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Understanding the Words of Wall Street:

Understanding the Words of Wall Street:. Putting your money to work. Investment Pyramid. More Volatile/Speculative Investments and decreased liquidity. Increasing Risk = Increased chance of larger rate of return. Collectibles Property. Stocks.

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Understanding the Words of Wall Street:

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  1. Understanding the Words of Wall Street: Putting your money to work

  2. Investment Pyramid More Volatile/Speculative Investments and decreased liquidity Increasing Risk = Increased chance of larger rate of return. Collectibles Property Stocks More Conservative Investments and increased liquidity IRA’s/401k’s Corporate Bonds Mutual Funds Government Bonds, Certificates of Deposit (CD’s) Savings/checking accounts Investments on bottom of pyramid = low risk & low rate of return!

  3. So What is a Stock? Stocks: • Ownership interest in a company • When you own stock/shares in a company essentially you own part of the company.

  4. Why buy a stock? You will have… • Possibility to sell shares at a higher price later. (buy low, sell high) • May receive dividends (profit or AKA earnings) • Possible claim on assets • Voting rights

  5. Preferred vs Common Stock • Preferred Stock: • Pays a fixed dividend • Common Stock: • Voting rights • More Volatile

  6. Where Are Stocks Bought & Sold?

  7. Major Stock Markets • New York Stock Exchange (NYSE) • Oldest, largest exchange • NASDAQ • Pure Electronic Exchange Video

  8. What affects the Price of a Stock? • Fundamentally: • Supply and Demand • Demand is effected by… • Company Health / Outlook • Industry Trends • Economy • National & World Events Confidence and Fear

  9. Advantages vs. Disadvantages • Advantages: • Medium to High return potential • Historically 10%-12% return • Highly Liquid • Disadvantage: • Medium to High risk • Highly volatile

  10. Buying Stocks Broker • A licensed professional that buys and sell stocks for investors. • Example: Schwab, Edward Jones

  11. Buying Stocks Online • A website that allows users to buy and sell stocks. • Example: Ameritrade

  12. Income Stocks • Older, stable companies • High dividends, low growth • Utility companies: ComEd • Low Risk/Low Return • Good for older investors

  13. Blue-Chip Stocks • Well Known, reliable companies • Small but regular dividends • Steady growth • GE, Microsoft, Walmart • Medium risk / Medium Return • Good for long term investors who don’t want to much risk

  14. Growth Stocks • Young, entrepreneurial companies • High Growth Potential • Example: Tech start-ups • High Risk / High Return • Good for risk takers who could afford a loss.

  15. Mutual Funds • A collection of investments managed by professionals. • Traded just like a stock. • Pros: • Easy way to diversify • Professionally managed • Cons: • Fees

  16. Types of Funds

  17. Retirement Accounts IRA’s • An investing plan with special tax benefits 401K Plan • A tax differed retirement plan set-up by your employer. • Employer may match contributions

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