1. The Fundamentals of Investing
Personal Finance
Part 3

2. STOCKS
Before a company can raise capital by issuing stocks or bonds, it must _________ the stock or bond issue with the __________________(SEC).

3. STOCKS
An investment banking firm assists the corporation in completing the ________ forms and serves as an intermediary between the _______ corporation and the initial investors.

4. Stocks
A company raises _____ (money) when it _____ stock. Since the corporation has not obligation to pay stockholders back the price of the stock, issuing stock does not create a ____, as does issuing bonds or borrowing money from a financial institution or the government.

5. Stocks Stock represents shares of ________ in a corporation.
Usually corporations issue stock to raise capital (money) to ______ the business.

6. Stocks
An investor buys stock through a _______, who earns a commission from both the purchase and the ____ of stock.

7. Negative Publicity
The share price of stock is likely to _____ because of the _____ publicity and the additional costs and penalties the company will likely incur.
Depending on how a company handles the problem, the incident may have only a temporary negative impact on its share price.

8. Stockholders
Stockholders receive ______ if the company issues dividends, have ______ rights, and can sell their stock to another investor at any time. They may also receive dividends.

9. Stockholders Shareholders do not receive interest payments.
A shareholder has the right to vote for members of the __________and for policy issues, the right to receive ________ dividends if paid, and the right to transfer ownership of his/her shares to someone else through sale, gift, or inheritance (bequest in a will).

10. STOCKHOLDERS
A _____, which is a kind of absentee ballot, is written authorization given by a shareholder to someone else, usually the corporate board of directors, to represent him/her and ____ his/her shares at a stockholder's meeting.
It is usually easier to vote by mail through a ____ than to attend the annual meeting in person.

11. A share of ownership in a company
Stock
Stock
Stockholder or shareholder
Before a company can issue stocks or bonds, it must ___________________ with the SEC (Securities and Exchange Commission)
A share of ownership in a company
Owner of the stock
Usually a stockholder owns a very small part of a company

12. IPO
________________ held corporations have shares of stock (ownership in the company) outstanding that are held by individual investors as well as pension plans and mutual funds. A company ____________________ from a privately held corporation to a publicly held corporation through an Initial Public Offering (IPO) of stock. Investment banks will underwrite the IPO and provide the company with the money they needed to raise and then offer the shares to the public in what is known as the ___________________ market.
Shareholders have the right to _________ at the annual meeting of the corporation. If they are unable to attend, they can vote online or by mail via ______________.

13. Stock Returns - Dividends
Share of ____________ distributed in cash to stockholders
Stockholder ___________________________ receive dividends

14. Dividends
Dividends are part of the company's _____ that are distributed to shareholders. They may be in the form of ____, company ______, or other ________.

15. Dividends
A company is not required to _______ any of its ______ to shareholders as dividends. In fact, newer companies usually do not pay dividends because they ________ any profits back into the company to ____ and _____ the business.

16. Dividends
A dividend reinvestment plan is designed to help the shareholder acquire additional shares (or partial shares if there is not enough money) of the stock by immediately __________________ the dividend in the same company’s stock as soon as the dividend is ______________. The shareholder is still responsible for paying taxes on the dividends earned.

17. What affects the price of Stock?
Current events (for example, a war or major oil spill), investor confidence, and interest rate levels can all affect the financial markets in general as well as a specific company's ________ or __________ prices. Diversification is an investing technique that can affect the value of an investor's portfolio but _______ the price of securities.
______________ news about corporate earnings will make the stock price _________
_________________ publicity due to problems with a product or lawsuits which would cost the company money will cause the price to fall.

18. Penny Stocks and Blue Chip Stocks
In recent years, the stock of many high-tech companies reached a very high price in a short period of time, then declined in value as the company failed, eventually declaring bankruptcy. A stock that trades for less than $1.00 is called a "penny stock." Investing in penny stocks is considered a ___________ risk because there is a high chance that the issuing company may default.
__________ chip stocks are of well-known companies with a long record of profit growth and or dividend payment and a reputation for quality management, products, and services. Some examples of blue chip stocks: General Electric and Dupont.

19. Stock Returns – Capital Gains
Market Price
Current price a buyer is willing to pay
Stocks sells for a price higher than what was paid
Capital ________ – unearned income received from the sale of an asset above its purchase price
Stock sells for a price lower than what was paid
Stockholder will _______ money

20. Stock Split
A stock __________ is when the existing stock divides into a larger number of shares and the price of each share is then reduced accordingly, i.e., a 2-for-1 split on 40 shares that is worth $80 would result in 80 shares at $40 at the time of the split. Among other reasons, companies often decide to declare a stock split when they want to bring in ________ investors and do not want to issue more stock. Or, they believe that by bringing _________ the price of the stock through a stock split, that they will increase activity and interest in the corporation’s stock.

21. Investment Philosophy
Everyone has a ______________ level for the amount of risk they are willing to take on
Generally divided into three categories: __________________, moderate, aggressive
_____________ may influence investment philosophy
If someone was an aggressive investor, what types of investment tools would they primarily have in their portfolio?

22. Stock Exchange Investments are purchased from a stock exchange
(except for real estate and some speculative investments)
In other words, a pharmacy is to drugs as the American Stock Exchange is to securities. The _____________ equities market in the world is the NY Stock Exchange.
Stock exchange provides an organized, central service to buy and sell all stocks, bonds and other investments that are traded
Worldwide, there are _________ different stock exchanges
A limited number of people are allowed to buy and sell directly from each stock exchange

23. Brokerage Firms Full-service Discount
Brokerage firms _________________ the buying and selling of investments on the stock exchange
Full-service
Offer investment transactions ______ a financial advisor
Financial advisor – trained professional that helps make investing ___________
Discount
_________ completes orders to buy and sell investments
Advice is _____ offered

24. Discount Brokerage Firm Fees
Will usually charge a ________ for completing a buy/sell transaction
Additional fees may include:
Total fees are often _______, but an individual must have the knowledge and time to monitor their investments
Service fee
Maintenance fee
Inactivity fee
Fees specific to an investment

25. Full-Service Brokerage Firm Fees
% of the Investment __________
% of the ___________ Invested
_________ Rate & Flat Fee
Financial advisors are _________________ for the time and knowledge they provide investors.
Most charge _______ using one of these methods.
In addition to fees, financial advisors may earn ______________ paid by the company.

26. What’s a Margin?
________________ is a speculative method whereby an investor ______________ up to 50% of the money needed from a brokerage firm in order to buy a wanted stock and pays a fee for the privilege.

27. Choosing a Brokerage Firm
Important to research the financial advisor and firm he/she works for
Questions to ask:
How are the firm’s financial advisors _________________________?
How _____________ has the firm been in business?
Does the firm have a ______________ of positive reviews and success?
How does the firm ________________ in comparison to other brokerage firms?

28. Summary Investments are important to building ________ worth
A trade-off to ___________ returns is lower liquidity and higher risk
Investments are ideal for the _________________
Take advantage of portfolio __________________
Discuss your _____________ with a financial advisor
Use _______-advantaged investments & employer-sponsored plan