Investment and the Economy

Supply and Demand  This “law” is the principle which governs the market value of any item bought and sold.  The best examples are collectable goods (baseball cards, stamps, coins, beanie babies…).  As we all know, the more rare an item is, the more it is worth. This is supply and demand at work

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Investment Terms  Capital: Money and property needed for a business to start or expand.  Stock (Share): Stocks are actually small pieces of a company. If a company needs capital they will sell stocks in order to get the money they need. People buy these stocks in the hopes that it will increase in value.  Investor/ Stockholder/ Shareholder: Someone who owns shares in a company (they are, in fact, part owners of that company and have certain rights as such)

 Stock Exchange: The place where stocks are bought and sold. In Canada most stocks are traded at the Toronto Stock Exchange on Bay Street.  of2HJk&feature=related of2HJk&feature=related of2HJk&feature=related  Tell me if this video isn’t helping!!!!

 Stock Broker: A person who buys and sells stocks at the stock exchange for people. This person often gives advice to their customers. For every trade they take a fee. Brokers get paid whether you make or lose money.

 Market Value: What people are willing to pay for a stock. Like everything else that can be bought and sold, this is based on the Law of Supply and Demand. This is also based on what people believe it may be worth in the future.  Real Value: What the stock is actually worth based on the value of the company (holdings and earnings).

Making Money Dividends: Money paid to stockholders from the profits of the company Trading: Money can be made by buying stocks and selling them when/if the price increases

Buying on the Margin  Borrowing money to buy stocks.  The assumption is that the price will go up so that you will be able to pay back your loan.  The problem is that if the price goes down the investor will lose that money plus have to sell off other stocks or goods to pay off the loans.

Run on the Bank  be.com/watch?v =OIOQZCmp02 o&feature=relate d be.com/watch?v =OIOQZCmp02 o&feature=relate d be.com/watch?v =OIOQZCmp02 o&feature=relate d  51:51  Banks can run out of money.  Banks invest our savings to earn interest in the form of payments from the borrowers.  If the bank loses its investments they may not be able to pay out money to their customers.  When people are afraid of this they may “run” to the bank to get their money.  People who arrive late may get there after the bank has run out of money and has closed.

Advice for investors  The basic philosophy is simple: buy stocks when the value is low so that you can sell it when the price goes up (buy low sell high)  Be patient. Investing is generally only profitable when it is done over long periods of time. Short term losses shouldn’t bother you if you are in for the long term.  Stay away from “get rich quick” schemes. If it sounds too good to be true, it probably is

 Don’t think too much of yourself. Many smart people have spent their lives trying to understand the market … and still don’t. But they know more than you do.  Investing is like gambling. Don’t invest money you don’t have or can’t afford to lose.  Unlike gambling YOU are the house and can eventually win in the end.