2 Three reasons to invest Investing helps beat inflationInvesting increases wealthInvesting is fun and challengingOpportunity to take riskRisk- the uncertainty of the outcome of any given situationGain knowledge
3 7 Wise practices of investing Define you financial goalsGo slowlyKnowledge is powerIf it sounds to good to be true it probably isFollow throughKeep good recordsSeek good investment adviceKeep knowledge currentKnow you limitsHow much money can you afford to risk?How much risk are you willing to take?
4 Risk/RewardThe greater the potential reward – The greater the risk that must be taken in order to achieve it.RiskReward
7 Risk Pyramid Medium risk Low risk Stocks Bonds Mutual funds Real EstateLow riskSavings BondsMoney marketCD
8 Medium risk/Medium return StockStock is a share of ownership in the assets and earnings of a companycore of America’s economic systemprovide portfolio diversificationDiversification- spreading risk among many types of investments
9 Why Companies Issue Stock To grow or expandTo pay for ongoing business activitiesIt is popular because:The company does not have to repay the moneyPaying dividends is optional
10 Common Stock Vs. Preferred Stock 2 Basic Types of StockCommon StockVs.Preferred Stock
11 Common StockCommon stock – shares or units of ownership in a public corporationMost basic form of ownershipOne vote per share owned to determine company’s board of directors
12 Preferred StockPreferred stock – type of stock that pays a fixed dividendDividendsdistribution of a portion of a company's earnings to shareholdersFixed value paid out before common stockIF company fails preferred gets paid before commonLess risk than common stock = lower returnsNo voting rights
14 NYSE Yahoo Guided reading Pg 293-294 Summarize what each column on a stock listing meansPick three columns that you believe will be the most useful to you when choosing stocksNYSEYahoo
15 How Well the Stock Market is Doing Overall Part 2
16 3 Basic Indicators Dow Jones Industrial Average (“DOW”) Lists the 30 leading industrial blue chip stocksStandard and Poor’s 500 Composite IndexCovers market activity for 500 stocksMore accurate than DOW because it evaluates a greater variety of stockNational Association of Security Dealers Automated Quotations (“NASDAQ”)Monitors fast moving technology companiesSpeculative stocks, show dramatic ups and downs
17 Ups and Downs bull market -market is doing well optimistic about the economy and are purchasing stocksbear market -market is doing poorlyinvestors are not purchasing stocksselling stocks already owned
19 Stock brokers Full-service brokers- most expensive will call with advicekeep an eye on stock and call if changes need to be made.Discount brokers- charge lessgeneral adviceresearch options availableBuy and sell for youOnline brokerage sites- CheapestNo advice-you do research for yourselfOrder takers
20 Three Stock Exchanges New York Stock Exchange (NYSE) Oldest and largest, began in 17922,800 companiesStrict requirementsAmerican Stock ExchangeBegan in 1849allowing younger, smaller companies to listNational Association of Securities Dealers Automated Quotationsover the counter electronic market4,000 small companiesMore volatile because companies are young and new
21 Stock Transactions Customer- you Broker- qualified and regulated professional who buys and sells stocksTrader- someone who buys and sells stock sharesSpecialist- Seller of specific stock. Shows best bids and asked prices to the market during trading hours.
22 NEW YORK STOCK EXCHANGE TradersNEWYORKSTOCKEXCHANGESpecialistVERY HUMAN LOCATIONBrokerCustomer
23 The guaranteed way to make money in the stock market is simple: Buy Low and Sell High
25 Medium risk/Medium return Mutual funds- shares bought in a large, professionally managed group of investmentPools money of investors to buy large amounts of stocks and bondsAdvantagesProfessional managementDiversification- spreading risk among many types of investments
26 Bond- money loaned to government or corporation CorporateDebentureMortgageConvertibleGovernmentMunicipalRevenueGeneral obligationStudy Guide- read pages and1.Explain the following types of bonds.2.Explain where and how you can buy bonds.3.What are the three ways to earn a return on a bond?4.Why are bonds safer than other investments?
28 High Risk/High ReturnFutures- buy and sell stock on a specific date in the future at a specific priceBetting the price will go up or down accordinglyPenny Stocks- low priced stocks of small companies- risk of failure is highCollectibles- gain or lose value as public tastes changeWatch prediction markets- John Stossel