1. Investment Options
Part 1

2. Three reasons to invest
Investing helps beat inflation
Investing increases wealth
Investing is fun and challenging
Opportunity to take risk
Risk- the uncertainty of the outcome of any given situation
Gain knowledge

3. 7 Wise practices of investing
Define you financial goals
Go slowly
Knowledge is power
If it sounds to good to be true it probably is
Follow through
Keep good records
Seek good investment advice
Keep knowledge current
Know you limits
How much money can you afford to risk?
How much risk are you willing to take?

4. Risk/Reward
The greater the potential reward – The greater the risk that must be taken in order to achieve it.
Risk
Reward

5. Risk Pyramid
Low risk
Savings Bonds
Money market CD

6. Low risk/Low return
Cash Management tools

7. Risk Pyramid Medium risk Low risk Stocks Bonds Mutual funds
Real Estate
Low risk
Savings Bonds
Money market CD

8. Medium risk/Medium return
Stock
Stock is a share of ownership in the assets and earnings of a company
core of America’s economic system
provide portfolio diversification
Diversification- spreading risk among many types of investments

9. Why Companies Issue Stock
To grow or expand
To pay for ongoing business activities
It is popular because:
The company does not have to repay the money
Paying dividends is optional

10. Common Stock Vs. Preferred Stock
2 Basic Types of Stock
Common Stock
Vs.
Preferred Stock

11. Common Stock
Common stock – shares or units of ownership in a public corporation
Most basic form of ownership
One vote per share owned to determine company’s board of directors

12. Preferred Stock
Preferred stock – type of stock that pays a fixed dividend
Dividends
distribution of a portion of a company's earnings to shareholders
Fixed value paid out before common stock
IF company fails preferred gets paid before common
Less risk than common stock = lower returns
No voting rights

13. Reading Stock Quotes

14. NYSE Yahoo Guided reading Pg 293-294
Summarize what each column on a stock listing means
Pick three columns that you believe will be the most useful to you when choosing stocks
NYSE
Yahoo

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 stocks
Standard and Poor’s 500 Composite Index
Covers market activity for 500 stocks
More accurate than DOW because it evaluates a greater variety of stock
National Association of Security Dealers Automated Quotations (“NASDAQ”)
Monitors fast moving technology companies
Speculative stocks, show dramatic ups and downs

17. Ups and Downs bull market -market is doing well
optimistic about the economy and are purchasing stocks
bear market -market is doing poorly
investors are not purchasing stocks
selling stocks already owned

18. Purchasing Stock

19. Stock brokers Full-service brokers- most expensive
will call with advice
keep an eye on stock and call if changes need to be made.
Discount brokers- charge less
general advice
research options available
Buy and sell for you
Online brokerage sites- Cheapest
No advice-you do research for yourself
Order takers

20. Three Stock Exchanges New York Stock Exchange (NYSE)
Oldest and largest, began in 1792
2,800 companies
Strict requirements
American Stock Exchange
Began in 1849
allowing younger, smaller companies to list
National Association of Securities Dealers Automated Quotations
over the counter electronic market
4,000 small companies
More volatile because companies are young and new

21. Stock Transactions Customer- you
Broker- qualified and regulated professional who buys and sells stocks
Trader- someone who buys and sells stock shares
Specialist- Seller of specific stock. Shows best bids and asked prices to the market during trading hours.

22. NEW YORK STOCK EXCHANGE
Traders
NEW
YORK
STOCK
EXCHANGE
Specialist
VERY HUMAN LOCATION
Broker
Customer

23. The guaranteed way to make money in the stock market is simple:
Buy Low and Sell High

24. Virtual Stock Market

25. Medium risk/Medium return
Mutual funds- shares bought in a large, professionally managed group of investment
Pools money of investors to buy large amounts of stocks and bonds
Advantages
Professional management
Diversification- spreading risk among many types of investments

26. Bond- money loaned to government or corporation
Corporate
Debenture
Mortgage
Convertible
Government
Municipal
Revenue
General obligation
Study Guide- read pages and
1.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?

27. Risk Pyramid High risk Medium risk Low risk Stocks Bonds Mutual funds
Futures
Penny stocks
Medium risk
Stocks
Bonds
Mutual funds
Real Estate
Low risk
Savings Bonds
Money market CD

28. High Risk/High Return
Futures- buy and sell stock on a specific date in the future at a specific price
Betting the price will go up or down accordingly
Penny Stocks- low priced stocks of small companies- risk of failure is high
Collectibles- gain or lose value as public tastes change
Watch prediction markets- John Stossel