INVESTMENTS 2 VEHICLES FOR CHOICE

1. INVESTMENTS 2VEHICLES FOR CHOICE Dr. Neidermeyer

2. Equity funds Fixed-income funds Mutual Funds Real Estate Call Options Put Options Derivatives Commodities Precious Metals Gems Coins Stamps Antiques/collectibles Vehicles for Choice

3. Equity funds • Common stocks representing ownership in a corporation.

4. Characteristics of equities • Residual ownership in the entity • Voting rights

5. Blue-chip funds Growth funds Income funds Defensive stocks Cyclical stocks Speculative stocks Types of Equity funds

6. Indicators of Value • EPS • Net Asset Value per share • Price-earnings ratio • Yield

7. Fixed-income securities Provide a determinable rate of return on your investment which is fixed for the period of the investment.

8. Characteristics of Fixed-income Securities • Interest-rate sensitive for valuation • Rate of return is stated

9. Preferred stocks Corporate bonds Deep-discount bonds Municipal bonds General obligation Revenue IDBs U.S. Treasury issues U.S. savings bonds Certificates of Deposit Savings Accounts Types of fixed-income securities

10. Indicators of Value for Fixed Securities • Stipulated interest rate • Time period for the investment • Probability of interest rates changes during the term of the investment

11. Mutual Funds • Pooled investor resources purchasing stocks, bonds and other securities chosen under the investment criteria established by the fund and implemented by the fund manager.

12. Characteristics of Mutual Fund Investments • Offer diversification to investors • May be closed or open ended • May be load or no-load • May carry additional annual fees • 12b-1 • Annual management fee

13. Stock: Growth Equity income Global Index Growth/income International sector Bond: Junk Corporate Government Municipal World Other Balanced Money market Types of Mutual Funds

14. Value Indicators for Mutual Funds • NAV: Net Asset Value of each fund is calculated at the end of each trading day • The total market value of fund holdings is divided by the number of outstanding shares.

15. Real Estate Investments • Acquisition of land and/or buildings for commercial use.

16. Characteristics of Real Estate Investments • Made in anticipation of long-term appreciation. • Usually leveraged. • Value and appreciation dependent on demand.

17. Types of Real Estate Investments • Land • Buildings

18. Indicators of Real Estate Value • Demand for occupancy space. • Growing population • Reasonable interest rates

19. Calls and Puts • Market instruments which provide purchase or sale discretion to the investor.

20. Call/Put Characteristics • A call provides the opportunity to purchase an investment at a stated price for a defined period of time. • A put provides the opportunity to sell an investment at a stated price for a defined period of time.

21. Types of Calls & Puts • These instruments exist for both stocks and bonds. They are actively traded on the open market.

22. Calls & Puts Indicators of Value • The likely change in value for the instrument during its established life. • The overall demand for the items to which the instruments provide market access.

23. Derivatives • Contracts which offer risk/price protection to the purchaser of the instrument.

24. Characteristics of Derivatives • Pseudo insurance policy for the holder • This instrument is a risk-management technique • The instrument is available for business situations in which one party is attempting to mitigate a potential shortfall in revenue or increase in cost.

25. Types of Derivatives • Derivative contracts are available for a variety of business situations: e.g. interest-rate derivatives & foreign currency derivatives

26. Indicators of Value for Derivatives • The likelihood of adverse market movement in price for the event being insured. • The greater the probability of adverse movement, the greater the cost of the derivative contract.

27. Commodities • Contracts calling for the delivery of named goods or services in the future.

28. Characteristics of Commodity Contracts • Written at a fixed price • Written for a state period of time • Includes a penalty clause for non-timely delivery of the contracted item.

29. Types of Commodity Contracts • Commodity contracts can virtually be purchased for any item in our economy. • Usual products on commodity contracts would be oil, wheat, barley, pork bellies, etc.

30. Indicators of Value for Commodity Contracts • Consumer demand for the respective commodity item and the probability of a change in the supply quantity would drive the value up or down.

31. Precious Metals • Extractive resources which have value to consumers and/or for industrial uses in the production of goods & services.

32. Characteristics of Precious Metals • Usually available in short supply • Subject to demand swings • May be subject to monopoly control

33. Types of Precious Metals • Gold • Silver • Magnesium • Copper

34. Indicators of Value for Precious Metals • Demand • Supply • Market control

35. Collectibles • Listed items which individuals may accumulate because of intrinsic value to them or assumed on the part of others.

36. Collectible Characteristics • Usually limited in number • May be old • Appeal to particular purchaser preferences • Usually limited sources of availability • Usually appreciating in value

37. Types of Collectibles • Unlimited depending on collectors’ tastes • May be gems, coins, stamps and/antiques • Usually evolve in composition each generation as collector tastes vary

38. Indicators of Collectibles’ Value • Strictly driven by the willingness of another to place enhanced value on an item in limited supply • Market forces and consumer preferences dictate direction of demand and thereby, value swings for these items