Models for Estimating Risk and Optimizing the Return on Security Investment.
Chapter 11.2 notes Why invest?. Basic Investment Considerations Risk-return relationship – the...
-
Upload
elmer-conley -
Category
Documents
-
view
221 -
download
6
Transcript of Chapter 11.2 notes Why invest?. Basic Investment Considerations Risk-return relationship – the...
![Page 1: Chapter 11.2 notes Why invest?. Basic Investment Considerations Risk-return relationship – the more your risk, the higher the potential return Investment.](https://reader036.fdocuments.in/reader036/viewer/2022082818/56649ebb5503460f94bc2e44/html5/thumbnails/1.jpg)
Chapter 11.2 notes
Why invest?
![Page 2: Chapter 11.2 notes Why invest?. Basic Investment Considerations Risk-return relationship – the more your risk, the higher the potential return Investment.](https://reader036.fdocuments.in/reader036/viewer/2022082818/56649ebb5503460f94bc2e44/html5/thumbnails/2.jpg)
Basic Investment Considerations
• Risk-return relationship – the more your risk, the higher the potential return
• Investment objectives – retirement, vacations, college fund?
• Simplicity – don’t invest in something you don’t understand
• Consistency – invest consistently over long periods of time
![Page 3: Chapter 11.2 notes Why invest?. Basic Investment Considerations Risk-return relationship – the more your risk, the higher the potential return Investment.](https://reader036.fdocuments.in/reader036/viewer/2022082818/56649ebb5503460f94bc2e44/html5/thumbnails/3.jpg)
diversification
• Putting money into different investments, different risk levels, etc.
![Page 4: Chapter 11.2 notes Why invest?. Basic Investment Considerations Risk-return relationship – the more your risk, the higher the potential return Investment.](https://reader036.fdocuments.in/reader036/viewer/2022082818/56649ebb5503460f94bc2e44/html5/thumbnails/4.jpg)
Chapter 11.3 notes
Stocks
![Page 5: Chapter 11.2 notes Why invest?. Basic Investment Considerations Risk-return relationship – the more your risk, the higher the potential return Investment.](https://reader036.fdocuments.in/reader036/viewer/2022082818/56649ebb5503460f94bc2e44/html5/thumbnails/5.jpg)
The basics
• You invest in a stock at a certain price per share
• You make money when the price goes up
• Called capital gains
![Page 6: Chapter 11.2 notes Why invest?. Basic Investment Considerations Risk-return relationship – the more your risk, the higher the potential return Investment.](https://reader036.fdocuments.in/reader036/viewer/2022082818/56649ebb5503460f94bc2e44/html5/thumbnails/6.jpg)
2 types of stock
• Common – gives voting rights
• Preferred – gives a share of profits, but no voting rights
![Page 7: Chapter 11.2 notes Why invest?. Basic Investment Considerations Risk-return relationship – the more your risk, the higher the potential return Investment.](https://reader036.fdocuments.in/reader036/viewer/2022082818/56649ebb5503460f94bc2e44/html5/thumbnails/7.jpg)
Organized Stock Exchanges
• Stock is sold through exchanges• Securities Exchanges – places where
buyers and sellers meet to trade securities• New York Stock Exchange (NYSE) –
oldest and largest original exchange; in NYC; use auctioning process through face to face trading; now a lot of trades are electronic
![Page 8: Chapter 11.2 notes Why invest?. Basic Investment Considerations Risk-return relationship – the more your risk, the higher the potential return Investment.](https://reader036.fdocuments.in/reader036/viewer/2022082818/56649ebb5503460f94bc2e44/html5/thumbnails/8.jpg)
What it looks like
Outside on Wall St. Inside on the floor
![Page 9: Chapter 11.2 notes Why invest?. Basic Investment Considerations Risk-return relationship – the more your risk, the higher the potential return Investment.](https://reader036.fdocuments.in/reader036/viewer/2022082818/56649ebb5503460f94bc2e44/html5/thumbnails/9.jpg)
Over-the-Counter Markets • OTC – electronic marketplace for securities
that are not traded on an organized exchange.
• National Association of Securities Dealers Automated Quotation (NASDAQ)
• most important OTC• largest electronic stock market• trading is done w/ a computer and
telecommunications network that connects investors in over 80 countries
• over 4,000 stocks
![Page 10: Chapter 11.2 notes Why invest?. Basic Investment Considerations Risk-return relationship – the more your risk, the higher the potential return Investment.](https://reader036.fdocuments.in/reader036/viewer/2022082818/56649ebb5503460f94bc2e44/html5/thumbnails/10.jpg)
Measures of Stock Performance
• Dow-Jones Industrial Average – most popular and widely publicized measure of stock performance. 30 stocks including B of A, Exxon, Coke, GE, Wal-mart and Disney; measured in points
• Standard and Poor’s 500 – measures price changes of 500 stocks
![Page 11: Chapter 11.2 notes Why invest?. Basic Investment Considerations Risk-return relationship – the more your risk, the higher the potential return Investment.](https://reader036.fdocuments.in/reader036/viewer/2022082818/56649ebb5503460f94bc2e44/html5/thumbnails/11.jpg)
Bull vs. Bear
• Bull v. Bear Markets – Bull = strong w/ prices going up for a while; Bear = “mean” market, w/ prices falling sharply for several months
![Page 12: Chapter 11.2 notes Why invest?. Basic Investment Considerations Risk-return relationship – the more your risk, the higher the potential return Investment.](https://reader036.fdocuments.in/reader036/viewer/2022082818/56649ebb5503460f94bc2e44/html5/thumbnails/12.jpg)
The Bronze Bull