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Ch. 8.3 Investment Pros and Cons

Ch. 8.3 Investment Pros and Cons. Objectives Examines ways to avoid risky schemes Graph the change in market value Use graphs to predict future value. 1. Investment Booby Traps. We see ads like these in the newspaper, “Worried about inflation? Diamonds are an investor’s best friend.”

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Ch. 8.3 Investment Pros and Cons

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  1. Ch. 8.3 Investment Pros and Cons Objectives Examines ways to avoid risky schemes Graph the change in market value Use graphs to predict future value

  2. 1. Investment Booby Traps We see ads like these in the newspaper, “Worried about inflation? Diamonds are an investor’s best friend.” “Make quick money! For only $1000, you can earn $16,000” “Let me show you how I can quadruple the value of you stock portfolio in 18 months”

  3. 1. Investment Booby Traps These type of come-ons operate on the principle that greed will overcome common sense. Their ultimate goal is to separate you from your money without anything much in return. However, In the past the situation was far worse The stock prices were frequently manipulated by those in a position to distribute misleading information about stocks.

  4. Video Clip • How were the days leading up to the crash? • When did the stock market crash? • What was RCA’s high and low? • What was the unemployment rate? • Why did the stock market crash?

  5. 2. How is it Different Now? Congress established the Securities and Exchange Commission (SEC). They are an independent federal agency whose purpose is to prevent unfair stock practices. They have 2 responsibilities: • To require companies to file with the commission complete and accurate information about the company. • To protect investors against misrepresentation and fraud in the issuance and sales of stocks.

  6. 3. Tips from the SEC • Do not deal with security firms or salespeople with whom you are not personally familiar with • Be sure you understand the risk you are taking. • Have all you purchases put down in writing. • Put a lot of thought and research in to it

  7. 3. Tips from the SEC • Do not play the market, that is, do not buy a stock with the intention of selling with a profit in only a few weeks or months. • Do not listen to high pressure sales talk. • Beware of “tips”, rumors, and promises of spectacular profits. “If it sounds too good to be true, it probably is”

  8. 4. Be aware of Con-Brokers You may occasionally run in to a con artist who is interested only in taking you money.

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