Mr. Marcotte was at Joel’s Little League game last week where he ran into one of...

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Finance

Mr. Marcotte was at Joel’s Little League game last week where heran into one of the other parents, who seemed to
be in a very upbeat mood. Mr. Richards could not seem to stoptalking about his windfall in the past week on some
stocks he had bought in the last month or so. Since Mr. Marcotte isstill new to the investing game, he seemed to be
somewhat overwhelmed with some of the terms like stock splits, P/Eratios, dividend payout that Mr. Richards was
using to explain his success story. Moreover, Martin Marcotte hasalways assumed that one needs to have a sizable
amount to invest in the stock market, not to mention the inherentrisk involved in the equities market. It has not
helped that by nature Mr. Marcotte is a risk averse person, heseems to think that if he was to dabble in the stock
market, he will have the same fate as those who invested in Enron,World Com, or some of the other companies
involved in fraudulent practices.
Having the above concerns aside, Martin knows that he will not beable to achieve his financial goals by keeping his
savings in a savings account or having certificates of deposits.Therefore he has decided to research stocks further,
and together with Mrs. Marcotte start a small investment in somewell-researched company. Before he does so,
however he still has several questions that he needs answered.
Part 1: The Marcottes are not sure what are the different waysone make money by investing in the stock of a company?
Please list and explain the three ways you can make money withstocks.
Part 2: Given that there are many classifications of stocks tochoose from, which ones should the Marcottes invest in
initially? (Remember, their initial goal is to have sufficientfunds for their kids’ college education) It may maybe
more than just one class of stock. Explain and support yourrecommendations for the Marcottes.

Part 3: The Marcottes are not sure if they should use aFull-Service of Discount Brokerage firm, since they feel they
will not be able to spend enough time researching individualstocks. What recommendation would you give them?
Please support your recommendation.
Part 4: What are the long term techniques that the Marcottes canfollow when investing in the stock market? List and
explain two methods. Which one do you recommend for thisfamily?
Part 5: What are the short term techniques that the Marcottescan follow when investing in the stock
market? List and explain two of the methods and explain why youwould not recommend them to Marcottes.

Answer & Explanation Solved by verified expert

4.1 Ratings (638 Votes)

1 Three ways to make money with stocks are cash dividends companies pay cash dividends to shareholders out of their profits stock dividends companies issue additional stock to existing shareholders capital gains the market prices of stocks can appreciate resulting in price gains 2 As See Answer

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Transcribed Image Text

Mr. Marcotte was at Joel’s Little League game last week where heran into one of the other parents, who seemed tobe in a very upbeat mood. Mr. Richards could not seem to stoptalking about his windfall in the past week on somestocks he had bought in the last month or so. Since Mr. Marcotte isstill new to the investing game, he seemed to besomewhat overwhelmed with some of the terms like stock splits, P/Eratios, dividend payout that Mr. Richards wasusing to explain his success story. Moreover, Martin Marcotte hasalways assumed that one needs to have a sizableamount to invest in the stock market, not to mention the inherentrisk involved in the equities market. It has nothelped that by nature Mr. Marcotte is a risk averse person, heseems to think that if he was to dabble in the stockmarket, he will have the same fate as those who invested in Enron,World Com, or some of the other companiesinvolved in fraudulent practices.Having the above concerns aside, Martin knows that he will not beable to achieve his financial goals by keeping hissavings in a savings account or having certificates of deposits.Therefore he has decided to research stocks further,and together with Mrs. Marcotte start a small investment in somewell-researched company. Before he does so,however he still has several questions that he needs answered.Part 1: The Marcottes are not sure what are the different waysone make money by investing in the stock of a company?Please list and explain the three ways you can make money withstocks.Part 2: Given that there are many classifications of stocks tochoose from, which ones should the Marcottes invest ininitially? (Remember, their initial goal is to have sufficientfunds for their kids’ college education) It may maybemore than just one class of stock. Explain and support yourrecommendations for the Marcottes.Part 3: The Marcottes are not sure if they should use aFull-Service of Discount Brokerage firm, since they feel theywill not be able to spend enough time researching individualstocks. What recommendation would you give them?Please support your recommendation.Part 4: What are the long term techniques that the Marcottes canfollow when investing in the stock market? List andexplain two methods. Which one do you recommend for thisfamily?Part 5: What are the short term techniques that the Marcottescan follow when investing in the stockmarket? List and explain two of the methods and explain why youwould not recommend them to Marcottes.