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INVESTING IN STOCKS

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INVESTING IN STOCKS & BONDS Business Department Mrs. Pollison – PowerPoint PPT presentation

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Title: INVESTING IN STOCKS


1
INVESTING IN STOCKS BONDS
  • Business Department
  • Mrs. Pollison

2
Investing
  • The use of savings to earn a financial return.
  • Objective earn money with money

3
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

4
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

5
Why Invest?
  • Helps beat inflation
  • Inflation general rise in prices
  • Increases wealth
  • Fun and challenging

6
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

7
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

8
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

9
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

10
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

11
Stock
  • Common
  • Variable dividend
  • Voting rights
  • Proxy transfer voting authority to someone else
  • Preferred
  • Fixed dividend
  • No voting rights
  • Less risky
  • Lower return

12
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

13
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

14
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)

15
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

16
INVEST WISELY!!!
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