SMART DECISION ABOUT INVESTING YOUR MONEY

ALL ABOUT INVESTMENT THAT YOU NEED TO KNOW

YOU NEED TO WORK VERY-VERY HARDLEARNING ABOUTTHE PRODUCTS

LEARNING BY DOING

LEARNING ABOUTTHE MARKETS

LEARNING ABOUTTHE TECHNIQUES

LEARNING TO CONTROL YOURSELF

SUKSES BERINVESTASI ?

PENGANTAR PASAR MODAL

• Essential nature of investmento Reduced current consumptiono Planned later consumption

• Real Assetso Assets used to produce goods and

services• Financial Assets

o Claims on real assets

Investments & Financial Assets

Characteristics of Financial Assets

• Financial assets are sought after because they promise future returns to their owners and serve as a store of value (purchasing power).

• They do not depreciate like physical goods, and their physical condition or form is usually not relevant in determining their market value.

• Their cost of transportation and storage is low, such that they have little or no value as a commodity.

• Financial assets are fungible – they can easily be changed in form and substituted for other assets.

Characteristics of Financial Assets

Different Kinds of Financial Assets

• Any financial asset that is generally accepted in payment for the purchases of goods and services is a form of money. Examples include currency and checking accounts.

• Equities represent ownership shares in a business firm and are claims against the firm’s profits and proceeds from the sale of its assets. Common stock and preferred stock are equities.

• Debt securities entitle their holders to a priority claim over the holders of equities to the assets and income of an economic unit. They are either negotiable or nonnegotiable. Examples include bonds, notes, accounts payable, and savings deposits.

• Derivatives have a market value that is tied to or influenced by the value or return on a financial asset. Examples include futures contracts, options, and swaps.

Different Kinds of Financial Assets

The Creation Process for Financial Assets

• To acquire assets, households and business firms may use current income and accumulated savings – internal financing.

• An economic unit may also raise funds by issuing financial liabilities (debt) or stock (equities), provided that a buyer can be found – external financing.

Financial Markets

• Brings together Borrowers and Savers• Trade Financial Assets

o Stockso Bondso Commercial Papero Treasury Securities

• Cost of Funds Determined by Interest Rate

• Efficient transfers of funds from savers to borrowers.

Savings

BorrowBorrow

Savings

Financial Markets

• Trades financial assets (securities which are claims on real assets)o Financial vs Physical assetso Trades bonds, stocks

Financial Markets

• Primary v. Secondary Marketo Primary

Company sells stocks or bonds in order to raise money to finance it's projects.

Securities

Money

PrimaryMarket

Financial Markets

• Primary Market

Financial Markets

• Primary MarketoMarket in which new issues of a

security are sold to initial buyers.

Financial Markets

• Primary MarketoMarket in which new issues of a

security are sold to initial buyers.

• Secondary Market

Financial Markets

• Primary MarketoMarket in which new issues of a

security are sold to initial buyers.

• Secondary MarketoMarket in which previously

issued securities are traded.

Financial Markets

• Primary v. Secondary Marketo Primary

Company sells stocks or bonds in order to raise money to finance it's projects.

Securities

Money

SecondaryMarket

• Secondaryo Investors buy and sell

securities to other investorso Necessary in order to make

stocks and bonds marketable. If ready market did not exist then people not as willing to hold securities.

Financial Markets

• Capital Transfer between Savers and Borrowerso Direct Transfer - from borrower to lender.

i.e. new business, or venture capitalists.

Stocks, Bonds

$$

Financial Markets

• Capital Transfer between Savers and Borrowerso Direct Transfer - from borrower to lender. i.e.

ESOPo Indirect Transfer - Investment Banker

Securities

Securities$$

$$

Financial Markets

• Capital Transfer between Savers and Borrowerso Direct Transfer - from borrower to lender. i.e.

ESOPo Indirect Transfer - Investment Bankero Financial Intermediary – Banks & Mutual Funds

Company’sStocks & Bonds

$$

$$

Mutual FundShares

Financial Markets

Role of Financial Assets and Markets in the Economy

• Consumption Timing• Allocation of Risk• Separation of Ownership

Financial System Clients and Their Needs

• Household Sectoro Primary Need: Invest Funds

• Business Sectoro Primary Need: Raise Funds

• Government Sectoro Primary Need: Raise Funds

How the Financial System Meets the Needs of Participants

• Financial Intermediation• Investment Banking• Financial Innovation & Derivatives• Responding to Regulation & Taxes

Technology and Delivery of Service• Computer advancements• On-line trading• More complete and timely information

Globalization• Domestic firms compete in global markets.• Performance in regions depends on other regions.• Causes additional elements of risk

Investments and Innovation

International and Global Markets ContinueDeveloping• Managing foreign exchange• Diversification to improve

performance• Instruments and vehicles continue to

develop.• Information and analysis improves.

Key Trends - Globalization