Ch. 8 & 9 Intro Video

How Money Is Made

SAVINGS & INVESTING

Saving- 10% of paycheck each month

• Saving is a trade-off• You trade spending NOW for the ability to

spend in the future.• Purpose of savings is to cover future

expenses whether or not you can see them coming.• Unexpected expenses

• Car repairs, unemployment, illness, house repairs, etc.

Ways to Save...

• Savings Account at a bank (earn interest)• Certificate of Deposit (CD)

• Earns a fixed interest for a specific period of time

• You cannot touch the money once you put it in a CD until the maturity date

• Ranges from few days to several years• Savings Bond

• Sold in amounts of $50- $10,000

Savings Vs. Investing

• Savings= socking away money

• Investing= using your savings to earn more money

• Why invest?1. Strengthen financial position over time2. Provides a source of income in addition to

paycheck

Investing

• A way to save• Investing is a way to also earn income

• Risk- A chance that an investment will decrease in value• All investments involve some form of risk

• Return- Income you earn on an investment

Types of investments

• Stocks• Bonds• Mutual Funds• Money Market Accounts• Real Estate• Collectables

Stocks

• Partial ownership of a company

• Companies sell stock to raise funds

• Common way of investing

Stock Market Basics

Stock: ownership interest in a corporation

Shares: individual units of ownership, available for purchase

Shareholder: investors who purchase shares of stock; part owners

Stockbroker: A person who handles the transfer of stocks and bonds between buyer and seller

How are stocks traded?

Central location where stocks are sold on a trading floor.

Wall Street- Manhattan; home of oldest stock exchangeNYSE

500 most widely held companies(70% diversification)S&P 500

OTC Stock: over the counter, where they are traded by phone & computerNASDAQ

Stock Exchange

Tracking the Stock Market:

Dow Jones

• Tracks 30 stocks of large, well known companies

• Called BLUE CHIP STOCKS!

NASDAQ

• Tracks more than 5,000 domestic stocks

Standard & Poor's 500

• Measures average performance of 500 stocks

• Industrial, transportation, financial, & utility

TraBLUE CHIP STOCKS!video

Tracks more than 5,000 domestic stocks

Dow Jones Industrial Average1. Alcoa Inc.2. American Express3. AT&T4. Bank of America5. Boeing 6. Caterpillar7. Chevron8. Cisco Systems9. Coca-Cola10. DuPont11. Exxon Corp.12. General Electric13. Hewlett Packard14. Home Depot15. Intel16. IBM

17. Johnson & Johnson18. J.P. Morgan/Chase19. Kraft20. McDonald’s Corp.21. Merck & Co.22. Microsoft23. 3M24. Pfizer25. Procter & Gamble26. The Traveler’s Companies27. United Technologies Corp.28. Verizon29. Wal-mart30. Walt Disney Co.

Ticker Symbols• 1 to 5 letter symbols used to

identify companies being traded

• NYSE: 3 letters or less• NASDAQ: 4 letters

APPL – ANF – CMG – GOOG –

• Ticker Symbol Worksheet

Diversification

• Spreading your risk among many different types of investment.• Example- Investing in some blue chip

stocks as well as some more risky stocks.

• Why would this be a smart way to invest?

Bull vs. Bear Market:

The UPS and DOWNS of Stocks

Capital Gains• Sell stock for more than you paid for it.• Example…bought 100 shares of Apple @ $80

share (total investment of $8,000). Later sold 100 shares @ $200 share ($12,000 gain).

Capital Loss• Sell stock for less than you paid for it.• Example... You bought 100 shares of Apple @ $80

a share (total investment of $8,000). Later sold 100 shares @ $60 a share ($6,000). $2,000 loss.

Stock Information

• Volume• Total shares of stock traded on the most

recent trading day.

• 52 week range• High- highest price for a stock during the

yr.• Low- Lowest price for a stock during the

yr.

Stock Information

• Change• Dollar difference between the preceding

days closing price and the most recent price.

• Percent Change• % difference between the preceding days

closing price and the current price.• Open

• Price paid in a stock’s first transaction of the current trading day.

Mutual Funds

• Pools the money of many investors and buys a large section of securities that meet the funds stated investment goal.

• Allow investors to spread out their risk among many different companies

Mutual Funds

• Example: Say you have $500 to invest but do not know which stock or bonds to buy, when to buy them, or when to sell them.

• You can buy shares in a large, professionally managed group of investments called mutual funds.

Mutual Fund ExampleReynolds Blue Chip Growth Fund

 

Company Symbol % AssetsYTD

Return %

Apple Inc. AAPL 3.48 121.15Google

Inc.GOOG 1.45 74.64

OFFICEMAX INC.

OMX 1.42 51.96

COTT CP COT 1.07 596.88Research In Motion Limited

RIMM 1.07 46.90

Starbucks Corporatio

nSBUX 0.97 105.29

OFFICE DEPOT INC

ODP 0.95 92.95

Baidu, Inc. BIDU 0.94 193.36LAS

VEGAS SANDS CORP

LVS 0.88 155.31

INTL PAPER

IP 0.81 97.80

Third Rock From The Sun

3rd Rock From The Sun- Stock Market

Researching Stocks Activity

• http://finance.yahoo.com• Chipotle Example• Pick a company you want to research• Follow the instructions on the

worksheet