders. While we will not focus on how those decisions are made, it is important that you understand how and when you will receive your dividends and how they are generally quoted. Sometimes these dividends are not paid out in cash, but in stock, which may or may not be what you wanted!

Whether you choose to trade regularly or buy and hold for the long term, and whether you prefer local or international stocks, large stable companies or small startups with lots of potential and lots of risks, stocks are likely to form a significant part of most investment portfolios.