Copyright 2007 Thomson South-Western
Chapter 12
Buying and Selling Investments
Slide 2
Sources of Information
• Magazines
• Newspapers
• Investor newsletters
• Company reports
• Internet
12-1 Researching Investments
Staying informed can help you make better investment choices.
Slide 3
Using Research Data
12-1 Researching Investments
COMPARISON FIGURES
FIGURE DESCRIPTION
Current stock price This price is the amount investors are willing to pay for a share of ownership in the company
Number of employees Changes can reflect growth or downsizing
Market cap The total value of a company in the stock market
Revenue The amount of money received from business activities
Net income or profit Money earned after deducting expenses
Profit margin Profit shown as a percentage
P/E ratio Compares the selling price of a company's common stock to the annual profits per share
Current ratio A measure of a company's ability to pay its current debts from current assets
Slide 4
Advice From Professionals
• Stockbrokers
• Financial planners
• Employees of banks and credit unions
• NASD Web site Broker Check feature
12-1 Researching Investments
Slide 5
Building Communications Skills
Persuasive Messages• A persuasive message tries to convince the
reader to take (or not take) some action• The message should be concise, clear, and
convincing • Begin by gaining the reader’s attention
• Give solid reasons for the person to take (or not take) action
12-1 Researching Investments
Slide 6
Trading Securities
• Primary market
• Secondary market– Securities exchanges
• New York Stock Exchange (NYSE)• American Stock Exchange (AMEX)
– Over-the-counter market
12-2 Buying and Selling Securities
Slide 7
Direct Investing
• Allows you to buy stock directly from a corporation
• You can reinvest dividends
• There are no brokerage fees
• Stock dividends and stock splits increase holdings
12-2 Buying and Selling Securities
Slide 8
Brokerage Services
• Full-service brokers
• Discount brokers
• Online brokers
• Commissions and fees
12-2 Buying and Selling Securities
Full-service stockbrokers offer advice about what to buy.
Slide 9
Stock Transactions
• Market order
• Limit order
• Stop order
• Discretionary order
12-2 Buying and Selling Securities
Slide 10
Market Timing
• Selling short
• Buying on margin
• Buy and hold
12-2 Buying and Selling Securities
Slide 11
Ethics
Churning • Is trading securities primarily to make
money from sales commissions
• Is illegal under SEC rules
• Is considered unethical
• Problems can be reported to the SEC using an online form
12-2 Buying and Selling Securities
Slide 12
Focus on...
Full-Service or Discount Brokers• Full-service and discount brokers
compete for business
• Full-service brokers have higher fees but offer more services
• Discount brokers have lower fees but offer fewer services
12-2 Buying and Selling Securities
Slide 13
Technology Corner
Blogs • Online locations with
– Short articles or comments on a particular subject area
– Text and sometimes video or audio
– One or several authors
• Several blogs are related to investing• Some blogs are free; others charge a fee
12-2 Buying and Selling Securities
Slide 14
Independent Agencies
• Federal Deposit Insurance Corporation
• National Credit Union Administration
• National Association of Securities Dealers
• Pension Benefit Guaranty Corporation
12-3 Regulatory Agencies
Slide 15
Government Agencies
• Securities and Exchange Commission
• U.S. Department of the Treasury
• U.S. Financial Literacy and Education Commission
• Internal Revenue Service
• Federal Reserve System
12-3 Regulatory Agencies
Slide 16
Success Skills
Leadership• Leadership is the ability to influence others • A leader is able to achieve goals by managing
a team • Leaders earn the respect of others
• Developing leadership skills can help you be successful at school and at work
12-3 Regulatory Agencies
Slide 17
Focus on...
Sarbanes-Oxley Act• Is also known as the Public Company
Accounting Reform and Investor Protection Act
• Was passed in July 2002 in response to scandals in large companies
• Created new and stronger standards for U.S. public companies and for accounting firms
12-3 Regulatory Agencies
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