1. Diversification of your Portfolio Stock Lesson

2. Learning Target  I can explain why is it important to diversify your stock portfolio.

3. Why Diversify?  Less risk of losing money when markets go down.  Greater return on investment over time.  Greater average rate of return over time.

4. Industry Terminology  Cyclical Stocks- Stocks whose performance tend to mirror the economy. Example- Real Estate Company’s  Economy is up = Housing Market up  Economy is down = Housing Market Down

5. Industry Terminology Cont’d  Industry : A group of companies producing similar products or services.  Net Income: Total earnings after all expenses and taxes have been paid.  Profit: What remains after subtracting a company’s costs from its revenue. Profit is a company’s reward for taking a risk and successfully producing what people want to buy at prices they are willing to pay.  Revenue: Revenue is the money collected for providing a product or service.  Sector: A group of stocks, often in one industry. The performance of any single stock in a sector can be measured against the performance of the group. Pharmaceutical companies, for example, are part of the health care sector.

6. Lets look at an industry…  Retail JC Penny Dillard's  If you were deciding to buy stock in this industry where could you research these company’s?  What would you look for?  How would you decide which one to invest in?

7. Cash Balance with SMG  Maintain a cash balance no greater than 25,000 You earn a generous 5% on your cash balance  Do not use all or more than all of your cash balance You pay 7% interest per day to borrow money if you are negative.  Do not have more than 30% of your portfolio invested in one stock.

8. Stock Group Activity  Create a list using Excel of companies in several different industries that you would consider investing.  Compare each of these stocks with a similar company in the same industry.  How is that company doing compared to yours? Better or worse? Justify your answer in a Word Document, and provide reasons as to why you would invest in each of these stocks.  How diversified is your portfolio? Explain using examples.