1. CH. 11: INVESTING

2. 3 THINGS YOU CAN DO WITH MONEY:
INVEST IT!
SAVE IT!
SPEND IT!

3. REDIRECTING YOUR RESOURCES FOR PROFIT AND FUTURE BENEFIT
INVESTING:
REDIRECTING YOUR RESOURCES FOR PROFIT AND FUTURE BENEFIT

4. INVESTING CONTRIBUTES TO THE FREE ENTERPRISE SYSTEM
Profit Motive:
PRIVATE
CITIZENS
INVEST IN
ORDER
TO MAKE A
PROFIT

5. HOW DOES INVESTING WORK?

6. WHAT DOES INVESTMENT REQUIRE?
Financial System
Assets
Financial Intermediary
Knowledge of Risks

7. FINANCIAL SYSTEM MUST BE: STABLE REGULATED
FREELY ACCESSIBLE BY INVESTORS AND INVESTEES

8. ASSETS
MONEY
(OR THINGS OF WORTH)
TO INVEST

9. FINANCIAL INTERMEDIARIES HELP YOU INVEST
PROVIDE:
PROSPECTUS
PORTFOLIOS
DIVERSIFICATION
LIQUIDITY

10. BONDS: LOANS OR IOUs THAT REPRESENT WHAT A CORPORATION OR GOVERNMENT OWES YOU AT MATURITY

11. THREE BASIC COMPONENTS OF BONDS:
COUPON RATE: interest rate paid to you
MATURITY: the date that you can cash it in
PAR VALUE: the principal (starting) value

12. See p. 279 for bond rating systems

14. STOCKS EQUITIES OR SHARES: a corporation allows you to
own a “piece” of their company in
exchange for either “dividends”
or “capital gains”

15. HOW DO YOU MAKE MONEY IN THE STOCK MARKET?
Step # 1: Research the corporation
Step # 2: Find a financial intermediary
Step # 3: Buy the stock (number of shares)
Step # 4: Monitor the progress
Step # 5: Sell it to earn “capital gains” or to
cut “capital losses”
Step # 6: Collect “dividends”

16. WHERE CAN YOU RESEARCH? FINANCIAL NEWS CORPORATE WEBSITES
FINANCIAL INTERMEDIARIES

17. ALL STOCKS ARE NOT THE SAME

18. WHERE DOES THIS HAPPEN? NYSE - an actual place in NYC
- largest stock exchange
- blue chip stocks
NASDAQ - mostly electronic
- OTC stocks
Brokers and Traders

19. DOW JONES INDUSTRIAL AVERAGE
SHOWS THE HEALTH OF THE
TOP 30 CORPORATIONS IN THE
STOCK MARKET

20. S & P 500: TOP 500 CORPORATIONS

21. BULL VS. BEAR MARKET Bull Market: prices are rising Bear Market:
prices are falling
Which is scarier?

22. OPTIONS & FUTURES Investing based on prices in the future
and reserving the option to buy or sell in the
future.

23. What’s it like to work at the NYSE?