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Chapter 11 - Investing for Your Future

Chapter 11 - Investing for Your Future. Part 2: Exploring Investment Options By Scott Feil January 3, 2006. Overview. Sources of Financial Information Investment Options. Sources of Financial Information. Newspapers Contain financial pages The Wall Street Journal Barron’s

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Chapter 11 - Investing for Your Future

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  1. Chapter 11 - Investing for Your Future Part 2: Exploring Investment Options By Scott Feil January 3, 2006

  2. Overview • Sources of Financial Information • Investment Options

  3. Sources of Financial Information • Newspapers • Contain financial pages • The Wall Street Journal • Barron’s • Investor Services and Newsletters • Standard and Poor’s Reports • Financial Magazines • Business Week, Forbes, Money, The Economist, Kiplinger’s Personal Finance

  4. Sources, cont. • Brokers • Full-service brokers • Provide opinions and analysis • Fidelity, Merrill Lynch, Piper Jaffray • Discount brokers • Buy and sell only • Does not provide advice • Charles Schwab, Ameritrade, E*Trade

  5. Sources, cont. • Financial Advisers • Professional investment planners • Sell stocks, bonds, insurance, retirement, etc. • Annual Reports and Financial Statements • Annual Report - A summary of a corporation’s financial results for the year • Required by the SEC (Securities and Exchange Commission) • Online Investor Education • Ex. The Motley Fool

  6. Investment Options • Low Risk/Low-to-Medium Return • Corporate and Municipal Bonds • Bonds: Represent money borrowed from an investor • Earn a fixed interest • Repaid first if company goes broke • U.S. Government Savings Bonds • Discount bond (Series EE savings bond): buy it for less than its maturity value • $50 bond for $25, get $50 in 10 years (maturity) • Exempt from taxes • Can be cashed for current value at any time

  7. Investment Options, cont. • Low Risk/Low-to-Medium Returns, cont. • Treasury Securities • Treasury bills (t-bills): $10,000+, up to 1 year • Treasury notes: $2,000-$5,000, 2-10 years • Higher rate than t-bills • Tresury bonds: $1,000+, 10-30 years • Interest is taxed by federal govt, but not state/local

  8. Investment Options, cont. • Medium Risk/Medium Return • Mutual Funds • Pools money of many investors to buy large selection of securities • Automatic diversification, personalize • Allows small investors a way in • Annuities • Buy from insurance company and get regular monthly payments (usually after retirement) • “Opposite of life insurance”

  9. Investment Options, cont. • Medium Risk/Medium Returns, cont. • Self-managed Retirement Acccounts • 401k, 403b (non-profit), 503b (govt) • IRA - Individual Retirement Account • Tax Deductible • Keogh Plan • Similar to IRA but for self-employed • Real Estate • Large, non-liquid investment

  10. Investment Options, cont. • High Risk/High Return • Stocks and Trading Instruments • Stock: A unit (share) of ownership in a corporation • Return on Investment: Increased value, dividends • Companies give profits to stockholders as dividends • Futures • Buy and sell commodities (stuff) • Betting that the price will go up • Very risky

  11. Investment Options, cont. • High Risk/High Return, cont. • Options • The right to buy or sell at a specific price • Limited to specific time period • Penny Stocks • Low priced stocks of small companies • Companies have no track record, few assets, no earnings, no revenues • Many will fail, Dot-com bust • Collectibles

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