🔴 0. Introduction
,● Securities
○ Stocks, bonds, mutual funds, and other financial instruments that an investor
might purchase to meet their financial goals.
○ 2 types
■ Equities (stocks)
● Represent ownership in a corporation
○ Buying a stock share makes you a shareholder, a part owner
of that company, giving you rights like voting on company
decisions and getting dividends
● Stocks offer the opportunity to participate in the growth/success of
businesses
● Types of stocks
○ Common stock
■ A type of equity security that represents ownership
in a corporation
■ Most basic form of ownership
■ Typically grants shareholders voting rights on
company matters (like electing board of directors)
■ Have the potential to earn dividends (benefit from
capital appreciation if the stock price increases)
○ Preferred stock
■ A type of equity security that represents ownership
in a corporation, BUT has features of both stocks
and bonds
■ Typically does not offer voting rights
■ Offers a fixed dividend payment, which is paid out
before dividends to common stockholders
● Dividends
○ Distributions of a company's profits to shareholders,
○ Typically paid out in cash or additional shares of stock
○ Often issued on a regular schedule (typically quarterly)
○ Vary depending on profits and are never guaranteed
● Capital Appreciation
○ An increase in the value of an investment over time, such
as when a stock's price rises
○ One of the primary ways investors can profit from owning
stocks or other assets
● Capital
○ Money used to grow a business.
○ Most common sources are investors and banks
, ● Capitalization
○ Size of a company as measured by market value
○ This value: outstanding shares (number of shares in the
market) multiplied by the price per share
○ Large-cap: largest companies, often with market
capitalization over $10 billion
■ Other terms for smaller companies like mid-cap,
small-cap, and even micro-cap
■ Debt (bonds)
● When a company/government needs to borrow money to grow and
operate
● Bonds are the most common
○ “IOUs issued by companies or government”
○ When you buy a bond, you're lending money to the issuer
in exchange for regular interest payments and the promise
of getting your principal back when the bond matures
● Often classified by the issuer (who sold the debt and must pay it
back, with interest) and the term (how long until the debt must be
paid back)
● Principal/face amount
○ Amount that was borrowed (what the issuer sold the bond
for)
○ Represents the amount that must be paid off at the end of
the term
● Maturity
○ Date when the principal must be paid off
● Interest
○ Amount of money the borrower pays the investor
○ Represents the cost of borrowing the money
● 3 main issuers of debt securities:
○ The Federal Government (“govies”) and its agencies sell
debt to fund operations of the government
○ Municipalities (“munis”) are governments below the
federal government, like states, counties, and cities
■ Like the federal government, these governments
issue debt to raise capital for operations and to build
big projects, like bridges and dams
○ Corporations also sell bonds and other types of debt
securities to raise capital for growth and expansion
, ● Debt securities are also classified by how long they have until they
mature
○ Long-term debt matures in ten years or more, medium term
debt matures in five-to-ten years, and short-term debt
matures in under five years.
○ Money market securities always mature in one year or less
○ Registration of new securities
■ Primary market (where corporations sell their stocks and bonds to the
public to raise capital)
● Government sells bonds to the public to raise capital in the same
way
● The primary market is where securities are born
■ Issuer (company or government selling a security)
■ Corporations sell stocks and bonds to help pay for expansion, like building
a new factory or new stores, buy other companies as a way to grow the
business, or to pay off early investors or pay down debt
■ Governments sell bonds to pay for large projects, like building a bridge or
a stadium, or to pay for everyday operations.
■ When you see a sale in the primary market, an issuer is selling a new
security to raise capital; when you see that a corporation has a new issue
or is making a primary offer, it is happening in the primary market
■ The Securities Act of 1933
● Sets most of the rules for primary markets
● Requires full and fair disclosure, so all investors have complete
and accurate information when a new issue is sold to the public
● Requires that a new issue, unless it is exempt from the act, be
registered with the Securities and Exchange Commission (SEC)
before sale
● All investors in a corporate issue must receive a prospectus (a
detailed disclosure document that outlines the company's
financials, risks, and important details) before the sale
● Make sure investors have access to accurate and complete
information about the securities being offered, and to prevent fraud
and deception in the market
● Material
○ "All material information needed to make an informed
investment decision"
○ By requiring this transparency, the Act helps investors
make more informed decisions and reduces the chances of
them being misled or taken advantage of
,● Securities
○ Stocks, bonds, mutual funds, and other financial instruments that an investor
might purchase to meet their financial goals.
○ 2 types
■ Equities (stocks)
● Represent ownership in a corporation
○ Buying a stock share makes you a shareholder, a part owner
of that company, giving you rights like voting on company
decisions and getting dividends
● Stocks offer the opportunity to participate in the growth/success of
businesses
● Types of stocks
○ Common stock
■ A type of equity security that represents ownership
in a corporation
■ Most basic form of ownership
■ Typically grants shareholders voting rights on
company matters (like electing board of directors)
■ Have the potential to earn dividends (benefit from
capital appreciation if the stock price increases)
○ Preferred stock
■ A type of equity security that represents ownership
in a corporation, BUT has features of both stocks
and bonds
■ Typically does not offer voting rights
■ Offers a fixed dividend payment, which is paid out
before dividends to common stockholders
● Dividends
○ Distributions of a company's profits to shareholders,
○ Typically paid out in cash or additional shares of stock
○ Often issued on a regular schedule (typically quarterly)
○ Vary depending on profits and are never guaranteed
● Capital Appreciation
○ An increase in the value of an investment over time, such
as when a stock's price rises
○ One of the primary ways investors can profit from owning
stocks or other assets
● Capital
○ Money used to grow a business.
○ Most common sources are investors and banks
, ● Capitalization
○ Size of a company as measured by market value
○ This value: outstanding shares (number of shares in the
market) multiplied by the price per share
○ Large-cap: largest companies, often with market
capitalization over $10 billion
■ Other terms for smaller companies like mid-cap,
small-cap, and even micro-cap
■ Debt (bonds)
● When a company/government needs to borrow money to grow and
operate
● Bonds are the most common
○ “IOUs issued by companies or government”
○ When you buy a bond, you're lending money to the issuer
in exchange for regular interest payments and the promise
of getting your principal back when the bond matures
● Often classified by the issuer (who sold the debt and must pay it
back, with interest) and the term (how long until the debt must be
paid back)
● Principal/face amount
○ Amount that was borrowed (what the issuer sold the bond
for)
○ Represents the amount that must be paid off at the end of
the term
● Maturity
○ Date when the principal must be paid off
● Interest
○ Amount of money the borrower pays the investor
○ Represents the cost of borrowing the money
● 3 main issuers of debt securities:
○ The Federal Government (“govies”) and its agencies sell
debt to fund operations of the government
○ Municipalities (“munis”) are governments below the
federal government, like states, counties, and cities
■ Like the federal government, these governments
issue debt to raise capital for operations and to build
big projects, like bridges and dams
○ Corporations also sell bonds and other types of debt
securities to raise capital for growth and expansion
, ● Debt securities are also classified by how long they have until they
mature
○ Long-term debt matures in ten years or more, medium term
debt matures in five-to-ten years, and short-term debt
matures in under five years.
○ Money market securities always mature in one year or less
○ Registration of new securities
■ Primary market (where corporations sell their stocks and bonds to the
public to raise capital)
● Government sells bonds to the public to raise capital in the same
way
● The primary market is where securities are born
■ Issuer (company or government selling a security)
■ Corporations sell stocks and bonds to help pay for expansion, like building
a new factory or new stores, buy other companies as a way to grow the
business, or to pay off early investors or pay down debt
■ Governments sell bonds to pay for large projects, like building a bridge or
a stadium, or to pay for everyday operations.
■ When you see a sale in the primary market, an issuer is selling a new
security to raise capital; when you see that a corporation has a new issue
or is making a primary offer, it is happening in the primary market
■ The Securities Act of 1933
● Sets most of the rules for primary markets
● Requires full and fair disclosure, so all investors have complete
and accurate information when a new issue is sold to the public
● Requires that a new issue, unless it is exempt from the act, be
registered with the Securities and Exchange Commission (SEC)
before sale
● All investors in a corporate issue must receive a prospectus (a
detailed disclosure document that outlines the company's
financials, risks, and important details) before the sale
● Make sure investors have access to accurate and complete
information about the securities being offered, and to prevent fraud
and deception in the market
● Material
○ "All material information needed to make an informed
investment decision"
○ By requiring this transparency, the Act helps investors
make more informed decisions and reduces the chances of
them being misled or taken advantage of
