1. What is a stock? Presented by: Sean Sturges, CFP® Senior Vice President, Director of Financial Planning D.A. Davidson & Co.

2. What is a stock? Ownership interest in a company Often called equity Can be public or private How does it become public? Private owners => Investment bankers => Investing public Initial public offering (IPO) How else are stocks acquired? Secondary market (stock exchanges) after IPO

3. Why do companies issue stock? Raise capital: Via a larger investor base To expand operations, product lines, etc. So that initial investors/owners can cash-out To reduce debt / restructure balance sheet

4. Why do people buy stocks? Potential for investment returns Source: SunGard. This does not represent an offer to buy or sell securities. Past performance is not a guarantee of future results. All investing involves risk. Results shown are annual index averages over the time period shown, and not representative of an investment in any security.

5. Why don’t people buy stocks? Potential for volatility and loss Source: SunGard. This does not represent an offer to buy or sell securities. Past performance is not a guarantee of future results. All investing involves risk. Results shown are annual index averages over the time period shown, and not representative of an investment in any security.

6. An argument for diversification

7. What are returns made of? Two main components Capital gain (or loss) Difference between the purchase price and sales price Not unique to stocks Dividends Essentially a distribution of profits to shareholders Can be stock, most often are cash Usually on a fixed schedule No obligation to pay

8. What are returns made of? How important are dividends? Source: http://us.spindices.com/documents/research/WhitePaper_500_Dividend_Aristocrats.pdfhttp://us.spindices.com/documents/research/WhitePaper_500_Dividend_Aristocrats.pdf This does not represent an offer to buy or sell securities. Past performance is not a guarantee of future results. All investing involves risk. Results shown are informational in nature and not representative of an investment in any security. It is not possible to invest directly in an index.

9. Dividends – why or why not? To pay or not to pay a dividend… Why would a company pay a dividend? Share profits with shareholders Market expectation Why wouldn’t a company pay a dividend? Use cash for other reasons Research and development Acquisition of other companies Share buybacks It’s “uncool”

10. Stock price determinants Fundamentals Price to earnings ratio and other metrics Comparison with peer companies Opinion / Expectation Estimated or anticipated future performance Public, media and market opinion Emotion Ultimately decided by what people are willing to pay for it.

11. Recap What is a stock? Why do companies issue stock? Why do/don’t investors buy stock? How can you mitigate investment risk? What are the two main components of return? Why would/wouldn’t a company issue dividends? What determines a stock’s price?

12. Reading the financial pages Presented by: Sean Sturges, CFP® Senior Vice President, Director of Financial Planning D.A. Davidson & Co.

13. Reading a stock table Key terms Symbol – abbreviation used to identify a stock Range – refers to variance in price over a time period such as a day or year P/E (Price to earnings) ratio - computed as price divided by annual earnings per share Dividend – annual dividend in dollars per share Yield – annual dividend divided by price of one share

14. Reading a stock table Source: Google Finance. This is not an offer or recommendation to buy or sell securities.

15. Reading a stock table Online resources: http://finance.yahoo.com/ http://www.google.com/finance http://www.morningstar.com/

16. Reading a mutual fund table Key terms NAV (net asset value) – value of one share of a mutual fund Load – initial cost (%) of purchasing a fund Turnover – measure of how often underlying holdings of the fund are bought and sold Investment style – generalized description of the type of investments the fund invests in

17. Reading a mutual fund table Source: Morningstar. This is not an offer or recommendation to buy or sell securities.

18. Reading a mutual fund table Online resources: http://www.morningstar.com/ http://finance.yahoo.com/funds/ http://www.google.com/finance

19. Reading a bond table Key terms Yield – may refer to current yield, yield to maturity, or yield to call. The table shown on following page uses “yield to worst” or the worst possible yield an investor would have if the security was held to maturity or earlier redemption. Interest rate – generally the “coupon” rate of the bond Maturity date – date on which principal of the bond comes due Ratings – credit rating assigned by a credit agency

20. Reading a bond table Source: MSRB EMMA. This is not an offer or recommendation to buy or sell securities.

21. Reading a bond table Online resources: http://cxa.gtm.idmanagedsolutions.com/fi nra/MarketData/Default.aspx http://cxa.gtm.idmanagedsolutions.com/fi nra/MarketData/Default.aspx http://emma.msrb.org/default.aspx Note: it can be difficult to find information on bonds.

22. What is a bond? Presented by: Sean Sturges, CFP® Senior Vice President, Director of Financial Planning D.A. Davidson & Co.

23. What is a bond? Buy bond (lend money to borrower) Receive principal and final interest payment Receive semi-annual interest payments Buy bond (lend money to borrower) Receive principal and accumulated interest Coupon Bond Zero-Coupon Bond

24. What is a bond? Who issues IOUs (bonds)? Sovereign Governments (U.S. and foreign) Gov’t Agencies / Gov’t. Sponsored Enterprises (Fannie Mae, Freddie Mac, TVA) Municipalities (states, cities, counties, etc.) Corporations (U.S. and foreign) What are the main differences? Taxation Credit quality Implied or explicit guarantees

25. What is a bond? Setting the coupon rate / pricing the zero Credit rating (how likely are you to get paid back) Time to maturity (how long does the issuer get to use your money) Prevailing interest rate environment / market conditions (what do similar bonds cost, what are current interest rates) Taxation (municipal bonds specifically) Other features (call options, conversion features, insurance, etc.)

26. What is a bond? What happens after you buy a bond? Does the price change? Holding to maturity versus selling before maturity How does this impact risk? What are the long-term price prospects for a 30 year bond in a rising interest rate environment?

27. Why do people buy bonds? Potential for investment returns Source: SunGard. This does not represent an offer to buy or sell securities. Past performance is not a guarantee of future results. All investing involves risk. Results shown are annual index averages over the time period shown, and not representative of an investment in any security.

28. Why do people buy bonds? Historically less volatile Source: SunGard. This does not represent an offer to buy or sell securities. Past performance is not a guarantee of future results. All investing involves risk. Results shown are annual index averages over the time period shown, and not representative of an investment in any security.

29. What is a bond? Recap What is a bond? Who issues bonds? What determines a bond’s coupon? What determines a bond’s price? What do the following mean: par value, coupon, yield to maturity, yield to call, issuer, credit rating, zero coupon bond, default? Why would you/would you not buy bonds?

30. What is a mutual fund? Presented by: Sean Sturges, CFP® Senior Vice President, Director of Financial Planning D.A. Davidson & Co.

31. What is a mutual fund?

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33. Types of funds Structure Open-end (what are commonly call mutual funds) Closed-end (CEF) Exchange-traded (ETF) Underlying Investments Equity Bond Sector Index

34. Why do people buy mutual funds? Diversification Access to broader investment pool Convenience Professional management

35. What is a mutual fund? Key Terms & Review Net Asset Value Load / No-load Investment style Turnover Diversification CDSC (contingent deferred sales charge) Share class Manager / manager tenure Benchmark

36. Questions?