investing: taking risks with your savings

Investing: Taking Risks With Your Savings6-2

• Where do people keep their savings?

• What other options might you have?

• Benefits?

• Disadvantages?

Stocks and Bonds• What are stocks?

• Corporations are formed by selling shares of stock• How does that work?

• A person who buys into stock entitle them to future profits and assets of the corporation

• Proof of ownership: Corporation issues stock certificates

• Stockholders• People who invest in a corporation and own some of its shares

of stock

• Benefit from stock in two ways:• Dividends• Return a stockholder receives on the amount that he or she

invested in the company• Typically paid out when the company makes a profit

• Selling your stock• When would you want to buy stock?• When would you want to sell it?

• What is capital gain?• Profit a person makes

• What is capital losses?• Losses a person suffers

Bonds• What is a bond?• Certificate issued by a company or the government in exchange

for borrowed funds

• Why might this be a good way to invest?• Receive interest• Money is invested for a certain amount of time• After that is over- bond’s maturity

• Differences than stock?

Tax-Exempt Bonds• What is a tax exempt bond?

• Bonds sold by government where your interest is paid on the bond and is not taxed by the government

• Good investments for the wealthy, why?

Savings Bonds• Bonds that are purchased at half value and increase every six

months until full face value is reached

• Interest rates on the bonds depend on the economy

• If you take out a savings bond early, you are guaranteed a fixed rate of interest

T-Bills, Notes, and Bonds• Treasury Bills-• Minimum investment is $1,000• Mature quickly- A few days-26 weeks

• Treasury Notes-• Minimum investment of $1,000• Maturity range is 2-10 years

• Treasury Bonds-• Minimum investment of ????• Maturity range is 30 years

• Exempt from state and local taxes; but not federal

• What is a stock broker?• Person who acts as a middle man for buyers and sellers of

stocks and bonds

• What are some ways you can buy and sell stocks and bonds?• Call the brokerage firm• Interest firms• Over 100 online brokerage firms

• Estimated 20 million investors through the internet each year

Stock Exchanges• What is the largest stock exchange company in the stock

market?

• NYSE• New York Stock Exchange

• Regional Branches• International Branches

• How might businesses be on these large exchanges?• Good financial standing• Usually the biggest companies in the world

Over-the-Counter Markets• NASDAQ?• National Association of Securities Dealers Automated

Quotations

• Electronic purchase and sale of stocks and bonds• Usually deals with smaller companies

Stock Market Indexes• What is the most well known stock market index?

• Measures of what is happening to a given set of stock prices for a specified list of companies

• Dow-Jones Industrial Average- The “DOW”• Involves 30 major companies in the United States

Bond Markets• New York Exchange Bond Market and the American Exchange

Bond Market- two largest in the world

• Who can you hire to help you out with investing in bonds?

• Financial Adviser

Mutual Funds• Investment company that pools the funds of many individuals

to buy stocks, bonds, or other investments

• Put money into many different stocks

• What is the advantage to that?• What might be a disadvantage?

Money Market Funds• Type of mutual fund that uses investors’ funds to make short

term loans to businesses and banks

• Federal government insures them against loss

• What FRA regulates to stock market?

• SEC!

• SEC was created in 1929, why is that significant?