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INVESTMENTS 101

INVESTMENTS 101. STOCK MARKET SUMMARY What is an INVESTMENT? Short term sacrifice long term gain HISTORY- Stock Market Crash (1929) resulted in regulations of banks GSA in 1933. Deregulation began in 1999. INVESTMENTS Why do people invest?. Wealth accumulation Comfortable retirement

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INVESTMENTS 101

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  1. INVESTMENTS 101 • STOCK MARKET SUMMARY • What is an INVESTMENT? • Short term sacrifice long term gain • HISTORY- • Stock Market Crash (1929) resulted in regulations of banks GSA in 1933. • Deregulation began in 1999

  2. INVESTMENTSWhy do people invest? • Wealth accumulation • Comfortable retirement • Maintain purchasing power

  3. Factors of INVESTING • RISK/ REWARD- the higher the risk, the higher the potential reward • Time Factor- length of time (short term vs long term)

  4. BANK INVESTMENTS • Savings • Money Markets • CD (Certificate of Deposit)

  5. STOCK MARKETFundamentals of Investing 2 Main Types: Stocks & Bonds

  6. How do companies finance business activities? By issuing: • Stocks (Equities) • Shares of stock represent ownership interest in company • Shareholders participate in profits of company through growth in value of stock

  7. Stocks- 3 Types • Preferred Stock- Stocks with priority and preference. • Common Stock- Most stocks are common unless specified otherwise. Prices changes with the market on a constant daily variation. • Treasury Stock- Company issued stock to employees usually in retirement plans (internally held shares of the company’s stock).

  8. Companies also issue… • Bonds (Fixed Income) • The purchaser of a bond is lending money to the company at a set interest rate specified at the time of purchase • Ownership of a bond makes them a creditor of the company • If a company bankrupts due to financial difficulty, bond holders have priority claims on assets before stock holders

  9. Bonds- 3 Types • Government/ Govt backed- Government issued bonds or secured by the government (FEDERAL GOVT) • Municipal- Local government issued bonds (Example- School bonds) • Corporate- Company issued bonds

  10. In what do people generally invest? • Stocks • Bonds • Mutual Funds

  11. Mutual Fund?!? What is a Mutual Fund? • Investors pool their money together into a fund, a “mutual fund” • A professional money management team is hired to manage the fund • The management team decides which stocks and/or bonds to buy and sell and when

  12. POOL OF FUNDS

  13. WHY Mutual Funds are popular? • By design mutual funds are less risky than individual stocks and even bonds because of DIVERSIFICATION. • You can purchase multiple stocks and bonds to spread out the risk. • Mutual funds are a very popular way for people to invest due to their features and benefits

  14. OTHER INVESTMENTS • Annuities • Options- Derivatives of Stock • Calls- • Puts- • Foreign Exchange (FOREX) • Commodities-

  15. Saving for retirement • Saving for retirement is the primary reason most people invest • RETIREMENT PLANS • IRA- Individual Retirement Plan (Tax Deferred Earnings) • ROTH IRA- Tax Free Earnings • 401k- Company Sponsored Plan

  16. THE MARKET • INDEX- • DJIA- • S&P 500 MARKETS- NYSE- NASDAQ-

  17. Careers in the investment industry • Financial Advisor • Financial Analyst • Portfolio Manager • Investment Banker

  18. THE END

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