investment tools

7/29/2019 investment tools

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Types of Investments


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Types of Investments

Stocks

Bonds

Mutual Funds Real Estate

Savings/Certificates of Deposit

Collectibles


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Stocks

An investment that representsownership in a company or

corporation.


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How Well the StockMarket is Doing

Overall


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3 Basic Indicators

Dow Jones Industrial Average (DOW) Lists the 30 leading industrial blue chip stocks

Standard and Poors 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


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Ups and Downs

The term bull market means the marketis doing well because investors areoptimistic about the economy and are

purchasing stocks

The term bear marketmeans the market is doing

poorly and investors arenot purchasing stocks orselling stocks alreadyowned


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Purchasing Stock


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Brokers

A Broker is a person who is licensedto buy and sell stocks, provideinvestment advice, and collect a

commission on each purchase or sale

Purchases stocks on an organizedexchange (stock market)

Over of all stocks are bought and soldon an organized exchange


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Organized Exchanges

Minimum requirements for a stock toensure only reputable companies areused

Each exchange has a limited numberof seats available which brokeragefirms purchase to give them the

legal right to buy and sell stocks onthe exchange


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New York Stock Exchange

New York Stock Exchange (NYSE)

Oldest and largest, began in 1792

1,366 seats available

2,800 companies

Average stock price is $33.00

Strict requirements


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American Stock Exchange

American Stock Exchange

Began in 1849

2nd largest exchange

Its requirements are not as strict asNYSE allowing younger, smallercompanies to list

Average stock price is $24.00


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Regional Stock Exchanges

Regional Stock Exchanges

Stocks are traded to investors living in aspecific geographical area

Including Boston, Cincinnati, Philadelphia,Spokane


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NASDAQ

National Association of SecuritiesDealers Automated QuotationsStocks are traded in an over the counter

electronic market4,000 small companies

Company requirements are not as strict

More volatile because companies are

young and newAverage stock price is $11.00


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Bonds

A security representing a loan ofmoney from a lender to a

borrower for a set time period,which pays a fixed rate of interest.


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Mutual Funds

An investment that pools moneyfrom several investors to buy a

particular type of investment,such as stocks.


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Real Estate

An investor buys pieces ofproperty, such as land or a

building, in hopes of generating aprofit.


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Savings/Certificates ofDeposits

A deposit that earns a fixed

interest rate for a specified lengthof time.

The longer the time period the

greater the rate of return.There is a substantial penalty for

early withdrawal.


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Collectibles

Unique items that are relativelyrare or highly valued.

Art work

Baseball trading cards

Coins

Automobiles

Antiques


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Risk vs. Return

On average, stocks have a high rate ofreturn

The increase or decrease in the original

purchase price of an investment Higher rate of return = greater risk

Uncertainty about the outcome of aninvestment

Stocks provide portfolio diversification Money invested in a variety of investment

tools


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Short-term Investment

Strategies

Buying on margin is where an

investor borrows part of themoney needed to invest in a stockfrom a brokerage firm.

There is a 50% margin requirement. If you want to purchase $2,000

worth of stock you can borrow up to$1,000 to make the purchase.


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Short-term Investment

Strategies Short selling is where an investor

sells shares of stock that they dontown with the intent to buy themback later at a lower price.

Lets use rollerblades as an example.


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Your friend buys new rollerblades for $80.

You borrow them and sell them for $80.

The price at the stores has been loweredto $45.

You buy a new pair for $45 and give themto your friend.

You made $35!!!


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Long-term Investment

Strategies

Diversification is spreading your

assets among different types ofinvestments to reduce risk.

Dont put all your eggs in one basket.


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Long-term Investment

Strategies

Dollar Cost Averaging is buying

an equal amount of the same stockat equal intervals.

Invest $100 in e-bay every month.

The price you pay for the stockaverages out over time.

ll


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Dollar Cost Averaging

AmountInvested

SharePrice ($)

SharesPurchased

$1,000.00 $20.00 50.00

AmountInvested

SharePrice ($)

SharesPurchased

$100.00 $20.00 5.00

$100.00

$100.00$100.00

$100.00

$100.00

$100.00

$100.00

$100.00

$19.50

$19.25$19.75

$19.20

$18.90

$18.00

$18.60

$19.78

5.13

5.195.06

5.21

5.29

5.56

5.38

5.06

$1,000.00 $20.00 50.00 $19.39* 51.66

$100.00 $20.90 4.78

One-Time Investment Dollar-Cost Averaging

$1,000.00

* Average Share Price


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Long-term InvestmentStrategies

Buy and hold technique is where

an investor buys stock and holdson to it for a number of years.

During that time you are paid

dividends and the price of the stockmay go up.


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How Can Government

Regulations ProtectInvestors?

Regulatory PyramidA network of safeguards that

surrounds the securities industry -

from individual brokerages all theway up to the U.S. Congress.


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Regulatory Pyramid

www.nyse.com


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Sources of Investment

Information

Prospectus

A formal written offer to sellsecurities that sets forth a plan for aproposed business enterprise. Aprospectus should contain the factsthat an investor needs to make aninformed decision.


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Information

Annual report

A document detailing the businessactivity of a company over theprevious year, and containing anincome statement, cash flowstatement, and balance sheet.


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Information

Financial publications

Wall Street Journal

Fortune

Kiplingers Personal Finance

Online informationhttp://finance.yahoo.com

http://moneycentral.msn.com
http://finance.yahoo.com/http://moneycentral.msn.com/http://moneycentral.msn.com/http://finance.yahoo.com/


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How Do You Buy and Sell

Investments?

Full-service broker

Discount broker

Online broker

Investment advisors

investment tools

Documents