The basics that we should know

 The use of long-term savings to earn a financial return.  Powerful way to strengthen your financial position over time.  Provides for future needs.  Allows you to make money on money.

 Inflation is the rise in the general level of prices.  Reduces buying power over time.  As prices rise, it takes more money to purchase items.

 Financial success grows from the assets that you build up over time.  Helps you accumulate wealth faster than if you simply saved.  When you invest in stocks and bonds, you are participating in helping businesses make and sell new products and services. You will be rewarded with dividends and interest.

STOCKHOLDERS a. People who own stock. Ways to earn money: a. DIVIDENDS: Money paid to stockholders. b. CAPITAL GAINS: An increase in the value of the stock over time. Ex. If you bought a stock for $5 per share and the corporation thrived, its stock price might go up to $10 per share. If so, you could sell it for a substantial profit. If a company fails or goes out of business, you can lose all of your investments.

Common Stock a. Represents a type of stock that’s a variable dividend. b. Gives the holder voting rights. c. A board of directors is elected and they make decisions about policies. Preferred Stock a. Pays a fixed dividend but no voting rights. b. Paid a set amount no matter how the company is doing. c. Less risky than common stock. d. Dividends may be lower than common stockholders would earn, if the company is thriving over time.

Growth Stocks a. Stocks in corporations that reinvest their profits in the business so that it can grow. b. Investors buy for future capital gains. c. Often selected by younger people who have more time to let investments grow. Blue Chip Stocks a. Stocks of large well-established corporations with a solid record of profitability. b. Usually well known by most people ie. IBM, Coca-Cola c. Conservative investments. d. Safe, stable, but moderate returns.

Several factors affect the price you will pay for a share of stock: a. The COMPANY. Stock is attractive when the company is doing well. Stock price will continue to rise. a. INTERST RATES. When interest rates fall below the rate of inflation, people buy more stock, and the price rises. b. The MARKET. If the company is in a popular industry and its products/services are selling, its stock price will rise.

Securities Exchanges a. A marketplace where brokers who are representing investors buy and sell securities. b. New York Stock Exchange (NYSE): largest organized stock exchange in the US. c. American Stock Exchange (AMEX) Bull and Bear Market Conditions a. The stock market goes through cycles. b. Bull Market: a.Prolonged period of rising stocks prices b.General feeling of investor optimism c. Bear Market: a.Prolonged period of falling stocks prices b.General feeling of investor pessimism

 A stock index is a benchmark that investors use to judge the performance of their investments.  Ex: The Dow Jones Industrial Average  Average price movements of 30 major stocks listed on the New York Stock Exchange.  Investors compare their stocks to this average to judge how well they are doing.  Others: Standard & Poor’s 500, NASDAQ

Define your goals. a. Be specific and measurable. b. Identify how you plan to use the money. Go slowly. a. Before making investments, gather information. b. Avoid get-rich-quick schemes. Follow Through. a. Re-evaluate your investments. Keep Good Records. a. Pay attention to how your investments are doing. b. Keep statements to verify account balances and transfers.

Seek Good Investment Advice. a. Ask questions. b. Seek advice from professionals. Keep Investment Knowledge Current. a. Be aware what is new in the financial market. Know Your Limits a. Understand your tolerance of risk and the amount of money you can afford to risk.

 Newspapers  The Wall Street Journal  Financial pages of local newspaper  Investor services and newsletters  Standard and Poor’s Reports  Value Line  Financial magazines  Business Week  Forbes

 Brokers  Provide clients with analysis and opinions based on their judgments.  Can’t expect a broker to pick winners every time.  Examples of Full-Service Brokers: Merrill Lynch, Fidelity Investments, American Express  Discount brokers: buy and sell securities for people at a reduced commission. Ex: Charles Schwab, E*TRADE  Financial advisors  Also called investment planners.  They are trained to give advice based on your goals, age, lifestyle, and other factors.

 Annual reports  Summary of a corporation’s financial results for the year and its prospectus for the future.  The SEC requires all public corporations to prepare this each year and send to stockholders.  Can be found online.  Online investor education  Teenvestor is dedicated to helping teens learn how to invest and manage money.  Motley Fool websites