1. Chapter 16: Buying and Selling Securities

2. Objectives Explain the operation and regulation of securities markets. Discuss factors to consider when selecting a brokerage firm. Interpret newspaper quotations for listed securities.

3. Objectives Describe the process of buying and selling securities. List the major sources of investment information about securities. Estimate and calculate potential returns on investments.

4. Objectives Explain the 12-step investment process.

5. Buying and Selling Securities specializes in buying and selling negotiable securities, such as stocks, bonds, and mutual funds. BROKERAGE FIRM

6. Initial public offerings (IPOs) Investment banking firms Venture capitalists Securities Markets PRIMARY MARKET:

7. Flow of Stocks and Bonds in Primary Markets

8. Securities Markets Securities markets Stock broker Account executive Registered representative SECONDARY MARKETS:

9. Flow of Securities in Secondary Markets

10. New York Stock Exchange American Stock Exchange Regional Stock Exchanges NASDAQ Over-the Counter Market Securities Markets ORGANIZED STOCK EXCHANGES:

11. SECURITIES MARKET REGULATION: Self-regulation State Federal Investor’s insurance Securities Markets

12. General brokerage firms Commissions and fees Discount brokerage firms Opening an account Brokerage Firm Operation

13. Interpretation of Quotations Columns 1 and 2: 52 weeks, high and low Column 3: Stocks Column 4: Sym Column 5: Div Column 6: Yld% Column 7: P/E Column 8: Vol 100s Column 9,10,11: High, Low, Close Column 12: Net Chg

14. Trading process Matching or negotiating prices Types of orders Market Order Limit Order Stop Order Securities Transactions and the Investor

15. Time limits Purchasing mutual funds Direct purchase Contractual accumulation plan Securities Transactions and the Investor

16. General economic conditions Securities market indexes Dow Jones Industrial Average (DJIA) Standard & Poor’s 500 New York Stock Exchange Composite American Stock Exchange (AMEX) NASDAQ Composite Nikkei Dow Information About Securities

17. Information about industries Trade associations Industry-oriented investment publications Information About Securities

18. Information about specific companies and funds Annual reports Prospectuses Profile prospectuses 10-K reports Investment rating publications Research reports Information About Securities

19. Use Beta to calculate estimated required rate of return Calculate potential rate of return on particular investment Compare estimated required rate of return with projected rate of return Estimating and Calculating Potential Returns on Investments

20. Total Estimated Rate of Return Calculation

21. 1. Identify personal investment philosophy. 2. Identify desired total return. 3. Keep an eye on local situations. 4. Set time horizon for investing objectives. 5. Choose your preferred investment medium. 6. Study available investment alternatives. How to Invest: A Twelve-Step Process

22. 7. Choose an investment for it components. 8. Invest in companies that will out earn competitors. 9. Develop plan for investing and stick with it. 10. Diversify portfolio. 11. Invest regularly. 12. Reinvest earnings. How to Invest: A Twelve-Step Process