types investments
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Types of Investments
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Types of Investments
Stocks
Bonds
Mutual Funds Real Estate
Savings/Certificates of eposit
Collecti!les
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Stocks
"n investment t#at representso$ners#ip in a company or
corporation%
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&o$ 'ell t#e StockMarket is oing
(verall
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) Basic Indicators
o$ *ones Industrial "verage +,('-. 0ists t#e )1 leading industrial !lue c#ip stocks
Standard and 2oor3s 411 Composite Inde5
Covers market activity for 411 stocks More accurate t#an (' !ecause it evaluates
a greater variety of stock
6ational "ssociation of Security ealers
"utomated 7uotations +,6"S"7-. Monitors fast moving tec#nology companies
Speculative stocks8 s#o$ dramatic ups anddo$ns
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9ps and o$ns
T#e term !ull market means t#e marketis doing $ell !ecause investors areoptimistic a!out t#e economy and are
purc#asing stocks
T#e term !ear market
means t#e market is doing
poorly and investors are notpurc#asing stocks or selling
stocks already o$ned
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2urc#asing Stock
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Brokers
" Broker is a person $#o is licensedto !uy and sell stocks8 provideinvestment advice8 and collect a
commission on eac# purc#ase or sale
2urc#ases stocks on an organi:ede5c#ange +stock market.
(ver ; of all stocks are !oug#t and soldon an organi:ed e5c#ange
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(rgani:ed E5c#anges
Minimum re
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6e$ =ork Stock E5c#ange
6e$ =ork Stock E5c#ange +6=SE.
(ldest and largest8 !egan in >?@A
>8) seats availa!le
A811 companies
"verage stock price is D))%11
Strict re
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"merican Stock E5c#ange
"merican Stock E5c#ange
Began in >@
Andlargest e5c#ange
It3s re
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Regional Stock E5c#anges
Regional Stock E5c#anges
Stocks are traded to investors living in aspecific geograp#ical area
Including Boston8 Cincinnati8 2#iladelp#ia8Spokane
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6"S"7
6ational "ssociation of Securitiesealers "utomated 7uotationsStocks are traded in an over t#e counter
electronic market8111 small companies
Company re
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Bonds
" security representing a loan ofmoney from a lender to a
!orro$er for a set time period8$#ic# pays a fi5ed rate of interest%
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Mutual Funds
"n investment t#at pools moneyfrom several investors to !uy a
particular type of investment8suc# as stocks%
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Real Estate
"n investor !uys pieces ofproperty8 suc# as land or a
!uilding8 in #opes of generating aprofit%
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Savings/Certificates ofeposits
" deposit t#at earns a fi5ed
interest rate for a specified lengt#of time%
T#e longer t#e time period t#e
greater t#e rate of return%T#ere is a su!stantial penalty for
early $it#dra$al%
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Collecti!les
9ni
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Risk vs% Return
(n average8 stocks #ave a #ig# rate ofreturn
T#e increase or decrease in t#e original
purc#ase price of an investment &ig#er rate of return greater risk
9ncertainty a!out t#e outcome of aninvestment
Stocks provide portfolio diversification
Money invested in a variety of investment tools
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S#ortGterm Investment
Strategies
Buying on marginis $#ere an
investor !orro$s part of t#emoney needed to invest in a stockfrom a !rokerage firm%
T#ere is a 41H margin re8111 to make t#e purc#ase%
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S#ortGterm Investment
Strategies Short sellingis $#ere an investor
sells s#ares of stock t#at t#ey don3to$n $it# t#e intent to !uy t#em!ack later at a lo$er price%
0et3s use roller!lades as an e5ample%
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Your friend buys new rollerblades for
$80.You borrow them and sell them for$80.
The price at the stores has beenlowered to $45.
You buy a new pair for $45 and give
them to your friend.You made $5!!!
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0ongGterm Investment
Strategies
Diversificationis spreading your
assets among different types ofinvestments to reduce risk%
on3t put all your eggs in one !asket%
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0ongGterm Investment
Strategies
Dollar Cost Averagingis !uying
an e
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ollar Cost "veraging
AmountAmountInvestedInvested
SharePrice ($)
SharesPurchased
$1,000.00 $20.00 50.00
AmountAmountInvestedInvested
SharePrice ($)
SharesPurchased
$100.00 $20.00 5.00
$100.00
$100.00$100.00
$100.00
$100.00
$100.00
$100.00
$100.00
$19.50
$19.25$19.75
$19.20
$18.90
$18.00
$18.0
$19.78
5.1!
5.195.0
5.21
5.29
5.5
5.!8
5.0
$1,000.00$1,000.00 $20.00$20.00 50.0050.00 $19.!9"$19.!9" 51.51.
$100.00 $20.90 #.78
ne%&ime Investment 'oar%ost Avera*in*
$1,000.00$1,000.00
* Average Share Price* Average Share Price
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0ongGterm InvestmentStrategies
Buy and hold techniqueis $#ere
an investor !uys stock and #oldson to it for a num!er of years%
uring t#at time you are paid
dividends and t#e price of t#e stockmay go up%
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&o$ Can overnment
Regulations 2rotectInvestorsJ
Regulatory Pyramid" net$ork of safeguards t#at
surrounds t#e securities industry G
from individual !rokerages all t#e$ay up to t#e 9%S% Congress%
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Regulatory 2yramid
www.nyse.com
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Sources of Investment
Information
Prospectus
" formal $ritten offer to sellsecurities t#at sets fort# a plan for aproposed !usiness enterprise% "prospectus s#ould contain t#e factst#at an investor needs to make aninformed decision%
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Sources of Investment
Information
Annual report
" document detailing t#e !usinessactivity of a company over t#eprevious year8 and containing anincome statement8 cas# flo$statement8 and !alance s#eet%
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Sources of Investment
Information
Financial pu!lications
'all Street *ournal
Fortune
Kiplingers 2ersonal Finance
(nline information#ttpL//finance%ya#oo%com
#ttpL//moneycentral%msn%com
http://finance.yahoo.com/http://moneycentral.msn.com/http://moneycentral.msn.com/http://moneycentral.msn.com/http://finance.yahoo.com/ -
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&o$ o =ou Buy and Sell
InvestmentsJ
FullGservice !roker
iscount !roker
(nline !roker
Investment advisors
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