Investing 101 How to grow your money wisely What’s an investment? An investment is something you...
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Transcript of Investing 101 How to grow your money wisely What’s an investment? An investment is something you...
Investing 101•How to grow your money wisely
What’s an investment?•An investment
is something you buy with the expectation that it will increase in value over time.
What are the different types
of investments?
Real Estate
•Land, office buildings, houses, warehouses, rental property
Tangible Assets•Coins, bullion, collectibles (classic cars, trading cards figurines, antiques)
EQUITIES• STOCKS, MUTUAL FUNDS,
COMMODITIES, FUTURES CONTRACTS
Debt Instruments
•Corporate Bonds, Treasury Bills, Municipal Bonds, Mortgage Securities, Personal Loans
All You Need to Know About Stocks!
• Common stock–Undivided, voting, ownership in a
corporation
• Preferred Stock–Undivided, non-voting, ownership in a
corporation, pays dividends before common stock
All You Need to Know About Stocks!• Dividends
–Profits paid to shareholders• Capital Gains
–Profits reinvested in the corporation which increase the value of your stock
All You Need to Know About Stocks!
• Pros–Stock Market
outpaces inflation
–Better rates of return in the long run over other investments
• Cons–Investment risk–Price
Fluctuations–Difficult to
time investments
BONDS!!!!
•Corporate–Balances yield with risk
•Junk–High yield High risk
•Municipal–Tax Free
•Treasury–Backed by the full faith and credit of The United States
Characteristics of Bonds
•Face Value–The printed value of the bond
•Maturity–The time at which the bond is redeemed for its face value
Pros and Cons of Bonds•Pros-
– provides current income– maintains asset value–liquidity
•Cons-–Inflation risk–Investment risk–Early Call
MUTUAL FUNDS•What are they?
–An investment tool which allows small investors to hold a diverse portfolio of stocks without the associated costs and time
MUTUAL FUNDS•Where do I get them?–Brokers–Direct Sales
–Internet
•How can I tell a good one from a bad one?–Newspaper–Financial magazines
–Rates of return
MUTUAL FUNDS• Pros–Easy to buy and sell–Easy to manage–Allows small investors the advantage of a diverse portfolio
• Cons– Investor has little control over mutual fund investment decisions
–High rates of return in some stocks are counteracted by low rates of return on others
Want to Buy Some Land?
•Real Estate–Land
•Real Estate Investment Trust
Pros and Cons of Real Estate
• Pros–Easy to
understand–Useful–Generally
increases in value
• Cons
–Not liquid
–Relatively Expensive
–Prices don’t always go up
Commodities•Hogs, pork bellies, frozen concentrate o.j., corn, soybeans, gold, silver–ProHigh Returns–ConDifficult to Understand, You can lose your shirt!
Options AND Futures• Options
–Certificate which allows you to purchase stock at a predetermined price• Generally below market level
• Futures–Contracts which allow businesses to
lock in prices for currencies and commodities
Protecting Your Investment From
Uncle Sam• IRA-individual retirement account• ROTH IRA-after tax IRA• SEP- simplified employee pension• 401(k)- retirement plan with matching• 403(b)- retirement plan for teachers, professors• TSA- Tax Sheltered Annuity• Pension- Retirement package from company