1. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Investment Planning #11

2. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Q. 1. What are the objectives of investing?

3. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. What Are Your Investment Objectives? Current Income – appropriate for retired persons Major Expenditures – college education, down payment on a home, or starting a business Retirement – live comfortably in "golden years" Shelter from Taxes – preserve more of your earnings

4. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Q. 2. What are the different ways to invest?

5. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Different Ways to Invest 1. Common Stock 2. Bonds 3. Preferreds and Convertibles 4. Mutual Funds and Exchange Traded Funds 5. Real Estate

6. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1. Common Stock Different Ways to Invest Represents a share of ownership in a corporation Greater potential returns with a higher level of risk

7. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2. Bonds Different Ways to Invest Represent debt – IOU’s of the issuerProvide interest income Bond values inversely related to changes in interest rates

8. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Different Ways to Invest 3. Preferred Stock Equity security that behaves like debt Fixed dividend paid before dividend to common stockholders Convertible Bonds Special type of fixed income security Allows conversion into common stock Provides income and possible price appreciation Hybrid Securities

9. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Different Ways to Invest 4. Mutual Funds – Professionally managed portfolio by an investment company – Returns and risk depend on portfolio 4. Mutual Funds – Professionally managed portfolio by an investment company – Returns and risk depend on portfolio Exchange Traded Funds Track a basket or index of securities

10. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5. Real Estate Different Ways to Invest Invest directly or through shares in a REITDifficult to estimate risk and returnInvestors must be aware of economic cycles

11. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Q. 3. Define Securities market.

12. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Securities Markets “Arenas” where financial instruments trade

13. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Q. 4. What are the two segments of securities market?

14. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Securities Markets - TIME Capital Market - long-term securities with maturities >1 year Money Market - low-risk, short-term securities with maturities l< 1 year

15. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Securities Markets - TYPE Primary market new issues available for first time Investment bank underwrites Issuing company gets proceeds Prospectus Secondary market trading previously issued securities Securities exchanges NASDAQ OTC Market

16. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Broker and Dealer Markets Broker Market buyer and seller come together, direct trade takes place between them Party A sells securities directly to Party B Dealer Market buyer and seller never meet buy/sell orders are executed separately through securities dealers acting as market makers

17. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Regulating the Securities Markets Federal and state laws regulate securities sales Provides for adequate and accurate disclosure of financial information Securities and Exchange Commission (SEC) administers federal securities laws

18. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Q. 5. Define a Bull market and a Bear market.

19. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Market Trends Bear Market Falling securities prices for extended time period – Investor pessimism – Economic downturn Bull Market Rising securities prices for extended time period – Investor optimism – Favorable economy

20. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Q. 6. Who is a Stockbroker? What are the services provided by the Stockbroker?

21. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Making Transactions in the Securities Markets Stockbrokers buy and sell securities for customers Full-service, discount, or online brokers Brokerage feesInvestor protection

22. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Q. 7. What are the different types of orders when buying or selling securities?

23. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Types of Orders Market order - trade now at best available price Limit order - trade when a specified price or better is reached Stop-loss order - sell if stock drops to certain price, use to limit losses

24. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Q. 8. What types of investment information are needed to become an informed investor?

25. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Becoming an Informed Investor Annual Reports

26. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Becoming an Informed Investor Annual ReportsFinancial Press

27. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Becoming an Informed Investor Annual ReportsFinancial PressIndustry Data

28. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Becoming an Informed Investor Annual ReportsFinancial PressIndustry DataStock Quotes

29. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Becoming an Informed Investor Annual ReportsFinancial PressIndustry DataStock QuotesAdvisory Services

30. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Becoming an Informed Investor Annual ReportsFinancial PressIndustry DataStock QuotesAdvisory ServicesOnline Services