saving & investingWHAT’S THE DIFFERENCE?

WHICH ONE WILL EARN ME MORE MONEY?

LEARNING TARGETSStudents will: Define different saving options and conceptsCalculate simple and compound interestUnderstand the difference between saving

and investingRead a stock listing.Calculate capital gain/loss.Describe the different types of stocks.Contrast the 2 types of brokers.Explain the role of the SEC.Put together an investment portfolio.

Investing

When you choose to save in a way that earns income.

Why invest?

RetirementCollegeTravel plansExtra income

Corporate Stocks

A unit of ownership in a corp.

Stockholders

Investors in a corporation. You need to buy only one share to be a stockholder.

RISK AND RATE OF RETURNLT #3 – Discuss how risk affects capital gain/loss

Risk = The chance that an investment will decrease in value. ↑ Risk = ↑chance for a return.

Return

The income you earn on an investment.

Why do companies sell stock?

Who can help?LT #6 – Contrast the 2 types of brokers

Full Service Brokers = give investment advice for a fee. EX: Merrill Lynch, Fidelity, American Express.

Discount Broker = for a discounted fee, will buy/sell securities (stock). EX: Charles Schwab, Ameritrade, E*Trade.

Annual Reports

A summary of a corporation’s finances and general business info.

Diversification

Choosing several types of investments (stocks, bonds, real estate) instead of one. ↓ risk.

Have you heard the phrase “Don’t put all your eggs in one basket?”

vs.

Investment OptionsLT #5 – Explain the different investment options

BondsStocksMutual fundsReal estate

How do you earn a return on your investment?LT #2 – Calculate capital gain/loss

Dividend = A share of a company’s profits.

 Capital Gain = The profit you earn from selling stock at a higher price than you paid for it.

Capital Loss = The amount you lose.

I wonder how long it would take me to double

my money?

Rule of 72This mathematical technique allows

you to estimate the # of years it will take you to double your money.

Example: You are earning a 10% return per year on your money. How long will it take to double your money?

Answer: 72 divided by 10 = 7.2 years

List 5 companies you might want to invest in.

TYPES OF STOCKLT # 4 – Describe the different types of stock

Preferred Stock = Gives you no voting rights, but pays a fixed dividend.

 Common Stock = Gives you voting rights, & dividends are determined year to year.

Blue Chip Stock

Shares in large, well-established companies. EX: Coke, Ford, IBM, Disney (Appear on the Dow Jones)

Growth Stock

Young corp. expected to experience rapid growth.

Penny Stocks

Sold for small companies that have no track record.

Why invest in growth stocks??

Why Not?

What we’ve learned

What it means to invest.Investment options.Types of stock.Who can help us buy/sell stock.Why companies sell stock.How you make money on investments.

Where can you buy stock?

STOCK EXCHANGE = A location where stocks are bought and sold.

NYSENew York Stock Exchange

NYSE FACTS

First organized May 17, 1792.24 brokers/merchants sign the

Buttonwood Agreement, agreeing to trade stocks with one another.

This took place on Wall St. in Manhattan under a buttonwood tree.

Five securities traded: 3 gov’t. bonds and 2 bank stocks.

NYSE FACTS CON’T.

1844 – invention of the telegraph broadened the exchanges ability to communicate with brokers outside New York City.

Bank of New York – first company listed with exchange.

Highest volume day: 5,799,792,281 shares on August 16, 2007. 

Lowest volume day: 31 shares on March 16, 1830.

NASDAQ

National Association of Securities Dealers Automated Quotation System

The most common way to trade stocks.

NASDAQ FACTS

Has no physical trading floor, all trades done electronically.

1.8 Billion trades per day. The largest volume of any other exchange.

Known for its high-tech, new and high growth companies. 3,300 companies are on its listing.

Is a publicly owned company. You can buy its stock.

Ticker symbol is NDAQ.

LT #1 – Read a stock listing

See Figure 12-5: Reading The Stock Listing pg. 294

Ticker Symbol

Each stock has a company abbreviation. Target = TGT.

How’s it going?

Bull Market = A period of rising stock prices. Bear Market = A period of falling stock prices.

MUTUAL FUNDSLT #5 – Explain the different types of investment options

A group of investments owned by many investors who pool their money together & buy a variety of stocks. What do we call this?

COST OF MUTUAL FUNDS

Loads = a sales fee you pay a broker when investing.

Types of Loads

Front-end Load = You pay this sales fee when you buy your shares.

Back-end Load = You pay this sales fee when you sell your shares.

Corporate BondsLT #5 – Explain the different types of investment options

Corp. raise money by selling bonds. Less risky than stocks.

*When you buy a bond you are lending a corp. money. In return they promise to pay back that money plus interest by a certain date.

INVESTMENT SCHEMESLT #7 – Explain the role of the SEC

SEC = Securities and Exchange Commission

Responsible for enforcing laws concerning the trading of stock/bonds. They investigate dishonest deals.

Insider Trading

Trading stocks based on information not available to the public.

Web sites:

www.nyse.com New York Stock Exchange

www.wsj.com Wall Street Journalwww.marketguide.comwww.teenvestor.com Teenvestorwww.fool.com The Motley Fool