1 / 24

Investing

Investing. Investing. Risk The chance that an investment will decrease in value Return The income you earn on an investment RATE OF RETURN Return (profit) / Investment $100 (earned) / $1000 (investment) = 10% Higher Risk = Higher Rate of Return (or Loss!). Investing. Diversification

clancy
Download Presentation

Investing

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Investing

  2. Investing • Risk • The chance that an investment will decrease in value • Return • The income you earn on an investment • RATE OF RETURN • Return (profit) / Investment • $100 (earned) / $1000 (investment) = 10% • Higher Risk = Higher Rate of Return (or Loss!)

  3. Investing • Diversification • Consider: • You financial situation • Your risk tolerance • Your values

  4. Investing in Corporations • Share of stock • Unit of ownership • Stockholders • Owners of a company • Dividend • Portion of the profits • Bought and sold • Stock exchange • Electronic system – NASDAQ • Usually round lots of 100 share

  5. STOCK EXCHANGE • Transactions • When shares are bought or sold • Stockbroker • Person who handles the transfer of stocks and bonds between buyers and sellers

  6. STOCK EXCHANGE • Brokerage firm • Company that specializes in buying and selling stocks and bonds • Fees charged for services • Stock exchange • Location where orders to buy or sell stock are sent and carried out • NYSE on Wall Street in NY

  7. NASDAQ • National Association of Securities Dealers Automated Quotation System • In 1990’s became most common way to trade stock • Electronically links brokerage firms • Transactions without central location

  8. Making Money from Stocks • Dividends • Selling • Capital gain • Capital loss

  9. Types of Stock • Preferred Stock • Non-voting share • Fixed dividend, unless company incurs loss • Receive assets if company goes under before common stockholders

  10. Types of stock • Common Stock • Voting share • No set dividend • Board of Directors (elected by shareholders) decide on dividends • No assets if company goes under (and after preferred stockholders) • Riskier than preferred stock (possibility of higher return) • Frequent price changes

  11. Remember.. • The only way to earn money is to sell the stock. • You are never guaranteed your investment back.. • No matter which stock you buy! • Investigate a company before buying

  12. Blue chip stocks • Large, well-established companies • History of steady sales and profits • Usually pay dividends • Dividends usually grow • Values do no change rapidly • AT&T • Ford • GM

  13. Growth stocks • Small/young companies • New products • Little to no dividends • Profits used to purchase new equipment or research • Expected to experience rapid growth • Higher risk

  14. Mutual Funds • Group of investments owned by many investors • Investors buy shares of the fund • Fund pools money to buy a variety of stocks and investments • Diversify your investment • Benefit of services of investment professionals who make decisions for you

  15. Mutual Funds • Minimum deposit ($1000) or more • Value changes with the value of stocks or bonds

  16. Mutual Fund • Maintenance fees • Annual fees = .2 percent of the value of investment to 3% or more • Some mutual funds have LOAD (5-6%) • Front end load – fees paid upon purchase • Back-end load – fees paid when sold • Pays salespeople who market fund • NO-LOAD • No sales people • You request an order form, complete, return with payment

  17. Mutual Fund Investment Objectives • Growth Funds • Growth and income • Income funds • Tax-free funds (municipal bonds) Smaller dividends, larger capital gains Lower Risk and Potential Return Greater Risk and Potential Return Growth funds Growth and Income funds Income funds Tax-free funds Higher dividends, lower capital gains

  18. Mutual Fund Investment Objectives • Risk/Return (see pyramid) • Global funds in businesses located in many nations • Index funds in stocks that an index is based on • S&P 500 Index – group of stocks economists use to judge the overall performance of the stock market (this fund invests in these stocks)

  19. Finding Investment Information • Request annual reports from company • Prospectus – mutual fund • Ask a stockbroker • Full-service broker – provides info and advice • Discount brokers – no info or advice

  20. Advice • Invest through large, well established stock brokerage firms • Ask name, address, info of any company asking you to invest—check them out! • Get investment offer in writing • Avoid a hard sales pitch to buy NOW • “inside” information is dishonest and fraudulent • Immediate payment is NOT due (5 days)

  21. Regulation • SEC prevents insider trading – trading stock based on info not available to the general public

  22. Retirement • Pension plans (not so common any more) • 401K plans through employer • Employee matching program • Portable • Choose investment plan • May be tax-deferred • Individual Retirement Account (IRA) • Traditional – tax-deferred • Roth – no taxes upon usage • Maximum yearly investment ($2,000)

  23. Investments • Investment Clubs • Real Estate • Your home • Rental property • Collectibles • Collecting for profit is risky

  24. Additional information • Odd lots vs. round lots • Bear market (prices of a certain group fo securities are falling or expected to fall) • Bull market (prices are rising or expected to rise) • Corporate bonds • Municipal bonds • American Stock Exchange

More Related