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INVESTMENTS 101

INVESTMENTS 101. STOCK MARKET SUMMARY What is an INVESTMENT? Short term sacrifice long term gain Deregulation began in 1999. HISTORY-. Stock Market Crash (1929)- Banks failed due to over-investing in the stock market. Glass Stegall Act of 1933 - Strict government regulations of banks.

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INVESTMENTS 101

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  1. INVESTMENTS 101 • STOCK MARKET SUMMARY • What is an INVESTMENT? • Short term sacrifice long term gain • Deregulation began in 1999

  2. HISTORY- • Stock Market Crash (1929)- Banks failed due to over-investing in the stock market. • Glass Stegall Act of 1933- Strict government regulations of banks. • De-regulation – in 1999 the government eased up on some of the banking restrictions

  3. INVESTMENTSWhy do people invest? • Wealth accumulation • Comfortable retirement • Maintain purchasing power

  4. Factors of INVESTING • RISK/ REWARD- The riskier the investment the greater potential for a large gain or loss. Small or new companies are considered a more risky investment. • Time Factor- When am I going to need this money back?

  5. BANK INVESTMENTS • Savings • Money Markets • CD (Certificate of Deposit)

  6. STOCK MARKETFundamentals of Investing 2 Main Types: Stocks & Bonds

  7. How do companies finance business activities? By issuing: • Stocks (Equities) • Shares of stock represent ownership interest in company (i.e. shareholders are part owners) • Shareholders participate in profits of company through growth in value of stock

  8. Stocks- 3 Types • Preferred Stock- Stocks with priority and preference. • Common Stock- Most stocks are common unless specified otherwise. Prices changes with the market on a constant daily variation. • Treasury Stock- Company issued stock to employees usually in retirement plans (internally held shares of the company’s stock).

  9. Companies also issue… • Bonds (Fixed Income) • The purchaser of a bond is lending money to the company at a set interest rate specified at the time of purchase • Ownership of a bond makes them a creditor of the company • If a company bankrupts due to financial difficulty, bond holders have priority claims on assets before stock holders

  10. Bonds- 3 Types • Government/ Govt backed- Government issued bonds or secured by the government (FEDERAL GOVT) • Municipal- Local government issued bonds (Example- School bonds) • Corporate- Company issued bonds

  11. In what do people generally invest? • Stocks • Bonds • Mutual Funds

  12. Mutual Fund?!? What is a Mutual Fund? • Investors pool their money together into a fund, a “mutual fund” • A professional money management team is hired to manage the fund • The management team decides which stocks and/or bonds to buy and sell and when

  13. WHY Mutual Funds are popular? • By design mutual funds are less risky than individual stocks and even bonds because of DIVERSIFICATION. • You can purchase multiple stocks and bonds to spread out the risk. • Mutual funds are a very popular way for people to invest due to their features and benefits

  14. OTHER INVESTMENTS • Annuities • Options- • Calls- • Puts- • Foreign Exchange (FOREX) • Commodities-

  15. Saving for retirement • Saving for retirement is the primary reason most people invest • RETIREMENT PLANS • IRA- • ROTH IRA- • 401k-

  16. Retirement planning is critical • The reality is that each one of us is in control of our own retirement destiny • The earlier you begin saving the more likely you will be in a better position in retirement • More time to accumulate retirement dollars • Compounding effect of your earnings making earnings is more powerful the longer you invest

  17. How much money does it take to retire? • The reality is that everyone has a different amount that will work for them but there are some consistent rules of thumb: • You should only expect to be able to draw out about 5% per year for income from the value of the assets you have accumulated (i.e. $1,000,000 x 5% = $50,000) • You will need approximately 75 to 85 percent of your working years income to maintain your standard of living during retirement

  18. What is this? 2x3x5x7x52x20 = $218,400.00

  19. 2x3x5x7x52x20 2 people 3 meals a day 5 dollars per meal 7 days per week 52 weeks per year 20 years (65% chance of living at least 20 years if you retire at age 62) $218,400 just to eat !!!

  20. THE MARKET • INDEX- • DJIA- • S&P 500 MARKETS- NYSE- NASDAQ-

  21. Careers in the investment industry • Financial Advisor • Financial Analyst • Portfolio Manager • Investment Banker

  22. THE END

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