Transcript Investment Strategies Career & Financial Management Mrs. Wilson Long-Term Techniques • Statistics show that over a long time stock investments have consistently beaten rates for savings.

Investment Strategies
Career & Financial Management
Mrs. Wilson
Long-Term Techniques
• Statistics show that over a long time stock
investments have consistently beaten rates for
savings accounts, CDs, and other conservative
options
Buy and Hold
• If you buy and hold, you can ride out the down
times
• When you are ready to sell years later, most
likely you stock will have gained value
• In addition, many stocks pay dividends, so you
are earning income while you hold stock
• A stock split can also add value over time
– A stock split is an increase in the number of
outstanding shares of a company’s stock
Stock Split Example
• If there were 1,000 shares outstanding with a
market value of $60 then…
– A 2:1 (two for one) split would result in 2,000 shares
outstanding selling for $30
– You will notice that the total stock is still worth
$60,000
– A stock split lowers the selling price, making the
shares more affordable and encouraging investors to
buy more
– Price often rises!
Dollar-Cost Averaging
• Involves the systematic purchase of an equal
dollar amount of the same stock at regular
intervals
• Usually results in a lower average cost per
share
• To calculate the average cost per share, divide
the total amount invested by the total number
of shares purchased, as shown in Figure 12-4
on page 345 in your book
Dollar Cost Averaging
Monthly Investment Amt Share Price
Number of Shares
$100
10
10
$100
7
14.29
$100
5
20
$100
10
10
$400
$32
54
Total Invested
Total Number of Shares
Average share price = $8 (32/4)
Your average cost per share = $7.41
Total $ invested ($400) / total number of shares (54)
Ending value = $540
Last share price ($10) x number of shares (54)
Reinvesting Dividends
• You can save money by reinvesting dividends
• This means using dividends previously earned
on the stock to buy more shares
• This avoids broker fees and other costs
Reading the Stock Listings
• To make wise decisions, you will need to track
the progress of your chosen investments to see
how they are performing
• Keeping track of your stock portfolio (or
holdings) can be as simple as checking the
closing prices periodically
• Refer to pages 346 and 347 in your textbook
Stock Indexes
• Stock index
– Benchmark that investors use to judge the
performance of their investments
• Examples:
– Dow Jones Industrial Average
• Simply called “the Dow”
• It is an average of the price movements of 30
major stocks listed on the NYSE
• Provides a general overview of what stock prices
are doing in the stock market as a whole
– Standard & Poor's \ NASDAQ Composite
• Other commonly used indexes
Two-Day Assignment
• Pages 354 & 355
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Questions 1, 5, 6 (tricky!), 8, and 9.
Each answer is worth 20 points
Counts as a test grade
Due tomorrow at the end of class