Investing Insight Where you think you should be vs. Where you have planned to be

Define Where You Are Do I have debt? What are my expenses? What are my time constraints? What are my ambitions? Vital questions every investor must ask before any trade Reality vs. Fantasy

The View

Markets Move “The market will move up, down or sideways tomorrow…” Anonoymous

Flow of Money

Security A financial instrument that represents an ownership position in a publicly-traded corporation, such as a stock, a creditor relationship with governmental body or a corporation, or rights represented by an option It is interchangeable (fungible characteristic) Divided into debts and equities Debt: someone owes you Equities: something you own With equities, you want growth or you lose

Derivative A derivative is a security with a price that is dependent upon or derived from one or more underlying assets Value fluctuates Common underlying assets: Stocks Bonds Commodities Currencies Interest rates

Direct vs. Indirect Finance Direct Finance Money is transferred directly from lender to borrower When borrowing money from a friend, it is direct finance Dealers, Brokers and Investment bankers are vital to direct finance Indirect Finance Borrowers received funds from the financial market through a 3 rd party A financial intermediary alters a set of characteristics and modifies them to another set of characteristics The benefit of this is: Flexibility Liquidity Diversification divisibility

Financial Intermediary An entity that acts as the middleman between two parties in a financial transaction Vast range of: Insurance brokerage, commercial banking, investment banking, and asset management Why are they important? ‘an overwhelming portion of every dollar financed externally comes from banks” Have the following characteristics 1. They borrow from one group of agents and lend to another group 2. The borrowing and lending groups are large, suggesting diversification on each side of the balance sheet 3. The claims issued to borrowers and to lenders have different state contingent payoffs They lend to a large number of consumers and firms using debt contracts, and they borrow from large numbers of agents using debt contracts as well

Mutual Funds Made up of a pool of funds collected from many investors for the purpose of investing Controlled by money managers Diversification is an advantage NAV: Net Asset Value

Index Fund Type of mutual fund designed to match or follow the components of a market index Standards and Poor 500 Index Market Index: Aggregate value produced by combining stocks together Other Examples: Dow Jones Industrial Average Price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE) Nasdaq Composite (Electronic Exchange) Market capitalization-weighted index of roughly 3000 common equities on the exchange

Exchange-Traded Funds A marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund Fund can consists of assets (shares of stock, bonds, oil futures, gold bars, currency and so on..) Difference from mutual funds An ETF trades like a common stock Experience price changes during the day Greater liquidity than mutual fund shares Lower fees than mutual fund shares

Exchanges NYSE The largest and most widely known exchange NASDAQ $4 minimum stock price London Stock Exchange Group A stock exchange does not own shares Acts as a connect between buyers and sellers Similar to brokers Primary function of an exchange is to ensure fair and orderly trading Little difference from OTC (Over-The-Counter) OTC companies are too small

Understanding the Market Fundamental Analysis What to buy Macroeconomic focus The Strength of a business Technical Analysis When to buy Assumes fundamentals are already priced in and tries to identify patterns Psychological Analysis How to buy FOMO Buy rumors, sell news

1 st Technical Technique The Candlesticks

Candlesticks, Cont’d Candlesticks recognize specific time periods A 1 year by 1 day candlestick chart contains a year’s worth of stock prices by 1 day candlesticks 5 day by 15 minute candlesticks contains 5 days of 15 minute candlesticks

Candlesticks, Cont’d candlesticks’ data set open high low close filled portion of the candlestick is considered the ‘body’ thin lines considered the high and low range, called ‘shadows’ (also called wicks and tails) there are other charts, but many traders consider candlestick charts more visually appealing and easier to interpret

Candlesticks, Cont’d What the Body says longer the body, the more intense the buying and selling pressure vice versa: shorter bodies indicate consolidation Long Green candlesticks indicate strong buying pressure Can mark potential turning point or support level Long Red candlesticks indicate strong selling pressure Can mark a turning point or mark a future resistance level

Candlesticks, Cont’d What the Tails say Markets ‘test’ certain price ranges Can potentially identify an upcoming price change “Tug of War” between open and closing prices The closing price for a security is weighed more heavily psychologically The belief is the closing price identifies more market consensus for the particular security

Recap Investing is about discipline and foresight Positioning is everything Everyone wants to be rich, but not everyone is willing to commitment time to achieving it Form your own thought process, and then compare yours to others whom have been successful previously Vision (Mental Capacity)  Due Diligence (Work ethic)  Luck If you have 2 of the above, you will be successful If you have 3 of the above you will accomplish something extraordinary