INVESTING IN STOCKS

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INVESTING IN STOCKS BONDS

• Business Department
• Mrs. Pollison

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Investing

• The use of savings to earn a financial return.
• Objective earn money with money

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Stages of Investing

• Emergency Account
• Short-term savings (3-6 months pay)
• Begin Investing
• Conservative, low risk
• Systematic Investing
• Retirement, college long-range
• Strategic Investing
• Self-management maximize return
• Speculation
• Take changes quick profit high risk

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Rule of 72

• Quick method to evaluate rate of return
• Double your money
• Number of years
• Divide 72 by the rate of return
• Earning 10
• Answer 72 divided by 107.2 years
• Rate of return
• Divide 72 by the number of years
• Need 5,000 double in 6 years
• Answer 72 divided by 612

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Why Invest?

• Helps beat inflation
• Inflation general rise in prices
• Increases wealth
• Fun and challenging

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Risk chance that an investments value will
decrease.

• Short-term investments are generally less risky
• Interest-rate risk
• Rates dont keep up with inflation
• Political risk
• Increased taxes controls
• Market risk
• Business declines
• Interest rate fluctuations
• Company or industry risk

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Sources of Financial Info

• Newspapers
• The Wall Street Journal
• Barrons
• Investor Services Newsletters
• Moodys Investor Service (www.moodys.com)
• Standard and Poors Reports (www.standardandpoors.
  com)
• Financial Magazines
• Business Week (www.businessweek.com)
• Forbes (www.forbes.com)
• Money (www.money.cnn.com)
• Brokers
• Financial Advisors (CFPs)
• Annual Reports
• Online Investor Education

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Low Risk/Low Return

• Corporate Municipal Bonds
• Debt obligations of corporations of local
  governments
• US Government Bonds
• Lending money to US govt
• Series EE discount bond
• Treasury Securities (T-Bills)
• 10,000 increments of 5,000
• Treasury notes Treasury bonds

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Medium Risk/Medium Return

• Stock
• Unit of ownership in a corporation
• Mutual Funds
• Shares in a large, professionally managed group
  of investments
• Annuities
• Contract sold by insurance co.
• Provides regular payments (retirement)
• Real Estate
• Houses and land

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High Risk/High Return

• Futures
• Specified price on a specified date in the future
• Options
• Right, not obligation, to buy or sell a commodity
  or stock for specified price, specified period
• Penny stocks
• Low-priced stocks of small companies w/no track
  record
• Collectibles
• Coins, art, memorabilia

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Stock

• Common
• Variable dividend
• Voting rights
• Proxy transfer voting authority to someone else

• Preferred
• Fixed dividend
• No voting rights
• Less risky
• Lower return

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Terms

• Income stocks consistent history of paying high
  dividends.
• Receive current income
• Retirees
• Growth stocks corporations that reinvest
  profits in business to promote growth.
• Little or no dividends
• Future capital gains
• Long-term investments

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Bulls and Bears

• Bull Market
• Prolonged period of rising stock prices
• Investor optimism
• Confidence in economy

• Bear Market
• Prolonged period of falling stock prices
• Investor pessimism
• Prices may fall 20
• Short savage

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Strategies (Short-Term)

• Buy on Margin
• Borrow money from broker (Margin Account)
• Minimum of 2,000 deposit
• Leverage using borrowed money to buy securities
• Betting that stock will increase
• Short selling
• Selling stock borrowed from broker
• Must be replaced later
• Betting that stock price will drop (buy back at
  lower price)

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Strategies (Long-Term)

• Buy and Hold
• Overall trend of non-speculative stocks is up
• Over years, ride out down times
• Dollar-Cost Averaging
• Systematic purchase of equal dollar amount of
  same stock at regular intervals
• Price averages out

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INVEST WISELY!!!