1. Methods of Investing

2. Why Invest? 0 What does investment mean? 0 An investment is something that you acquire with the goal of making money! 0 This begins if you can carefully build a solid financial plan, having money available then understanding the options you have available.

3. Investments 0 As you build your financial plan, your priority should be to save cash that is placed in a liquid investment! What is a liquid Investment? 0 These include insured bank accounts such as checking accounts, CD’s and saving accounts! 0 Why not use these Liquid Investments for everything? 0 High liquid, lower risk investments generally offer low interest rates. 0 These kind of accounts barely keep pace with inflation. 0 What is inflation? 0 Not keeping pace with inflation means that if you put $5,000 in an account and left it for 7 years it would actually buy less then when you started. 0 When investing you should strive for investments that offer you the hope of higher returns on your investment (Stocks, bonds and Mutual Funds)

4. Higher Returns 0 The price though of higher returns comes with a higher risk. 0 These investments are more fun to trade and watch but don’t produce even, steady results. 0 They are very unpredictable. 0 The stock market is unpredictable but has offer higher long term results then liquid investments. 0 While you can make a lot of money over the course of a few months, it can also be lost in a matter of hours. 0 You have no insurances, for example if a company you invest in goes bankrupt you can loose everything you invested.

5. Investing in stocks 0 What are Stocks? 0 They are Certificates that represent pieces of ownership in a company. 0 Example, If a company issues 100 shares of stock that represent the entire ownership of the firm, then each stock would represent 1 % of the firms ownership 1/100 th of the firms value (Microsoft and Apple have Millions of shares)

6. Stock Exchanges 0 Companies issue & Sell stock as a way of raising money for business operations, expansion and other needs 0 When a company decides to go “Public” the first sale of a stock is called an “Initial Public Offering” (IPO). 0 The initial sale makes the company money but only if the company has an IPO of one million shares. 0 Then sell the stocks for $10 a share and at the end should make $10,000,000 in cash. 0 After the stocks can be traded and sold again but the company doesn't’t make money off of that.

7. Stock Exchanges 0 After the IPO is sold the trading and selling takes place in the secondary market which are more known; New York Stock Exchange (NYSE) or the National Association of Security Dealers Automated Quotation system (NASDAQ). 0 This is known as “public trading” 0 What your are looking at at the NYSE is yelling, screaming and Chaos. What this is actually showing is the buying and selling of stocks---believe it or not it works remarkably well!! 0 https://www.youtube.com/watch?v=6yguPLkPh0A https://www.youtube.com/watch?v=6yguPLkPh0A

8. Behavior of investors 0 There are many types of investors who trade (buys and sell) Stocks. 0 One type is an Institutional Investor…What is this? 0 They trade large volumes of stocks on behalf of large institutions. 0 Mutual Funds 0 Investors sell stocks to make a profit

9. Factors that may increase or decrease stock price 0 Strong Econ. Growth 0 Low Interest Rates Strong demand for Increase in 0 Low inflation Conditions Investor expect firms stock; low Firm’s 0 Strong industry Conditions Firms to supply of firm’s stock price 0 Proper decisions by firm performs well shares for sale! 0 Weak Economy Weak demand 0 High Interest Rates for firm’s stock; Decrease 0 High Inflation Investors expect Large supply of in Firm’s 0 Weak Industry conditions firms to firms shares for Stock 0 Improper decisions made perform poorlySale. Price By firm

10. Markets 0 What is a “Bear Market? - Markets that are trending Downward 0 What is a “Bull Market”? - Markets that are trending upward. 0 What is a share holder? - Companies distribute cash to these people, these are people who own stock in the company! 0 What are Dividends? - Dividends are the distribution of cash. Companies' pay dividends in cash, or sometimes, In additional stocks. Dividends are another way stock holders make money in the market.

11. Market 0 For some companies instead of giving out dividends they use that money to expand their business and in the future reward their investors with high stock prices. 0 Stocks unlike banks does not have insurance on your money. The FDIC insures your money up to $250,000 the stock exchange does no such thing, which is why there is such a high risk. 0 The Security and Exchange Commission (SEC) is the agency that regulates and monitors the stock market. 0 Make sure its fair for everyone and that the companies that offer stocks are giving accurate information.

12. Stock Transactions 0 When buying and selling stocks will require you to open an account at a brokerage firm. 0 These are firms that provide you access to the stock market 0 Full service brokerage firm---Provides advice and executes your trade for you (Merrill Lynch or Edward Jones). 0 Discount brokerage--- Reduced level of service, lower costs, and often the ability to make your trades yourself online.

13. Investing in Bonds 0 What is a Bond? 0 A bond is basically a promissory note, or a promise to repay a certain amount of money at some point in the future. Investors buy bonds, basically lending money to the bond issuer. In return, the investor accumulates interest. 0 How they Work… 0 Each bond has a face value & a rate of interest 0 Maturity Date- A bond usually has a maturity date of five to thirty years and this is the expiration date of the bond. 0 Face value= The bonds maturity value which is on the front of the bond. 0 Coupon Rate= A bond’s interest rate

14. Bonds 0 Bond holders can also sell their bonds at a higher value than their face value. 0 Bond also carry some risk…remember that when you buy a bond you are basically lending the bond issuer money…If the issuer has problem you might not get your money back or the interest owed to you.

15. Type of Bonds 0 Four types of Bonds; 1) Treasury Bonds, 2) Municipal Bonds, 3)Federal Agency Bonds and 4) Corporate Bonds 0 Treasury Bonds - The U.S. Treasury uses these bonds to finance the debt of the U.S. government - Investors can buy and sell bonds prior to their maturity date. - These present no default risk as they are backed by the federal government. 0 Municipal Bonds - State and local gov’t issue these. - they are used to finance large public projects, such as water and sewer systems. 0 Federal Agency Bonds - Certain federal agencies issue bonds to help them fund projects. - In cases of housing, the bond proceeds are used to buy mortgages to encourage home ownership. 0 Corporate Bonds - Large firms issue these. - Have all degrees of risk depending on company strength. - Companies with solid financial positions have low risk other have high risks.

16. Mutual Funds 0 Mutual Funds sell shares to investors in order to collect a pool of money that is then used to buy various investments. 0 Have a process of investing called Diversification - Diversifying investments reduces the risk because failure of one company (or even one industry) will not significantly impact the entire amount invested. - You can loose money in those investments but the other investments you are invested in can offset those costs if they are doing well.

17. Other Investments 0 Real estate - Is an asset you can buy and sell. This can also in the future sell for more money than you paid for it. 0 Owning a Business

18. Interest 0 Compounding Interest - Interest that accrues on the initial principal and the accumulated interest of a principal deposit, loan or debt. Compounding of interest allows a principal amount to grow at a faster rate than simple interest, which is calculated as a percentage of only the principal amount. 0 Simple Interest - A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate by the principal by the number of periods.