Investing Chapter 9

Essentials Of Investing

Investing Means going beyond savings, and planning for the future. Making Money with Money.

Some Ways to Invest IRA’s – Individual Retirement Acct. Stocks/Bonds. Mutual Funds. Real Estate – buy/sell, rent. SAVINGS ACCOUNTS. Money Market Accounts/Funds – invest in short-term securities. Certificates of Deposits (CD).

Sources of Financial Information Newspapers (Financial Pages) Financial Magazines – Bus. Week, Fortune, Money Financial Advisors –Advice based on goals/age/occupation/lifestyle Annual Reports –History, data, future growth plans, lawsuits, competition (req. SEC)

If you invest $1,000 each year Interest Rate 5 yrs.10 yrs.15 yrs.20 yrs. 5%$5,525$12,578$21,578$33,065 6%5,63713,18123,27636,786 7%5,75113,81625,12940,995 8%5,86714,48727,15245,762 9%5,98515,19329,36151,160 10%6,10515,93731,77257,257 11%6,22816,72234,40564,203 12%6,35317,54837,27975,052

Rule of 72’s Determine how long it will take you to double your money –Take 72 and divide it by the amount of time you have to save. The number calculated will determine the interest rate you need to double your money in that time period –Take 72 and divide it by the interest rate you are earning. The number calculated will provide you with the amount of time needed to double your money

NASDAQ OTC N- National A - Association of S - Securities D - Dealers A - Automated Q - Quotation System

Types of Stocks Growth - Reinvests profits into Co. Penny - Less than $5 per share Blue Chip - Well established Co. Income - Consistently pays a dividend Cyclical - Up and Down with Economy Defensive - Remains stable even during economic decline

Common Vs. Preferred Can only lose what you put in COMMON –Vote - policy decisions - more shares more votes (Proxy) –Receive Dividends if Co. is doing well –Paid 2nd –Risky PREFERRED –No voting rights –Dividends are fixed –Paid first –Less Risky

BULL VS. BEAR BULL - Is a stock market with rising stock prices over an extended time. BEAR - Is a stock market with falling prices over an extended period of time.

Commission Front-end – pay commission up front Back-end – pay commission when you sell No-load – when purchased from mutual fund co., No salespeople

Vocabulary Prospectus – how fund operates, distributed by law, co. Must provide Trustee – individual that manages assets for someone else Dow Jones Industrial Average

Bonds Pays interest at maturity. Face value/par value-amount bond holder is paid when comes due. Savings – risk free, $50 – 10,000. Up to $15,000 Corporate – sold thru brokers on open market just like stocks. Junk – risky, low investment rating, higher rating the lower the interest. (Ba/BB) Municipal – issued by state and local government, min – $5,000, exempt from Fed. Taxes.

Mutual Funds Growth fund – invest in established co. And industries, aggressive –new co. and industries (risky). Income fund – consistently pay good dividend (moderate risk). Balanced fund – invest in mixture of stocks and bonds (low risk) want income with growth and safety.