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Ch. 8.2 Commission and Stocks, Bonds, and Mutual Funds

Ch. 8.2 Commission and Stocks, Bonds, and Mutual Funds. Objective Discover which factors must be considered before deciding to buy stocks or Mutual fund Understand the process when stocks are traded Calculate profit or loss from stocks. 1. Should I invest in the Stock Market?.

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Ch. 8.2 Commission and Stocks, Bonds, and Mutual Funds

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  1. Ch. 8.2 Commission and Stocks, Bonds, and Mutual Funds Objective Discover which factors must be considered before deciding to buy stocks or Mutual fund Understand the process when stocks are traded Calculate profit or loss from stocks

  2. 1. Should I invest in the Stock Market? One should consider the following before investing. • Be sure you can afford to lose what you risk • Determine specific long term and short term investment goals • Ask yourself, are you fit to handle the ups and downs? • Plan to spend time and money

  3. 1. Should I invest in the Stock Market? • Choose an experienced broker to give you advice • Do not expect too much too soon • After setting goals, stick to them • Be aware that you are buying part of a company and not a lottery ticket • Have an over all family investment plan

  4. 2. The Process of Buying and Selling Broker – is a person who specializes in buying and selling stocks and bonds One must pay a commission to a Broker for buying stocks. There are full service Brokers who can give advice on which companies to invest but charge a high commission There are discount brokers who don’t offer advice but charge a lower commission

  5. 3. How many shares should one buy? When a person buys more than 100 share, it is called a round lot. Fewer than 100 is called an odd lot. Odd lots are more difficult to trade so Brokers charge higher commission for these.

  6. Example Maria would like to buy 250 shares of International Enterprises, Inc. at 17.75 per share. She wants to compare the commissions charged by Osgood and Company, a full service broker with a commission rate 2%, and Willcox and Company, a discount broker with a commission rate of 1%.

  7. Example: What would be Maria’s capital gain if the market price of the stock increases to 72.25 over the next 10 years? The capital gain would be… If she decides to sell the shares, then she is taxed only on the capital gain.

  8. Example: Maria would like to know the percent of decrease or increase when the price of a share of stock varies. • If the price of a share drops from $45 to $40. • If the price of a share increases from $45 to $60.

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