Copyright 2007 Thomson South-Western Chapter 12 Buying and Selling Investments

Slide 2 Sources of Information Magazines Newspapers Investor newsletters Company reports Internet 12-1 Researching Investments Staying informed can help you make better investment choices.

Slide 3 Using Research Data 12-1 Researching Investments COMPARISON FIGURES FIGUREDESCRIPTION Current stock priceThis price is the amount investors are willing to pay for a share of ownership in the company Number of employeesChanges can reflect growth or downsizing Market capThe total value of a company in the stock market RevenueThe amount of money received from business activities Net income or profitMoney earned after deducting expenses Profit marginProfit shown as a percentage P/E ratioCompares the selling price of a company's common stock to the annual profits per share Current ratioA measure of a company's ability to pay its current debts from current assets

Slide 4 Advice From Professionals Stockbrokers Financial planners Employees of banks and credit unions NASD Web site Broker Check feature 12-1 Researching Investments

Slide 5 Building Communications Skills Persuasive Messages A persuasive message tries to convince the reader to take (or not take) some action The message should be concise, clear, and convincing Begin by gaining the reader’s attention Give solid reasons for the person to take (or not take) action 12-1 Researching Investments

Slide 6 Trading Securities Primary market Secondary market –Securities exchanges New York Stock Exchange (NYSE) American Stock Exchange (AMEX) –Over-the-counter market 12-2 Buying and Selling Securities

Slide 7 Direct Investing Allows you to buy stock directly from a corporation You can reinvest dividends There are no brokerage fees Stock dividends and stock splits increase holdings 12-2 Buying and Selling Securities

Slide 8 Brokerage Services Full-service brokers Discount brokers Online brokers Commissions and fees 12-2 Buying and Selling Securities Full-service stockbrokers offer advice about what to buy.

Slide 9 Stock Transactions Market order Limit order Stop order Discretionary order 12-2 Buying and Selling Securities

Slide 10 Market Timing Selling short Buying on margin Buy and hold 12-2 Buying and Selling Securities

Slide 11 Ethics Churning Is trading securities primarily to make money from sales commissions Is illegal under SEC rules Is considered unethical Problems can be reported to the SEC using an online form 12-2 Buying and Selling Securities

Slide 12 Focus on... Full-Service or Discount Brokers Full-service and discount brokers compete for business Full-service brokers have higher fees but offer more services Discount brokers have lower fees but offer fewer services 12-2 Buying and Selling Securities

Slide 13 Technology Corner Blogs Online locations with –Short articles or comments on a particular subject area –Text and sometimes video or audio –One or several authors Several blogs are related to investing Some blogs are free; others charge a fee 12-2 Buying and Selling Securities

Slide 14 Independent Agencies Federal Deposit Insurance Corporation National Credit Union Administration National Association of Securities Dealers Pension Benefit Guaranty Corporation 12-3 Regulatory Agencies

Slide 15 Government Agencies Securities and Exchange Commission U.S. Department of the Treasury U.S. Financial Literacy and Education Commission Internal Revenue Service Federal Reserve System 12-3 Regulatory Agencies

Slide 16 Success Skills Leadership Leadership is the ability to influence others A leader is able to achieve goals by managing a team Leaders earn the respect of others Developing leadership skills can help you be successful at school and at work 12-3 Regulatory Agencies

Slide 17 Focus on... Sarbanes-Oxley Act Is also known as the Public Company Accounting Reform and Investor Protection Act Was passed in July 2002 in response to scandals in large companies Created new and stronger standards for U.S. public companies and for accounting firms 12-3 Regulatory Agencies