INVESTMENTS

INVESTMENTS

• Means you give up the use of the money for a period of time in exchange for a chance to perhaps make even more money

BONDS

• A bond represents owning debt of in a company.  For example if you own 1 bond from McDonalds, then McDonalds owes you money.  Companies issue bonds to help finance their business operations or investments.

• Companies/governments borrow money from you with a promise to repay the amount borrowed plus interest

BONDS CONTD.

• The amount borrowed is called the principal

• People buy Bonds as they usually pay higher interests rates then savings accounts

BONDS CONTD.

• You purchase a bond for $1000 from Ford Inc. The bond is for 1 year and has a 8% interest rate. How much do you get after 1 year.

1000 x 8% = 80

1000 + 80 = 1080

Thus after 1 year Ford mustpay you $1080.

WHAT IS A STOCK

A stock represent a share in the ownership of a company. If you own a company's stock, then you are a owner, or shareholder, of the company. A stock represents a claim on the company's assets and profits. A stock is also known as equity financing.

STOCKS CONTD.

• The ownership percent, of a company that you own is calculated by dividing the number of shares a person owns buy the number of shares of stock outstanding.

For example:

1000 shares owned10,000 shares outstanding

= 10% ownership.

STOCKS CONTD.

• So, now that you have stock and ownership of a company, what can you do? Not really very much. You will benefit when the price of the stock goes up, or lose if the price goes down. As an part-owner of the company, you are given the right to vote for company's board of directors.

STOCKS CONTD.

• Buying stock can be risky, since while the price of the stock may go up, it may also go down. If the company goes bankrupt, then you could potentially lose all the money you invested in the stock. However, that is what investing is all about. Taking risks, in the hope of making money on your investment, with no guarantee that you will make money.

SO HOW DO I MAKE MONEY OFF OF STOCKS

• Dividends represent a percent of the company's profit, paid to the shareholders.

• More often shareholders make money when they sell their stocks. You hope to sell your stocks for more then your purchased them for.

• The goal of shareholders is to buy a stock for a low price and sell it for higher price.

WHAT CAUSES STOCKS TO GO UP & DOWN

• The value of the shares increases and decreases as the company has success or difficulty.

• Supply vs. demand also makes the value of the stock change

• The price of the share can also be affected by the health of the economy, financial or technical reports, and/or the success of other companies

WHO SETS THE PRICE OF STOCK

• Basically it’s like a big giant auction with people yelling out prices and others accepting offers

WHAT CAUSES STOCKS TO GO UP & DOWN contd.

• As more people want to purchase a stock, the value of that stock increases. When you purchase a stock, you hope a continual wave of good news for that company.

HOW CAN I BUY STOCKS?

• You need a stock broker to purchase stocks for you or you can do it buy yourself online

• Stocks can only be purchased from stock markets all around the worldexamples include the Toronto Stock Exchange (TSX), or the New York Stock Exchange (NYSE)