1. Investing in Stocks, Bonds, and Mutual Funds
Session 4
Investing in Stocks, Bonds, and Mutual Funds

2. Back to some Basic Principles
Diversification
Don’t put all of your eggs in one basket
Protects against risk
Time in the market, not timing the market
Time is the greatest resource in investing
Risk Tolerance
Fixed Vs. Variable Investments

3. Let’s start with the Fixed
Bonds
US Government
US Securities
Already addressed
Municipal
State and Local governments
Corporate
Issued by corporations

4. How do Bonds Work? Debt obligation of issuer
Promise to pay you/lender, a fixed interest rate for a set # of years (term)
Payments on set schedule
Monthly, quarterly, semi annually, annually
Pay you the face value again at maturity
Can be bought and sold with relative ease

5. Municipal Bonds Issued by state and local governments
Debt obligations of municipalities
Build a swimming pool, stadium, roads, etc.
Tax benefits
Free from federal tax
Free from state and local tax if you live in the area
Generally very secure

6. Corporate Bonds Debt obligations of corporations Used to fund projects
Building
Research
Safety and security of bond is dependent on the safety and security of the company
Generally pay higher rates than government bonds
Risk

7. Bond Ratings
Want to know how “safe” a bond is
Bond Insurance
Table

8. Stocks Variable investment
Actually buying a small piece of ownership in that company
Become a stockholder or a shareholder
Stocks have outperformed fixed investments over the long term
“Time in the market, not timing the market”
See Chart on pg. 101

9. Stocks Stocks carry more risk than most fixed investments Research
Can lose money
Research
Future
Growth
Management
Product or service strength
Profitable
Publicly held

10. Buying Stocks Initial Public Offering (IPO) Secondary Market
NYSE
NASDAQ
Purchasing
Broker
Internet

11. Buy Low, Sell High “Buy good value at a fair price” Warren Buffet
Let’s do an Activity
Pg. 82

12. A Few More Things Dividends Risks Bear and Bull Markets
Company profits paid to shareholders
Risks
Bear and Bull Markets
Bull Market: Rising stock prices in the market
Generally looked at as good
Bear Market
Falling stock prices
Generally looked at as bad

13. Mutual Funds Everyone knows the term “Funds” What are they
A collection of stocks and/or bonds managed by a professional.
Portfolio
As an investor, we buy shares of the fund
Buying small parts of many companies or bonds

14. Activity Look at your cards 2 Leaders Ready: GO!!
Determine what team you are 1 2
What color are you?
Red
Green
Blue
2 Leaders
Need to organize your team into 3 rows based on color
Ready: GO!!

15. Advantages Risk Management Professional Management
Instant Diversification
Like riding in an elevator
Professional Management
Managed by professional manager, or a team
Their full time job

16. Buying Mutual Funds Direct or through a broker Fees “Load”
Front end, back end, no load
Impacts the return
Usually an annual fee
Even “No Load”

17. Information on Mutual Funds
Business publications
Wall Street Journal
Business Week
Websites
Fund Family Sites

18. Tax Consequences of Investing
Taxes on interest
Capital Gains
From sale
Taxed on gains from investments
Greatly impact total returns
Tax beneficial accounts and products
IRAs
Municipal Bonds

19. Asset Allocation Expanded Diversification Types of investments Bonds
Stocks
Bank Accounts
Other

20. Questions??

21. Back

22. Back

23. Back