FIN352 Vicentiu Covrig 2 Objectives of the course and text To understand the investments field as currently practiced Gain familiarity with the institutions and language of Wall Street so as to facilitate the development of an effective personal investment strategy. To help you make investment decisions that will enhance your economic welfare To create realistic expectations about the outcome of investment decisions Acquire a framework for understanding the returns on all financial assets, including stocks, bonds and financial derivatives.
FIN352 Vicentiu Covrig 3 Buy High, Sell Low?! It is obvious that investors should buy low and sell high in order to build wealth over time. - So why do investors frequently buy high and sell low? The investment process involves analytical analysis of investment alternatives that are filtered through a decision process that is fraught with psychological biases. - To be a successful investor, you should be able to use the analytical tools and control your emotions and psychological biases!
FIN352 Vicentiu Covrig 4 Investment Industry Jobs Jobs - Brokers - Traders - Portfolio managers - Financial planners - Investment bankers - Security analysts Working at - Commercial banks - Savings and credit unions - Securities firms - Investment banks - Companies - Credit rating agencies - Mutual funds - Life insurance companies - Securities exchanges
FIN352 Vicentiu Covrig 5 Key Investment Concepts A portfolio - Diversified (hopefully!) collection of stocks, bonds and other assets. - Individual investments are often evaluated on how they change the characteristics of the portfolio. Risk - Chance of economic loss. - Sometimes measured as a variation in return. Expected Return - Anticipated gain of a specific period of time. - Often evaluated as compensation for taking certain types of risks.
FIN352 Vicentiu Covrig 6 The Tradeoff Between Expected Return and Risk Investors manage risk at a cost - lower expected returns (ER) Any level of expected return and risk can be attained Risk ER Risk-free Rate Bonds
FIN352 Vicentiu Covrig 7 Getting information - Newspapers Barron’shttp://www.barrons.com/Biting market commentary once a week, portfolio analysis and databank. Investor’s Business Dailyhttp://www.investors.com/default.aspFounder William O’Neal dispenses stock picking, charting, and momentum strategies. Big on investor education. The Wall Street Journalhttp://online.wsj.com/home/usThe daily paper when it comes to financial news and information. Print subscribers get interactive access at a bargain price. USA Todayhttp://www.usatoday.com/money/front. htm Don’t underestimate “McPaper’s” Money Section when it comes to business, economic, and financial news. It’s terrific!
FIN352 Vicentiu Covrig 8 Getting information - Magazines Business Weekhttp://businessweek.com/index.htmlTimely business news and analysis, useful business school, career and small business information. The Economisthttp://www.economist.com/Offers analysis and opinion on the business and political events of the week. Forbeshttp://forbes.com/Terrific commentary on economics and financial markets from an all- star stable of regular columnists. Fortunehttp://www.fortune.com/fortuneFamous for Fortune 500 company list. Interesting advice on career development. Kiplinger's Personal Financehttp://www.kiplinger.comProvides practical guidance on saving, investing, planning for retirement, and major purchases. Moneyhttp://money.cnn.com/Interesting market commentary, company and mutual fund analysis aimed at novice investors. Smart Moneyhttp://www.smartmoney.com/Serves the need for personal finance information for affluent, sophisticated, professional, and managerial Americans.
FIN352 Vicentiu Covrig 9 Getting information - Online CBS MarketWatchhttp://cbs.marketwatch.comFocused on financial news and information. Individual investors can find news, commentary, advice, and stock price information. The Motley Foolwww.fool.comAn online forum designed to "educate, amuse and enrich investors." A constant stream of witty investment advice on active message boards. MSN Moneyhttp://moneycentral.msn.com/home.aspInvesting highlights for customized portfolios, market reports, mutual fund directory, retirement and personal finance. TheStreet.comwww.thestreet.comA full menu of stock analysis, market commentary, and biting satire. U.S. Securities and Exchange Commission http://www.sec.gov/This is the place to find free access to official SEC filings by individual companies, obrain information about individual brokers, or file a complaint about shady business practices Yahoo! Financehttp://finance.yahoo.com/A terrific web site with U.S. markets, world markets, quotes, financial news, and data.
FIN352 Vicentiu Covrig 10 The Investment Decision Process Two-step process: - Security analysis and valuation Necessary to understand security characteristics - Portfolio management Selected securities viewed as a single unit How and when should it be revised?