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Stock Market & Indexes Reference Cheat Sheet
A printable reference covering stocks, dividends, market indexes, price changes, returns, risk, diversification, and compound growth for grades 9-12.
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This cheat sheet explains how the stock market works and how indexes help investors track market performance. Students need these ideas to understand investing news, compare companies, and make informed long-term financial decisions. It also supports classroom work on percentages, graphs, risk, and personal finance planning. The core concepts include share ownership, stock price changes, dividends, total return, and market indexes such as the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite. Important formulas include percent change = (new value - old value) / old value x 100 and total return = (ending value - beginning value + dividends) / beginning value x 100. A strong understanding of diversification, risk, and compounding helps students see why investing outcomes can change over time.
Key Facts
- A stock is a share of ownership in a company, and its price can rise or fall based on supply, demand, company performance, and investor expectations.
- Percent change = (new value - old value) / old value x 100, which measures how much a stock or index has increased or decreased.
- Capital gain = selling price - purchase price, and a capital loss occurs when the selling price is lower than the purchase price.
- Total return = (ending value - beginning value + dividends) / beginning value x 100, which includes both price change and income received.
- Dividend yield = annual dividend per share / stock price per share x 100, which shows dividend income as a percentage of the stock price.
- A market index tracks a group of stocks to show how part of the market is performing, such as the S&P 500 tracking many large U.S. companies.
- Diversification means spreading money across different investments to reduce the effect of one poor-performing stock on the whole portfolio.
- Compound growth means investment earnings can earn more earnings over time, and the future value formula is future value = present value x (1 + rate)^time.
Vocabulary
- Stock
- A stock is a share of ownership in a company that may increase or decrease in value.
- Market Index
- A market index is a measurement that tracks the performance of a selected group of stocks.
- Dividend
- A dividend is a payment that some companies give to shareholders from company profits.
- Portfolio
- A portfolio is the collection of investments owned by a person or organization.
- Diversification
- Diversification is the strategy of spreading investments across different assets to reduce risk.
- Volatility
- Volatility is the amount and speed of price movement in an investment or market.
Common Mistakes to Avoid
- Confusing a stock with a bond is wrong because a stock represents ownership, while a bond represents a loan that is usually repaid with interest.
- Using only price change to judge performance is incomplete because total return also includes dividends received during the investment period.
- Thinking an index is a single company is wrong because an index tracks a group of stocks chosen to represent a market or sector.
- Ignoring percent change and comparing only dollar changes can be misleading because a 20 stock than for a $200 stock.
- Putting all money into one popular stock is risky because poor performance by that one company can greatly damage the entire portfolio.
Practice Questions
- 1 A stock rises from 50. What is the percent change in the stock price?
- 2 You buy a stock for 92, and receive $3 in dividends. What is your total return percentage?
- 3 An index starts the year at 3,200 and ends the year at 3,600. What is the index percent change for the year?
- 4 Explain why an investor might choose an index fund instead of buying shares of only one company.