INVESTMENTS 101 STOCK MARKET SUMMARY What is an INVESTMENT? Short term sacrifice long term gain HISTORY- Stock Market Crash (1929) resulted in regulations of banks GSA in 1933. Deregulation began in 1999
INVESTMENTS Why do people invest? Wealth accumulation Comfortable retirement Maintain purchasing power
Factors of INVESTING RISK/ REWARD- the higher the risk, the higher the potential reward Time Factor- length of time (short term vs long term)
BANK INVESTMENTS Savings Money Markets CD (Certificate of Deposit)
STOCK MARKET Fundamentals of Investing 2 Main Types: Stocks & Bonds
How do companies finance business activities? By issuing: Stocks (Equities) Shares of stock represent ownership interest in company Shareholders participate in profits of company through growth in value of stock
Stocks- 3 Types Preferred Stock- Stocks with priority and preference. Common Stock- Most stocks are common unless specified otherwise. Prices changes with the market on a constant daily variation. Treasury Stock- Company issued stock to employees usually in retirement plans (internally held shares of the company’s stock).
Companies also issue… Bonds (Fixed Income) The purchaser of a bond is lending money to the company at a set interest rate specified at the time of purchase Ownership of a bond makes them a creditor of the company If a company bankrupts due to financial difficulty, bond holders have priority claims on assets before stock holders
Bonds- 3 Types Government/ Govt backed- Government issued bonds or secured by the government (FEDERAL GOVT) Municipal- Local government issued bonds (Example- School bonds) Corporate- Company issued bonds
In what do people generally invest? Stocks Bonds Mutual Funds
Mutual Fund?!? What is a Mutual Fund? Investors pool their money together into a fund, a “mutual fund” A professional money management team is hired to manage the fund The management team decides which stocks and/or bonds to buy and sell and when
POOL OF FUNDS
WHY Mutual Funds are popular? By design mutual funds are less risky than individual stocks and even bonds because of DIVERSIFICATION. You can purchase multiple stocks and bonds to spread out the risk. Mutual funds are a very popular way for people to invest due to their features and benefits
OTHER INVESTMENTS Annuities Options- Derivatives of Stock Calls- Puts- Foreign Exchange (FOREX) Commodities-
Saving for retirement Saving for retirement is the primary reason most people invest RETIREMENT PLANS IRA- Individual Retirement Plan (Tax Deferred Earnings) ROTH IRA- Tax Free Earnings 401k- Company Sponsored Plan
THE MARKET INDEX- DJIA- S&P 500 MARKETS- NYSE- NASDAQ-
Careers in the investment industry Financial Advisor Financial Analyst Portfolio Manager Investment Banker
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