2.  Planning to use your money for the future  Making Money with Money  Risk is going to be involved  Higher Risk=Higher Rate of Return (or Loss)!  Return is the amount of money earned on an investment  RATE OF RETURN  Return (profit) / Investment  $100 (earned) / $1000 (investment) = 10%

3.  Consider:  Financial Situation  Risk Tolerance  Values  Goals  Diversification – spreading your money out over several different investments

4.  Common Stock  Voting share  No set dividend ▪ Board of Directors (elected by shareholders) decide on dividends  No assets if company goes under (and after preferred stockholders)  Riskier than preferred stock (possibility of higher return)  Frequent price changes  Market Price of Common Stock is determined by the demand for the stock

5.  Preferred Stock  Non-voting share  Fixed dividend, unless company incurs loss  Receive assets if company goes under before common stockholders

6.  Large, well-established companies  History of steady sales and profits  Usually pay dividends  Dividends usually grow  Values do no change rapidly  AT&T  Ford  IBM  GE

7.  Small/young companies  New products  Little to no dividends  Profits used to purchase new equipment or research  Expected to experience rapid growth  Higher risk

8.  Dividends - Distribution of a portion of a company's earnings, decided by the board of directors to a class of its shareholders. The amount of a dividend is quoted in the amount each share receives or in other words dividends per share.  Selling  Capital gain  Capital loss

9.  The only way to earn money is to sell the stock.  You are never guaranteed your investment back..  No matter which stock you buy!  Stocks are better used as a long-term investment compared to a short term investment  Investigate a company before buying

10.  Annual Dividend of an Investment/current market value (current price)  Yield = a %  Increase in current yield is healthy

11.  Corporations after tax earnings / the number of outstanding shares (shares people own)  Measure the amount of profit for each share  Increase is a good thing

12.  Price Earnings Ratio  Price of one stock/corporations earnings per share  Low PE is a good sign  Low PE indicates the company has a lot of earnings when compared to the price of the stock

13.  Difference between the close of a stock on one day and that of the opening on a new day.  You would want a high change because more people are demanding the stock.

14.  Security and Exchange Commission (SEC) – enforces laws concerning the trading of stocks and bonds and licenses stockholders  SEC prevents insider trading – trading stock based on info not available to the general public

15.  Original Investment = Shares * Cost  Dividend * Number of Shares * Years = Current Return  (Selling Price Per Share – Purchase Price Per Share)*Number of Shares Held = Capital Gain  Current Return + Capital Gain = Total Return$  Total Return/Original Investment = Rate of Return /$6375 = 34%

16.  Bondholder is a creditor of the company issuing the bond  Bonds essentially a loan to a company or government for repayment in the future

17.  401K plans through employer  Employee matching program  Portable  Choose investment plan  Can be tax deferred  Pension plans (not so common any more)  Offered by Corporations as a benefit for lengthy employment  Designed to provide retirement income  Usually a portion of what the employee was making before retirement

18.  Group of investments owned by many investors  Investors buy shares of the fund  Fund pools money to buy a variety of stocks and investments  Diversify your investment  Benefit of services of investment professionals who make decisions for you  Value changes with the value of stocks or bonds

19.  Wall Street Journal  Info on businesses, banks, government, foreign nations  Quotes stocks (ticker symbol), bonds, mutual funds  Forbes, Fortune, Kiplinger’s Personal Finance Magazine, Money  Internet

20.  Invest through large, well established stock brokerage firms  Ask name, address, info of any company asking you to invest—check them out!  Get investment offer in writing  Avoid a hard sales pitch to buy NOW  “inside” information is dishonest and fraudulent  Immediate payment is NOT due (5 days)

21.  How does diversification help limit risk?  How does age and financial situation affect how you make investment decisions?