Weekly Topics
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Transcript of Weekly Topics
WEEKLY TOPICSJason Matteo
Technical Director
Goals…• Understand the basics of investing
and of investment methods and strategies
• Learn from each other building your knowledge and your network
• Get Bloomberg certified• Have fun
Weekly Lessons Each week will have a brief topic related to investing9/5- Basic Overview9/12- Bloomberg Professional Certification9/19- Example Online Broker Overview9/26- Technical vs. Fundamental Analysis10/3- The Power of Compounding, Dividends, DRIPs10/10- Mutual Funds & ETFs10/17- Bonds10/24- Options11/7- Futures11/14 -Forex
Disclaimer All information is intended for
educational/informational purposes only and is not a recommendation or endorsement of any particular investment or investment strategy
I am not an expert and I will not pretend to be. My goal is for everyone to benefit from each other by shared knowledge
9/5 Investment BasicsQuestions to be answered:
How should one invest? And why?Invest in what? How does one
invest? What
are the mechanics?
Basics Saving
provides funds for emergencies and for making specific purchases in the near future
InvestingFocuses on
increasing net worth and achieving long-term financial goals
Investing Buying an investment
Putting money into an asset that generates a return
SpeculationNot the same as an investmentPurchasing assets, equity or debt because
of an assumed valueEx: Gold coins, baseball cards, gems
What to Invest In – The Basics
Asset Classes Stocks Bonds Cash
There are others but these
are the fundamental asset classes. Start with these before getting fancy.
Asset Classes• Stocks
– Ownership in a corporation• Bonds
– Corporate and government debt – Must be repaid
• Cash– Checking, savings accounts– Money market accounts– CDs– US Treasury Bills
Types of Stock Common stock Preferred stock
Convertible
Investing in Stocks Common Stock
Purchasing a part of the company
Possible dividends and capital appreciation
Many are limited liability
Companies may repurchase their own stock
Types of Common StockBlue-Chip StocksGrowth StocksIncome StocksSpeculative StocksCyclical StocksDefensive Stocks
BASIC STOCK TERMS
Basic Terms Earnings per Share: The amount of profit to
which each share is entitled
Going Public: Slang for when a company is planning an IPO.
IPO: Short for Initial Public Offering. An IPO is when a company sells stock in itself for the first time.
Basic Terms Market Cap: The amount of money you would
have to pay if you bought every share of stock in a company. Multiply outstanding shares by stock price
Share: A share represents an investor's ownership in a "share" of the profits, losses, and assets of a company.
Basic Terms Ticker Symbol: A short group of letters
that represents a particular stock (e.g., ”Google" is referred to as ”GOOG".)
Underwriter: The financial institution or investment bank that is doing all of the paperwork and orchestrating a company's IPO.
Basic Terms Bull Market
A market in which prices are rising
Bear MarketA market in which prices are falling
RecessionA period of temporary economic declineAKA the past 5 years…
Mutual Funds vs. Individual Stock and Bond Trading
Mutual FundsProfessional
management of investing
Minimal transaction costs
May offer higher returns
Many to choose from
Individual Stock and Bond TradingRequires time and
expertiseHigher transaction
costsLess likely to have
proper diversification
Types of Bonds Corporate
Debenture Federal Government
Treasury Bonds (T-Bonds, Treasuries) Municipal bonds
General obligationRevenue
Bonds Investing
Produce steady incomeIf held until maturity, bonds are a safe
investment with low risk Par Value
Face value or return at maturity Coupon interest rate
Percentage of par value paid out annually
Types of Bonds Corporate Bonds
Allow firms to borrow money
Treasury and Agency BondsAgency bonds are
virtually risk-free with higher interest rates than Treasuries
Municipal BondsTax-exemptSerial maturitiesNot entirely risk free
Junk BondsLow-rated or high-yieldGreater risk of defaultCallable (issuer can
call them back and reissue at an altered interest rate)
Risk In finance, typically defined as standard
deviation of returns. What are the risks for:
StocksBondsCash
Asset Allocation What percent of your money should be in each
asset class?For example:
○ 70% stock, 25% bonds, 5% cash, or○ 30% stock, 65% bonds, 5% cash
The answer depends upon:Your investment objectiveYour tolerance for risk
Common rule-of-thumb% stock = 100 - your age
Risk – By Asset ClassWorst Annual Return
Since 1925Average Annual Return
Since 1925
Stocks -43.4%(-67.6% worst 12 mo.)
9.6%(162.9% best 12 mo.)
Bonds -7.8% 5.5%
Cash .1% 3.7%
Sources: personal.fidelity.com, Morgan Stanley, www.efficientfrontier.com, Federal Reserve – St. Louis
“Typical” Portfolio Allocations
Stocks Bonds Cash
Conservative 20% 55% 25%
Moderately Conservative 40% 50% 10%
Moderate 60% 35% 5%
Moderately Aggressive 70% 25% 5%
Aggressive 80% 15% 5%
Summary Asset allocation is the single biggest
determinate of portfolio results Major asset classes
StocksBondsCash
How you allocate your investments depends upon the returns you need and risk you can take
Rule-of-thumb: %stock = 100 - age
Where and how do I start?(Starting an account, resources for learning)
Keep learning! Make sure you understand the basics
Investopedia (www.investopedia.com)Motley Fool (www.fool.com)Investor Guide (www.investorguide.com)These sites also have introductions to certain investing
strategies
Books (learn from the greatest investors)How to Make Money in Stocks (William O’Neil)Beating the Street (Peter Lynch)Lessons from the Great Stock Traders of All Time (John Boik)The Warren Buffet Way (Robert Hagstrom)The Intelligent Investor (Benjamin Graham)
Brokerages Need a medium to trade through
(brokerages)
Choosing a brokerfull service vs. discount
○ Fees (Commission)○ Services○ Minimum balance
http://www.stockbrokers.com/compare
Brokerages
Videoshttp://www.investopedia.com/video/play/what-are-stocks/http://www.investopedia.com/video/play/what-moves-stock-prices/http://www.investopedia.com/video/play/what-is-the-dow-jones-industrial-average/
Next Meeting 9/12 Bloomberg Professional Certification
Bloomberg Professional Service and the Bloomberg Terminal
Bloomberg Named for Bloomberg L.P. founder
Michael Bloomberg. Current mayor of NYC for a little while
longer…until Anthony Weiner aka Carlos Danger “the peter tweeter” wins the upcoming election.
Bloomberg Terminal• Computer system that allows users to
monitor and analyze real-time financial market data movements
• The system also provides news, price quotes and an immense database
• Most financial firms use it• http://
www.youtube.com/watch?v=ALNjoN-taog
Bloomberg Terminal (cont.)
Bloomberg (cont.)• It costs $1500 a month• We have two here at UF, one in Hough
Hall and one on 3rd floor Library West• FREE for students!• The certification is free also!
Getting Started http://
businesslibrary.uflib.ufl.edu/bloomberg Go to Club West. The terminal is located
on the 3rd Floor behind the services desk next to the microfilm area
Ask a receptionist about it and they will type in a magic password so you can use it
Certification
Certification Takes about 8 hours, I was able to
knock it out all in one sitting, but you can work on it a little at a time
Bring headphones so you can watch the videos with sound and not piss off everyone in the library
There is a sign in sheet where you can reserve time slots if someone else is currently using the machine
Why Get Certified Its cool and you learn a lot. Using
double monitors automatically makes you feel more important
You can put something else on your resume other than your name
Many companies use it so the fact you even know what it is AND have used it before will make recruiters SMILE
“Yay he knows how to use Bloomberg!”
Next Meeting 9/19 Example online broker overview
Random Ass Videos
$#!* People Say About Investing
Stock Market Rap
E-Trade Baby 2
E-Trade Baby
Technical vs. Fundamental Analysis
Their Main Differences At the most basic level, a technical
analyst approaches a security from the charts, while a fundamental analyst starts with the financial statements.
http://www.investopedia.com/video/play/fundamental-versus-technical-analysis/
Fundamental Analysis Looks at financial data: revenues, profits
and losses, business trends Seek growth factors. Examine macroeconomic factors such
as a company's business sector and the overall economy in relation to a company's lines of business
Technical Analysis Looks only at price and volume action All information about a stock is reflected
in the share price Analyzing the price movements will
predict where a stock price will go from here
Indicators: MACD, crossovers, divergence, RSI etc.
Pros and Cons Proponents of fundamental analysis
think technical analysis is voodoo mumbo jumbo and doesn’t work.
If fundamental analysis works so well then why isn’t everyone rich?
Conclusion A wise investor will understand and take
into consideration both methods of analysis.
Next Meeting 10/3 The Power of Compounding, Dividends,
DRIPs
The Power of Compounding, Dividends, DRIPs
“Compounding interest is the most powerful force in the universe”
-Albert Einstein
http://www.investopedia.com/video/play/what-is-compound-interest/
The Rule of 72 A rule stating that in order to find the
number of years required to double your money at a given interest rate, you divide the compound return into 72. The result is the approximate number of years that it will take for your investment to double.
http://www.investopedia.com/video/play/rule-of-72/
Dividend A cash payment (usually quarterly) to
shareholders out of its profits.
Comic Relief If you had bought $1000.00 worth of
Nortel stock one year ago, it would now be worth $49.00.
With Enron, you would have $16.50 of the original $1,000.00.
With WorldCom, you would have less than $5.00 left.
If you had bought $1,000.00 worth of Budweiser
(the beer, not the stock)
one year ago, drank all the beer, then turned in the cans for the 10 cent deposit, you would have $214.00.
Based on the above, my current investment advice is to drink heavily and recycle.
DRIPs Dividend Reinvestment Plan Broker automatically uses dividend to
purchase more shares of the company Most online brokers offer them for free. Best part is you do not have to pay
transaction commission (still have to pay taxes though )
Drawbacks Frequent purchases of fractional shares
becomes somewhat complicated for tax purposes and documentation
However most online brokers do a good job at automatically generating statements and tax forms
Next Meeting 10/10 Mutual Funds & ETFs