INVESTMENTS 101 STOCK MARKET SUMMARY STOCK MARKET SUMMARY What is an INVESTMENT? What is an INVESTMENT? Short term sacrifice long term gain Short term sacrifice long term gain HISTORY- HISTORY- Stock Market Crash (1929) resulted in regulations of banks GSA in Stock Market Crash (1929) resulted in regulations of banks GSA in Deregulation began in 1999 Deregulation began in 1999

INVESTMENTS Why do people invest? Wealth accumulation Wealth accumulation Comfortable retirement Comfortable retirement Maintain purchasing power Maintain purchasing power

Factors of INVESTING RISK/ REWARD- the higher the risk, the higher the potential reward RISK/ REWARD- the higher the risk, the higher the potential reward Time Factor- length of time (short term vs long term) Time Factor- length of time (short term vs long term)

BANK INVESTMENTS Savings Savings Money Markets Money Markets CD (Certificate of Deposit) CD (Certificate of Deposit)

STOCK MARKET Fundamentals of Investing 2 Main Types: Stocks & Bonds

How do companies finance business activities? By issuing: Stocks (Equities) Stocks (Equities) Shares of stock represent ownership interest in companyShares of stock represent ownership interest in company Shareholders participate in profits of company through growth in value of stockShareholders participate in profits of company through growth in value of stock

Stocks- 3 Types Preferred Stock- Stocks with priority and preference. 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. 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). 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) Bonds (Fixed Income) The purchaser of a bond is lending money to the company at a set interest rate specified at the time of purchaseThe 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 companyOwnership 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 holdersIf 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) Government/ Govt backed- Government issued bonds or secured by the government (FEDERAL GOVT) Municipal- Local government issued bonds (Example- School bonds) Municipal- Local government issued bonds (Example- School bonds) Corporate- Company issued bonds Corporate- Company issued bonds

In what do people generally invest? Stocks Stocks Bonds Bonds Mutual Funds Mutual Funds

Mutual Fund?!? What is a Mutual Fund? Investors pool their money together into a fund, 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 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 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. 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. 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 Mutual funds are a very popular way for people to invest due to their features and benefits

OTHER INVESTMENTS Annuities Annuities Options- Derivatives of Stock Options- Derivatives of Stock Calls-Calls- Puts-Puts- Foreign Exchange (FOREX) Foreign Exchange (FOREX) Commodities- Commodities-

Saving for retirement Saving for retirement is the primary reason most people invest Saving for retirement is the primary reason most people invest RETIREMENT PLANS RETIREMENT PLANS IRA- Individual Retirement Plan (Tax Deferred Earnings)IRA- Individual Retirement Plan (Tax Deferred Earnings) ROTH IRA- Tax Free EarningsROTH IRA- Tax Free Earnings 401k- Company Sponsored Plan401k- Company Sponsored Plan

THE MARKET INDEX- INDEX- DJIA-DJIA- S&P 500S&P 500MARKETS- NYSE- NYSE-NASDAQ-

Careers in the investment industry Financial Advisor Financial Advisor Financial Analyst Financial Analyst Portfolio Manager Portfolio Manager Investment Banker Investment Banker

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