1. Risk and Reward
Investment options

2. Stocks, Bonds, and Mutual Funds
Stock- An investment in the ownership of a corporation, usually represented by shares of the business.
A companies profits are paid to it’s stockholders in the form of dividends
If a company’s value goes up, the value of the stock will also go up (Vise Versa)
When you sell your stock, you either earn a capital gain or a capital loss

3. Stocks, Bonds, and Mutual Funds
Basic Types of Stock
Common Stock
Preferred Stock

4. Stocks, Bonds, and Mutual Funds
Common Stock
Receive dividends based on the companies earnings
Voting rights in the companies board of directors
Each share you own, you have one stock
Owning this type of stock is a pro/con

5. Stocks, Bonds, and Mutual Funds
Preferred Stock
Receive a fixed earning
Receive the same dividends no matter what kid of profit the company is/isn’t making.
If the company does not make enough money, the preferred stockholders get paid, however the common stockholders will not
No voting rights
Owning this type of stock is a pro/con

6. Stocks, Bonds, and Mutual Funds
The Stock Markets- Stocks are bought and sold on the stock market, also called the stock exchange.
Anyone who has the money to buy a share of stock can invest
Three major stock markets
New York Stock Exchange
NASDAQ
American Stock Exchange

7. Stocks, Bonds, and Mutual Funds
New York Stock Exchange
In terms of dollars, it is the largest in the world and one of the oldest (1790s)
Very similar to what you see in the movies
Around 1,366 brokers buying and selling orders per day.
About 3,000 US and foreign companies are listed on the NYSE

8. Stocks, Bonds, and Mutual Funds
NASDAQ
Founded in 1971
Represents the largest US stock market in terms of listings
Approx. 3,200 companies are listed and trades more shares per day than any other US market.
NASDAQ= National Association of Securities Dealers Automated Quotations systems
All done online

9. Stocks, Bonds, and Mutual Funds
American Stock Exchange
AMEX
Not very big
Only handles 10% of trades

10. Stocks, Bonds, and Mutual Funds
Before you invest in a stock you will want to know the following….
What has it been doing the past year
Has its price been going up or down
What kind of dividends does it pay

11. Stocks, Bonds, and Mutual Funds
Newspaper (or online) terms you will want to know
52 Week High- in dollars and cents, the highest price paid for one share during the past 52 weeks
52 Week Low- shows the lowest price paid for a share during the past 52 weeks.
Stock(Ticker)-The name of the company and its stock ticker symbol

12. Stocks, Bonds, and Mutual Funds
Newspaper (or online) terms you will want to know
Div- indicates, in dollars, the amount of dividend forecasted for the following year
Yield- % indicates the rate of return, which is equal to the dividend per share of stock dividend by the closing price.
P/E- the price-earning ratio-the closing price per share of stock divided by the company’s net earning per share over the past year

13. Stocks, Bonds, and Mutual Funds
Newspaper (or online) terms you will want to know
Vol(00s) indicates the number of shares traded on that particular day (in hundreds)
High- each day’s intra-day high trading price
Low- each day’s intra-day low trading price
Close- shows the closing price-the price paid in the final transaction of the day
Net Chg- the difference between today’s closing price and the closing price on the previous day.

14. Stocks, Bonds, and Mutual Funds
Evaluating Stocks
Blue-Chip Stocks- safe investments in the ownership of large respected corporations that have been around for many years
Dow Jones Industrial Average
Daily average of the 30 largest blue-chip companies
“The Dow” quotes on a number of points not actual stock prices
Each point is equal to $1.00

15. Stocks, Bonds, and Mutual Funds
Evaluating Stocks
Bull Market
When investors are optimistic about the market
Bear Market
When investors are pessimistic about the market

16. Stocks, Bonds, and Mutual Funds
Risk and Return
How much risk are you willing to take?
The greater potential on your return, the greater the risk
Are you buying and selling stocks to make money?
If this is the case you may be wiling to take more risk since you are not in it for the dividends

17. Stocks, Bonds, and Mutual Funds
Higher Risk Investments
for the extreme dare devils
Futures
Options
Penny Stocks

18. Stocks, Bonds, and Mutual Funds
Futures
Contracts to buy or sell a commodity, stock, or other financial instrument for a set price, at a specific date in the future.
Wheat, Corn, and/or Soybeans
Livestock
A person investing in futures is basically betting that the price of a particular stock is going to rise or fall in the future.

19. Stocks, Bonds, and Mutual Funds
Options
The owner of a option has the right- but not the obligation- to buy or sell a stock at a predetermined price, on or before a specific date.

20. Stocks, Bonds, and Mutual Funds
Penny Stocks
Low-priced stocks, usually less then $1.00 per share.
Issued by start up companies
They do not have reliable growth patterns.
Not traded on major markets, so they are not easy to find
More times than not they end up closing- if this happens investors lose all their money
If the company is successful, investors could end up with a lot of money.

21. Stocks, Bonds, and Mutual Funds
Many different organizations sell bonds to raise money
Bonds can be purchased from companies as well as towns, cities, states or the government.

22. Stocks, Bonds, and Mutual Funds
Basic Types of Bonds
Bond- similar to an IOU
Bonds are sold in order to borrow money for things such as new buildings, starting up new businesses or creating new transportation systems.
When you buy a bond you are simply lending money to that organization.
The issuer of the bond (the lender) must pay you back, plus interest when the bond is mature- or reaches its due date.

23. Stocks, Bonds, and Mutual Funds
Four types of Bonds
Corporate
Municipal
Savings
T-Bill

24. Stocks, Bonds, and Mutual Funds
Corporation Bond
Corporations sell corporation bonds
Must be repaid in full at maturity
The bond owner receives regular, periodic interest payments during the life of the bond

25. Stocks, Bonds, and Mutual Funds
Municipal Bonds
Sold by cities, towns, countries, and other governments
Also must be repaid when they reach maturity
Interest on these bonds are tax-exempt
You do not have to pay taxes on the income you receive by these bonds

26. Stocks, Bonds, and Mutual Funds
Savings Bonds
Sold by the US government
Most popular is the Series EE Savings Bond
This type of bond is purchased at a financial institution for half of what it will be worth when it is mature.
Electronic EE Savings Bond
Done via the Internet, purchased for face value, but cannot be redeemed for 12 months.
Another way to save money

27. Stocks, Bonds, and Mutual Funds
T-Bills – Treasury Bills
Very similar to a savings bond
Lowest denomination for a T-Bill is $1,000.
Maturity rates vary from a few years up to 30 years.

28. Stocks, Bonds, and Mutual Funds
Risk and Return
People like Bonds because they are less risky than stocks
You are garneted your money back after the maturity date