1. Bell Question
How might institutions (such as banks/credit unions) help individuals accomplish their financial goals?

2. Investing: Taking Risks with Your Savings
Chapter 6 Section 2

3. Stocks and Bonds: Stock Returns
Corporations are formed by selling shares of stocks
Shares of stocks entitle buyers a certain part of the future profits and assets of the corporation
The person buying the stock, becomes part owner of the corporation
Proof of ownership=stock certificate

4. Stocks and Bonds: Stock Returns
Stockholders: owners of stock and they benefit in two ways
1.) Dividends=a sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits (or reserves)
2.) Sell the stocks for more than what you paid for: buy stock at a low price in hopes it will increase in value

5. Stocks and Bonds: Capital Gains and Losses
Capital gain: increase in value of an asset from the time it was brought to the time it was sold
Capital loss: decrease in value of an asset from the time it was bought to the time it was sold

6. Real Life Example of Potential Stock Returns
Mrs. Kay’s husband wanted to buy Under Armor Stock in Feb (lets say 100 shares) but I didn’t let him. Let’s see roughly what would have happened.
$18.24 a share Feb Spend $1824
$ a share October =$10,025 (not including dividends)
Profit=$8,201 (OUCH)

8. Stocks and Bonds: Bonds
Instead of buying stocks, you can buy bonds
Bond: a certificate issued by a company or the government in exchange for borrowed funds. It promises to pay a stated rate of interest over a stated period of time and then repay the borrowed amount.
A bondholder: lends for a period of time to a company or government
Unlike stocks, buying a bond DOES NOT make a bondholder part owner of the company
The bond instead becomes part of the debt the corporation/gov owes the bondholder

9. Stocks and Bonds: Tax-Exempt Bonds
Local and state governments also sell tax-exempt bonds
Interest on these bonds is NOT taxed by the federal government
If a state or city issues bonds, you do not pay local taxes on those either
Good investments for wealthier people who would other wise pay high tax rates on interest earned from investments

10. Stocks and Bonds: Savings Bonds
Savings bonds: bonds issued by the federal government as a way of borrowing money
Purchased at half the face value
Increase every 6 months until full value is reached
If you choose to redeem a U.S. savings bonds before it matures, you are guaranteed a certain rate of interest, which changes depending on rates of interest in the economy.

11. Stocks and Bonds: T-Bills, T-Notes, T-Bonds
T-Bills (treasury bills) certificates issues by the U.S. Treasury in exchange for a minimum amount of $1,000 and maturing in a few days up to 26 weeks
T-notes (treasury notes) certificates issued by the U.S. Treasury in exchange for minimum amounts of $1,000 and maturing in 2-10 years
T-bonds (treasury bonds) certificates issued by the U.S. Treasury in exchange for minimum amounts of $1,000 and maturing in 30 years.
The interest on all three of these are exempt from state and local income taxes, but NOT federal income tax

12. Stock and Bond Markets
Broker: a person who acts as a go between for buyers and sellers
Stock exchanges: stock market, largest one is the NYSE New York Stock Exchange.
There are also supplemental stock exchanges and regional ones (Chicago Exchange, London, Tokyo)
To be listed on the stock exchange, a corporation offering stock must prove to the exchange that it is in good financial condition.

13. Over-the-counter markets: an electronic marketplace for stocks not listed on the organized exchanges.
(NASDAQ) National Association of Securities Dealers Automated Quotations.
Brokerage firms hold shares of stocks that they buy and sell for investors

14. Stock and Bond Markets
Stock market indexes: measures of what is happening to a given set of stock prices for specified list of companies; the most well known is the Dow Jones Industrial Average.
“The Dow” index involves 30 major industrial companies in the United States
Bond Market: New York Exchange Bond Market/American Exchange Bond Market-two largest bond exchanges
Bonds, including U.S. government bonds are sold over-the counter and on the internet

15. https://youtu.be/hCzIcS_xPiQ

16. https://youtu.be/F3QpgXBtDeo

17. Mutual Funds
Mutual funds: investment company that pools the funds of many individuals to buy stocks, bonds, or other investments
Most mutual finds hold a variety of stocks/bonds
Losses in one area are likely to be made up by gains in another
Money market funds: type of mutual fund that uses investors’ funds to make short term loans to businesses and banks

18. https://youtu.be/Eb3nY-0jWck

19. Government Regulations
Responsibilities of the SEC (Security and Exchange Commission)
The stock market is heavily regulated at both the state and federal levels
The Securities and Exchange Commission is responsible for administering all federal securities laws and investigates any dealings among corporations, such as mergers, that affect the value of stocks
States also have securities laws that are designed to prevent schemes that would take advantage of small investors

20. https://youtu.be/3TIki6rUBEA

21. Where can I buy stocks?
Acorn
Robinhood