Transcript Investing - Carlisle County Public Schools

Stages of Investing
Type of
Investment
Strategy
Considerations
Put and Take
account
Short-term savings
Safety
Security
Liquidity
Short-term needs
Initial Investing
Conservative, lowrisk securities
Higher rates of return Reasonable
than savings
purchase price
Systematic Investing
Retirement funding
Long-range planning
Growth
Future financial
security
Strategic Investing
Portfolio expansion
Maximization of
return in the medium
term (5-10 years)
Diversifying
Planning
Hedging against risk
High profits
Uncertain future
income
Short-term profit
potential
Speculative Investing High-risk options
Stages of Investing

In Stage 4: Strategic Investing you
carefully manage investment
alternatives to maximize growth of your
portfolio
 Collection of investments
Risk and Return

Investing risk- chance that an
investment’s value will decrease
 The greater the risk the greater the potential
return
Diversification

Spreading of risk among many types of
investments
 Stocks, bonds, real estate
 Low risk stocks to balance high risk

Minimizes risk
Types of Risk

Interest-Rate risk- chance that inflation
will rise faster than the return on your
investments
 Inflation makes your fixed-rate investments
worth less because they are “locked in” at
lower rates

Political risk- actions the government
might take that would reduce the value
of your investment
Types of Risk
Market risk- caused by the business
cycle– periods of economic growth or
decline
 Nonmarket risk- unrelated to market
trends; unpredictable and uncontrollable

 Terrorism threats, people change their
behavior and want to protect themselves
Types of Risk
Company risk- associated with owning
one company’s stock, if the company
fails you lose investment
 Industry risk- affects groups of
businesses

 If you invest in the candy industry, a
nationwide trend toward dieting or
avoidance of sugar would negatively affect
the value
Criteria for Choosing an
Investment
Degree of safety
 Degree of liquidity
 Expected dividends or interest
 Expected growth in value
 Reasonable purchase price and fees
 Tax benefits

Wise Investment Practices
Define your financial goals
 Go slowly

 Temporary investments

Follow through
 Permanent investments
Keep good records
 Seek good investment advice
 Keep investment knowledge current
 Know your limits

Sources of Financial Information

Newspapers
 Financial pages of your local newspaper
 Wall Street Journal


Investor Services and Newsletters
Financial Magazines
 Business Week, Forbes, Money, Fortune,
Kiplinger’s Personal Finance, The Economist




Brokers
Financial Advisers
Annual Reports
Online Investor Education
Broker vs Financial Advisers

Full service- provide
clients with analysis and
opinions based on their
judgments
 Merrill Lynch, Fidelity
Investments, American
Express

Discount- buy and sell
securities at a reduced
commission
 For people who are well
informed and know what
they want to buy and sell
○ E*Trade, Charles
Schwab
Certified Financial
Planner (CFP)
 Trained to give
investment advice
based on your goals,
age, lifestyle, and other
factors.

Investment Choices
Low Risk/Low Return
 Medium Risk/Medium Return
 High Risk/High Return

Investment Choices
Low Risk/
Low Return
Medium Risk/
Medium
Return
High Risk/
High Return
Bonds
Stocks
Futures
Mutual Funds
Options
Annuities
Penny Stocks
Real Estate
Collectibles
U.S.
Government
Savings Bonds
Treasury
Securities
Low Risk/ Low Return
Good for first investments
 Safe
 Low return
 Include in diversified portfolio

Low Risk/ Low Return

Bonds
 Debt obligations of
corporations
(corporate bonds) or
state or local
governments
(municipal bonds)
 IOU
 Earn interest
 Repay amount
borrowed at maturity

U.S. Government
Savings Bonds
 Series EE- discount
bond, purchased for
less than the maturity
value (half)
 Series I- sold at face
value and earn
interest for up to 30
years, designed for
investors wanting to
protect against
inflation
Low Risk/ Low Return

Treasury Securities
 U.S. Treasury Bills-
short term
 U.S. Treasury Notesmatures in 2,5, or 10
years
 U.S. Treasury Bondsinterest paid every 6
months and matures
in 30 years
Medium Risk/ Medium Return
Once you have additional money to
invest
 Increase return
 Investing with companies that manage
the investment

Medium Risk/ Medium Return

Stocks
 Riskier than savings
 Unit of ownership in a
bonds, earnings go
up or down
depending on
company’s profits
 Investing in wellestablished
companies are safe
 Less-stable
company= risky
investment
corporation
 Stock certificate is
evidence of
ownership
 Stockholders share in
corporation’s profits
called dividends
Medium Risk/ Medium Return

Mutual Funds

Annuities
 Pooling of money
 Contract that provides
from many investors
to buy a large
selection of securities
 Professionally
managed
 Allows for portfolio
diversification
the investor with a
series of regular
payments, after
retirement
 Opposite of life
insurance

Real Estate
 Large, non-liquid
investment of cash
 Houses and land
High Risk/ High Return


Futures- contracts to
buy and sell
commodities or stocks
for a specified price
on a specified date in
the future
Options- right, not
obligation, to buy or
sell a commodity or
stock for a specified
price within a
specified period of
time


Penny stocks- are
low-priced stocks of
small companies that
no track record
Collectibles- coins,
art, memorabilia,
ceramics, or other
items popular at the
time