1. What to do with the second $10 million you earn!
Investments
What to do with the second $10 million you earn!

2. The first $10 million you gave to Mr. Rapacz.
Investments
The first $10 million you gave
to Mr. Rapacz.

3. Four factors that affect the Investment Decision
Growth
Does the value of the investment appreciate or depreciate over time?
Growth can be positive or negative.
Capital Gain or Capital Loss.
“On Paper” until sold.

4. Four factors that affect the Investment Decision
Income
Does the investment while owned provide earnings?
Interest – from money lent.
Dividends – from ownership of the asset.

5. Four factors that affect the Investment Decision
Risk
How safe or secure is the investment?
What are the possibilities of the investment losing money?
Risk-Reward trade-off

6. Four factors that affect the Investment Decision
Liquidity
Ability to convert to cash.
Market that trades the item.
Maintain value
“Fair market value”

7. Investment Pyramid
Banks - Savings and CD’s
Risk
Return

8. Savings Accounts Growth – None
Income – Interest payments are taxable income
Risk – None
Insured by FDIC up to $100,000 $250,000
Limit is for all accounts in a bank
Liquidity – Savings -aka Demand Deposits (atm)
CD’s Certificates of Deposit give up some liquidity for higher interest rate

9. Investment Pyramid Risk Return Government Bonds
Banks - Savings and CD’s
Risk
Return

10. Government Bonds Savings Bonds – non negotiable
Own until mature – at least 7 years
Great gift – lousy investment
Treasury Bills – up to 26 weeks
Treasury Notes – 2, 5 or 10 years
Treasury Bonds – 30 years
T-Bills, Notes & Bonds are negotiable
Can sell at any time
Can purchase through a bank, broker or directly from the U.S. Treasury

11. Government Bonds T-Bills, Notes & Bonds
Growth – perhaps –
purchased at discount – all T-Bills
Income – yes Interest (Coupon Rate)
Exempt from state & local income tax
Risk – It’s the U.S. Government! NONE!
Liquidity – good
Marketable/negotiable – pay broker fee

12. Investment Pyramid Risk Return Corporate Bonds Government Bonds
Banks - Savings and CD’s
Risk
Return

13. Corporate Bonds A way that corporations borrow money
Corporation can issue bonds for a variety of purposes
Expand their business
Building facilities
Purchasing equipment

14. Corporate Bonds Growth – yes - if bought below par (100%) Income – yes
Varies widely due to risk involved
Highest risk bonds are “Junk Bonds”
Risk – varies
Ratings/grades text pp 322
Liquidity – yes – Bond Market

15. Investment Pyramid Risk Return Stocks Corporate Bonds Government Bonds
Banks - Savings and CD’s
Risk
Return

16. Stocks Shares of ownership in a company Common Stock Preferred Stock
Voting share of ownership in a corporation
Trades quoted on a stock market
If a public corporation.
Preferred Stock
First claim on profits/assets (preferred position)
Dividend rate is usually guaranteed.
Non-voting ownership

17. Stocks Xcel Energy Income stocks Stock pays a consistent high dividend
Share price does not widely fluctuate
Power companies are a good example
Xcel Energy

18. Stocks Growth Stocks Stocks that increase their per share value
Usually do not pay dividends
Often split their shares
Examples would be technology and software stocks.
Microsoft
100 shares of Microsoft on Sept 18,1987 @ $11,450
Today(1/10/12) : 28,800 $27.82 = $801,216
Dec 1999 was max $ $840,672
Google
Apple

19. Stocks Growth – yes –Buy Low – Sell High Income – yes – dividends
Risk – yes
Liquidity – yes – stock markets
Stock Markets – Quote Tickers on CNBC
NYSE - 3 letters or less
NASDAQ – 4 letters

20. Investment Pyramid Risk Return Stocks Mutual Corporate Bonds Funds
Government Bonds
Banks - Savings and CD’s
Risk
Return

21. Mutual Funds “Don’t put all your eggs in one basket.”
Designed to allow investor to diversify
Professional money manager
Collects money from many investors
Purchases a variety of stocks, bonds or other type of investments.
There are now more mutual fund choices than stocks.

22. Mutual Funds Growth – possible Income – possible Risk – possible
Liquidity – varies – fund policies
Mutual Funds

23. Investment Pyramid Risk Return Other risky stuff Stocks Mutual
Corporate Bonds Funds
Government Bonds
Banks - Savings and CD’s
Risk
Return