Investing: Taking Risks With Your Savings 6-2

Where do people keep their savings? What other options might you have? Benefits? Disadvantages?

Stocks and Bonds What are stocks? Corporations are formed by selling shares of stock How does that work? A person who buys into stock entitle them to future profits and assets of the corporation Proof of ownership: Corporation issues stock certificates

People who invest in a corporation and own some of its shares of stock Stockholders People who invest in a corporation and own some of its shares of stock Benefit from stock in two ways: Dividends Return a stockholder receives on the amount that he or she invested in the company Typically paid out when the company makes a profit Selling your stock When would you want to buy stock? When would you want to sell it?

What is capital gain? What is capital losses? Profit a person makes Losses a person suffers

Bonds What is a bond? Certificate issued by a company or the government in exchange for borrowed funds Why might this be a good way to invest? Receive interest Money is invested for a certain amount of time After that is over- bond’s maturity Differences than stock?

Tax-Exempt Bonds What is a tax exempt bond? Bonds sold by government where your interest is paid on the bond and is not taxed by the government Good investments for the wealthy, why?

Savings Bonds Bonds that are purchased at half value and increase every six months until full face value is reached Interest rates on the bonds depend on the economy If you take out a savings bond early, you are guaranteed a fixed rate of interest

T-Bills, Notes, and Bonds Treasury Bills- Minimum investment is $1,000 Mature quickly- A few days-26 weeks Treasury Notes- Minimum investment of $1,000 Maturity range is 2-10 years Treasury Bonds- Minimum investment of ???? Maturity range is 30 years Exempt from state and local taxes; but not federal

What are some ways you can buy and sell stocks and bonds? What is a stock broker? Person who acts as a middle man for buyers and sellers of stocks and bonds What are some ways you can buy and sell stocks and bonds? Call the brokerage firm Interest firms Over 100 online brokerage firms Estimated 20 million investors through the internet each year

Stock Exchanges What is the largest stock exchange company in the stock market? NYSE New York Stock Exchange Regional Branches International Branches How might businesses be on these large exchanges? Good financial standing Usually the biggest companies in the world

Over-the-Counter Markets NASDAQ? National Association of Securities Dealers Automated Quotations Electronic purchase and sale of stocks and bonds Usually deals with smaller companies

Stock Market Indexes What is the most well known stock market index? Measures of what is happening to a given set of stock prices for a specified list of companies Dow-Jones Industrial Average- The “DOW” Involves 30 major companies in the United States

Bond Markets New York Exchange Bond Market and the American Exchange Bond Market- two largest in the world Who can you hire to help you out with investing in bonds? Financial Adviser

Mutual Funds Investment company that pools the funds of many individuals to buy stocks, bonds, or other investments Put money into many different stocks What is the advantage to that? What might be a disadvantage?

Money Market Funds Type of mutual fund that uses investors’ funds to make short term loans to businesses and banks Federal government insures them against loss What FRA regulates to stock market? SEC! SEC was created in 1929, why is that significant?