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Investment Information / Averages
 

Investment Information / Averages

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    Investment Information / Averages Investment Information / Averages Presentation Transcript

    • Chapter 3 Investment Information and Securities Transactions
    • Online Investing, Information, and Trading
      • Learning Goals
        • Discuss the growth in online investing and the pros and cons of using the Internet as an investment tool.
        • Identify major types and sources of traditional and online investment information.
        • Explain the key aspects of commonly cited stock and bond market averages and indexes.
        • Review the roles of stockbrokers.
        • Describe the basic types of orders, online transactions, transaction costs, and legal aspects of investor protection.
        • Discuss roles of investment advisors and investment clubs.
    • Getting Started in Online Investing
      • Internet is a major force in investing
        • Makes investing more accessible to more people
        • Provides access to sophisticated investment tools
        • Convenient, relatively simple, inexpensive and fast
    • Online Investment Tools
      • Investment Education Websites
        • Offer tutorials, online classes and articles
        • Examples: Investing Online Resource Center , Investor Guide.com , The Motley Fool
      • Investments Tools Websites
        • Develop financial plans, set investment goals
      • Planning Tools Websites
        • Provides financial calculators
        • Example: Kiplinger’s Personal Finance
    • Figure 3.2 Financial Calculators Concerned with Stocks
    • Online Investment Tools
      • Screening Tools Websites
        • Sort through databases of stocks, bonds and mutual funds to find those with specific characteristics
        • Examples: Zacks.com and Yahoo!Finance
      • Charting Tools Websites
        • Plot performance of stocks over a specified time period
        • Examples: Barchart.com and BigCharts.com
      • Stock Quotes and Portfolio Tracking Websites
        • Obtain prices and track stock performance
        • Examples: Yahoo!Finance and MSN Money
    • Figure 3.3 Zacks Predefined Screener
    • Figure 3.4 Stock Chart for Qualcomm
    • Pros and Cons of Using the Internet as an Investment Tool
      • Exercise same cautions as regular investing
      • Remember: there is no live broker to act as a “safety net”
      • Be skeptical of “free” advice online
      • Know what you are buying and from whom
      • Watch out for frequent trading
        • High transaction costs
        • Higher taxes on short-term gains
      • Beware of the risks of margin trading
    • Types of Investment Information
      • Descriptive Information – factual data on past behavior of economy, market, industry company or given investment vehicle
      • Analytical Information – available current data in conjunction with projections and recommendations about potential investments
    • Types of Investment Information
      • Economic and current events
      • Industry and company information
      • Information on alternative investment vehicles
      • Price information
      • Information on personal investment strategies
    • Sources of Investment Information
      • Economic and Current Event Information
        • Finance Journals: Wall Street Journal, Barron’s, Investor’s Business Daily
        • General newspapers: The New York Times
        • Institutional News: Dow Jones, Bloomberg Financial Services, AP, UPI, CNNMoney
        • Business Periodicals: Fortune, Forbes, Business Week, Kiplinger’s Personal Finance, Money, Smart Money, Worth
        • Government Publications: Economic Report of the President, Federal Reserve Bulletin
        • Special Subscription Services: Kiplinger Washington Letter
    • Sources of Investment Information (cont’d)
      • Industry and Company Information
        • General business periodicals: Wall Street Journal, Business Week, Forbes, Fortune
        • Trade publications: periodicals devoted to a specific industry
        • Regulation FD: requires critical company information to be disclosed simultaneously to investment professionals and public
        • Company Web sites
        • Stockholders’ Reports: report published annually by publicly held corporations
        • Form 10-K: annual statement filed with SEC by all companies with publicly traded stock
        • Freeedgar.com: SEC-maintained website with free access to SEC filings
    • Sources of Investment Information (cont’d)
      • Industry and Company Information (cont’d)
        • Comparative Data Sources: Dun & Bradstreet’s Key Business Ratios
        • Subscription Services: Standard & Poor’s Corporation, Mergent, Value Line Investment Survey
        • Brokerage Reports: research reports available to brokerage firm’s clients
        • Investment Letters: recommendations of experts in securities investment
    • Figure 3.5 A Report Containing Descriptive and Analytical Information
    • Sources of Investment Information (cont’d)
      • Price Information
        • Quotations: use ticker symbols to obtain current price data and statistics on companies
        • TV sources: Bloomberg TV, CNBC, CNN Headline News
    • Sources of Investment Information (cont’d)
      • Other Online Investment Information Sources
        • Financial Portals: supersites on the Web that combine investing features with other personal finance features
        • Bond sites: online resources for bond and interest rate information
        • Mutual fund sites: online resources for mutual fund information
        • International sites: online resources for global investing, from country research to foreign currency exchange
        • Investment discussion forums: websites where investors can exchange opinions on stocks and investing strategies (Examples: Motley Fool, Yahoo! Finance)
    • Table 3.3 Symbols for Some Well-Known Companies
    • Sources of Investment Information (cont’d)
      • Avoiding Online Scams
        • Beware of stock manipulators posting false news or overly optimistic opinions
        • Always know your source
        • Beware of “pump-and-dump”—promoters who hype a stock and sell out on the inflated prices
        • Beware of “get-rich-quick”—promoters selling worthless investments to naïve buyers
    • Sources of Investment Information (cont’d)
      • Protect Yourself by Asking Three Key Questions:
        • Is the investment registered?
        • Is the person licensed and law-abiding?
        • Does the investment sound too good to be true?
    • Understanding Market Averages and Indexes
      • Reasons to use market averages and indexes
        • Gauge general market conditions
        • Compare your portfolio performance to large, diversified portfolio
        • Study market cycles, trends and behaviors to forecast future market behavior
      • Stock market averages and indexes measure the general behavior of stock prices over time
        • Averages reflect the arithmetic average price behavior at a given point in time
        • Indexes measure the current price behavior relative to a base value set at an earlier point in time
    • Understanding Market Averages and Indexes (cont’d)
      • Dow Jones Industrial Average (DJIA)
        • Most popular average
        • Comprised of 30 high quality, diversified stocks
        • Tracks overall market activity
        • Stock makeup can change to better reflect the broader stock market
      • Dow Jones Transportation Average
        • Comprised of 20 stocks, including railroads, airlines, freight forwarders and mixed transportation companies
    • Understanding Market Averages and Indexes (cont’d)
      • Dow Jones Utilities Average
        • Comprised of 15 public utility stocks
      • Standard & Poor’s 500 Composite Index
        • Comprised of 500 stocks from major industry sectors
        • More broad-based and representative of overall market than DJIA
        • True index calculated from 1941–1943 base period closing market values
        • Standard & Poor’s provide seven other indexes for tracking specific industry sectors
    • Figure 3.7 Stock Market Averages and Indexes (July 12, 2006)
    • Understanding Market Averages and Indexes (cont’d)
      • NYSE Composite Index
        • Includes 2,100 or so stocks listed in NYSE
      • AMEX Composite Index
        • Includes all stocks listed on the AMEX
      • Nasdaq Composite Index
        • Includes all stocks traded on the Nasdaq stock market
        • Often used to track technology companies’ behavior due to large technology companies listed with Nasdaq
    • Understanding Market Averages and Indexes (cont’d)
      • Value Line Composite Index
        • Includes all 1,700 or so stocks tracked by Value Line
        • Uses equal weighting to eliminate the bias of stocks with large total market values
      • Wilshire 5000 Index
        • Includes 5,000 stocks traded on the major exchanges
      • Russell 1000 Index
        • Includes 1,000 largest companies
      • Russell 2000 Index
        • Includes 2,000 small companies
      • Europe/Australia/Far East (EAFE MSCI)
        • Tracks stocks trade on foreign exchanges
    • Bond Market Indicators
      • Bond Yields
        • Total return on bond purchased at current price and held to maturity
        • Interest +/– changes in bond value
        • Reported as annual rate of return
      • Dow Jones Corporate Bond Index
        • Calculated for utility bonds, industrial bonds and a composite bond average