INVESTMENTS – RISK TOLERANCE QUIZ Stocks Bonds Real Estate Collectibles Mutual Funds

bull market good times on Wall Street bear market bad times on Wall Street

WRITE DOWN 5 COMPANY NAMES YOU KNOW  How could you become an owner of those companies?

STOCKS  When you buy a stock you become part owner of a public company – no matter how many shares you own.  If the stock price exceeds what you paid for it, your investment increases in value.  If the stock price goes lower than what you paid for it, your investment decreases in value.  You risk ONLY the money you invest.

STOCK EXCHANGES  NYSE  NASDAQ

STOCK MARKET INDICATORS  The Dow Jones (“The Dow”) (NYSE)  Gauges the performance of the industrial sector of the American Stock Market. The average consists of 30 of the largest and most widely held public companies in the United States.

STOCK MARKET INDICATORS  Standard & Poor's 500 (S & P 500) (NYSE)  Gauges the performance of 500 Large Corporations, all of which are from the United States.

WHY WOULD NIKE, APPLE AND SONY GIVE UP A PORTION OF THEIR OWNERSHIP?  Need Money!  If a company’s product or service is in great demand, demand may exceed the ability of banks and venture capitalist (who privately supply funding) to provide money for the company’s expansion to meet that demand.  At that point company leaders may decide to “go public.”  Initial Public Offering (IPO)

PRIMARY AND SECONDARY  Primary Market  Where the IPO happens – Investment Bankers  Secondary Market  Where we trade! This is the buying and selling of stocks to the general public

DIVIDEND  Dividends are payments made by a company to its shareholders.  When a company earns a profit, that money can be put to two uses: it can either be re-invested in the business, or it can be paid to the shareholders as a dividend. Many corporations retain a portion of their earnings and pay the remainder as a dividend.

SEC  Security and Exchange Commission  Regulatory agency of Wall Street

STOCK CLASSIFICATIONS  Blue Chip Stocks  Growth Stocks  Income Stocks  Speculative

BLUE-CHIP STOCKS  Blue-chip stocks are stocks of the biggest companies in the country.  The term "blue chip" comes from poker, where the blue chips carry the highest value.  Blue chip companies are large, established firms, with a long record of profit, growth, dividend payout, and a reputation for quality management, products, and services.  These firms are generally leaders in their industries and often set the standards by which other companies in their fields are measured. Blue chip stocks are some of the safest stocks in invest in.  Well known blue chips include IBM, Coca-Cola, General Electric and Microsoft.

GROWTH STOCKS  Growth stocks are stocks of companies with profits that are increasing quickly.  This increase in profits is reflected in the rise in the company's stock price.  A growth company usually spends a lot of money on research and puts all its profits back into the company instead of paying dividends.

INCOME STOCKS  Income stocks are those stocks of stable companies that pay higher- than-average dividends over a sustained period

SPECULATIVE STOCKS  Penny stocks are low-priced, speculative stocks that are very risky.

READING A STOCK TABLE  Ticker  High  Low  Open  Close  Net Change  Volume

HOW DO YOU MAKE MONEY IN STOCKS?  Buy low – Sell High  Capital Gains & losses  (Selling price – Purchase price)*number of shares  Taxed  Keeping securities for more then a year reduces taxes

INVESTMENT STRATEGIES  Steps to take before investing?  Stage in life considerations?  Diversification  Not putting all your eggs in one basket  Do not invest in stocks if  There is a need for liquidity  Cannot afford to lose capital  Investor is retired and needs to have low risk

BONDS

WHAT ARE BONDS?  Bonds are certificates of indebtedness  Think of a Bond is as an I.O.U.  In reality a bond is nothing more than a loan.  You are lending to the bond issuer  In return, you receive a stated interest rate  The rate is stated on the face of the bond

PARTS OF A BOND  Principal – price you pay for the bond  Coupon or Interest Rate  Face Value  Maturity

TYPES OF BONDS  Corporate  Issued by individual companies  Municipal  Issued by a county, city or state  Government Bonds  T-bill, T-note, T-bond

MUTUAL FUNDS  an investment program funded by shareholders that trades in diversified holdings and is professionally managed. Why use them? Diversification Investors like funds that are professionally managed How do you buy? You can purchase shares in some mutual funds by contacting the fund directly. Other mutual fund shares are sold mainly through brokers, banks, financial planners, or insurance agents. All mutual funds will redeem (buy back) your shares on any business day and must send you the payment within seven days.