The Basics of Investing

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Get the 12 rules you need to follow to be a successful investor right here. This basic presentation gets you started in the right direction. You can now view the presentation here, order the Family Financial Freedom book from any of the ebook sites for iPhone, iPad, Kindle, Nook, Kobo reader etc. contact me at floyd.saunders@yahoo.com for a copy of the presentation or more information on how to get seminar materials.

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The Basics of Investing

  1. 1. The Beginning Investor Series. Investing Basics 12 rules for successful stock investing Saunders Learning Group, LLC May 2012
  2. 2. Training from Saunders Learning Group Saunders Learning Group provides a variety of training programs, workshops and seminars targeted to the financial services industry. Programs are available in a wide range of topics, and we are specialists in developing custom programs that are targeted to your needs. Contact the founder, Floyd Saunders at 316-680-6482 or at floyd@floydsaunders.com for more information. Saunders Learning Group, LLC, Andover, KS2
  3. 3. Economic AnalysisInvolves assessing economic conditions that can affect a firm’s stock priceEconomic growth Interest ratesA measure of growth in a country’s  Stocks perform better when interesteconomy over a particular period rates are lowGross domestic product (GDP):  Some stocks are more sensitive tothe total market value of all products interest rates than othersand services produced in a country  The Federal Reserve uses monetary policy to influence interest rates Weak economic conditions Inflation  Lowers demand and stock prices The increase in the general level of prices of products and services over a specified period  Consumers spend less, further lowering demand Consumer price index (CPI): a measure of Fiscal policy inflation that represents prices of various The means by which the U.S. government consumer products imposes taxes on individuals and Producer price index (PPI): a measure of corporations and by which it spends its inflation that represents prices of products money used to produce other products Saunders Learning Group, LLC, Andover, KS 14-3
  4. 4. Sources for Economic Analysis Saunders Learning Group, LLC, Andover, KS 14-4
  5. 5. Evaluating Stocks Saunders Learning Group, LLC, Andover, KS
  6. 6. Analysis of the FirmFirm-specific characteristics - Analysis of a firm’s income statement and balance sheet can reveal the following characteristics: Saunders Learning Group, LLC, Andover, KS 14-6
  7. 7. Financial Ratios Used to Evaluate a Business Saunders Learning Group, LLC, Andover, KS 14-7
  8. 8. Evaluating StocksTo find out about the health of a corporation, you can use numerical measures such as: Industry Norms, Go to: http://biz.yahoo.com/research/indgrp Provides information on various industry groups and financial information on firms you specify in any industry. Saunders Learning Group, LLC, Andover, KS
  9. 9. Analysis of the FirmSaunders Learning Group, LLC, Andover, KS 14-9
  10. 10. 12 Rules for Investing in Stocks1. Start with an emergency fund2. Open a “cash” only account with a stock broker – Online, Discount, Full-Service 1. Save the margin account for later, after you know more about what you are doing 1. New investor, need advise – Use a full service brokerage for guidance, check for a good track record 2. More experienced – Use a discount brokerage with good service and quality products3. Start with $1,000 in mutual funds 1. $5,000 buy just two to three stocks 2. $10,000 add one or two additional stocks 3. $25,000 allows you have five or six stocks 4. $100,000 Not more than 20 stocks, unless you want to spend 100% of your time investing4. Buy the very best companies, concentrate on a limited number of stocks with growing dividends, and watch them closely using stock alerts. Saunders Learning Group, LLC, Andover, KS 10
  11. 11. 12 Rules for Investing in Stocks1. Cut loses on stocks @ 8% with Stop Lost orders  This takes out the hope and fear of investing, makes for rational decision making  Be persistent about cutting loses, so you have money to invest in the next best option2. Sell your best stocks with 25 to 30% gains  Always sell you worst-performing stocks first, not your best, but don’t hang on for the last ounce of gains3. Pick Market leaders in areas you have some knowledge  Profits drive the price of stocks: improving earnings (EPS), growing profits, increasing sales and earnings growth  #1 in their category with strong Return on Equity (ROE)4. Invest dollars, not number of shares. Pick stocks with a price between $15 and $150 per share  70% of trades are with institutional investors, who drive the market and shun low priced stocks Saunders Learning Group, LLC, Andover, KS 11
  12. 12. 12 Rules for Investing in Stocks1. Use fundamental analysis for picking stocks to own and technical analysis to know the buy and sell signals  Technical analysis is reading a stock’s prices and trading volume to time the buying and selling of stocks. Look for price corrections and base building in charts.2. Earnings Per Share of 30% or more  Over time 3 of 4 of the biggest winners are growth stocks with EPS of 30% or more3. Buy leaders  Sales up 25%  Look for stocks with gains of 25% in the same quarter from a year earlier  #1 in their field for recent sales, earning growth, profit margins and ROE (20% or more)  Also look for strong management team and management ownership with strong institutional ownership4. Look for stocks with a strong record of annually increasing dividends Saunders Learning Group, LLC, Andover, KS 12
  13. 13. QuestionsSaunders Learning Group, LLC, Andover, KS
  14. 14. Post Workshop Action Plan  Complete the Post Workshop Action Plan Saunders Learning Group, LLC, Andover, KS14
  15. 15. Reference Material Figuring Out Wall Street Consumer’s Guide To Financial Markets By Floyd Saunders Publisher: Saunders Learning Group ISBN: 978-0-9824019-0-3 available from Amazon, B&N, and http://www.figuringout wallstreet.com or www.floydsaunders.com Book summary: From bank failures to home foreclosures and panic around the world, Figuring Out Wall Street, is the concise guide to help everyone understand how this latest crisis happened, who was responsible and what to do now to restore our financial systems. Written in an easy to understand manner, even the most complex financial concepts are easy to digest. This book provides help to monitor investments with a review of investment products, financial regulators and economic indicators. Learn how the stock market exchanges work and the world of investment banking, hedge funds, venture capital and private equity. Every chapter includes action plans for investing.Saunders Learning Group, LLC, Andover, KS
  16. 16. About the Author  Floyd Saunders has worked on Wall Street with both Bank of America and JPMorgan, where is was a vice president in global financial systems. He has worked across the industry in retail, commercial, and investment banking.  He has taught courses in Money and Banking and extensively for the American Institute of Banking and various colleges.  As a consultant, he developed and taught a wide range of banking and investing courses.  He authored three programs for the American Bankers Association: Banking on Mutual Funds and Annuities, Introduction to Securities Markets and Investing in Securities.Saunders Learning Group, LLC, Andover, KS date

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