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020910 Econ Investing Part 2 50m

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020910 Econ Investing Part 2 50m

  1. 1. Good Day! DRAW A LINE SEPARATING TODAY & YESTERDAY 1) Write: Date: 02/09/10 , Topic: Investing Part 2 2) On the next line, write “ Opener #17 ” and then: 1) Plot your mood, reflect in 1 sent . 2) Write down: Dow % Change , NASDAQ % Change , and your current stock % 3) Respond to the opener by writing at least 2 sentences about: Your opinions/thoughts OR/AND Questions sparked by the clip OR/AND Summary of the clip OR/AND Other things going on in the news. Announcements: None Intro Music: Untitled
  2. 2. Agenda 1) Stock Market Part 2 2) Mutual Funds and ETFs End Goal, you will be able to… 1) What can I do other than stocks? Reminder 1) Print out Stock Portfolio by Thurs 2) Test 1 Debrief + Diploma list?
  3. 3. Participation ( 10 points a week ) Negative Mark: Minus 2 Points Each 0 Check: 6 Points 1 Check: 7 Points 2 Checks: 8 Points 3 Checks: 9 Points 4 Checks: 10 Points 5 Checks: 11 Points (+1 EC) 6 Checks: 12 Points (+2 EC) 7 Checks: 13 Points (+3 EC) 8 Checks: 14 Points (+4 EC)
  4. 4. TEST EXTRA POINTS 1) If you score below 60 , you can retake for max of 60 ( anytime ) 2) If you score below 60 , you can also come see me during tutorial for 10 points ( tutorial soonest after the test ) 3) If you score between 60-70 , , you can also come see me during tutorial for X points need to get to max of 70 ( tutorial soonest after the test ) QUESTIONS ABOUT THE TEST?
  5. 5. Debtors: Owe compounding interest Most Americans are debtors, so when interest goes up, it hurts them because their interest terms of borrowing like on credit cards go up. They get poorer. Investors: Earn compounding interest Most Americans fail to do this, but most Americans are poor, don’t be most Americans. When interest goes up, they earn more . Money makes them money! Borrowing of edu/biz also an investment!
  6. 6. Review Real Interest/Real Profit Rate: Interest rate minus inflation. Shows how much money you are really making. Example of Bank’s Profit Model: Loan: @ 6% Savings Rate: @ 0.25% Profit Rate: 5.75% Inflation: 3% Real Profit Rate: 2.75%
  7. 7. Be the saver (investor) not the borrower. Though smart borrowing is an investment like borrowing for tuition or to start/expand biz. Saver Bank Gives Saver Interest Bank Charged Lender Interest Bank Pockets the Difference
  8. 8. Why do investors get interests? Companies to Raise Money to Grow their Biz: a) Bank loan: Biz give % to bank to get $ loan b) Corporate Bonds: Biz give % to get $ iou from investors (first to be paid back in bankruptcy) c) Stocks: Biz get $ by selling shares of ownership (share profit) d) Private Investments (venture capitalists, private equity firms): Privately sales shares
  9. 9. Review 1) Bonds : IOUs, gov+biz borrow at fixed rates + lengths of term. Reliability Rated: AAA-D “Junk”
  10. 10. 2) Stocks : Selling share of ownership in the biz to raise money. Buyer earns money 2 ways: a) Sell Shares: to Someone Else at Higher Price b) Receive Dividends : Biz divides profits among shareholders (biz can deny dividends roll $ back in investment)
  11. 11. 2) Stocks : Selling share of ownership in the biz to raise money. Buyer earns money 2 ways : a) Sell Shares: to Someone Else at Higher Price b) Receive Dividends : Biz divides profits among shareholders (biz can deny dividends roll $ back in investment)
  12. 12. 2) Stocks : Selling share of ownership in the biz to raise money. Buyer earns money 2 ways : a) Sell Shares: to Someone Else at Higher Price b) Receive Dividends : Biz divides profits among shareholders (biz can deny dividends roll $ back in investment)
  13. 13. Corporation Basics 1) Private Company : Biz owned privately. Finances are private 2) Corporation/Public Comp : Biz that shares bought/sold. Finances under gov monitoring. 3) Board of Directors (BoD) : Elected by shareholders to hire CEO and set major policies a) Share Vote : Each share equals a vote. Votes elect a BoD 4) CEO : Hired by BoD to run daily operations 5) Duty to Shareholder : Maximize profits
  14. 14. 5) Stocks Price : Price based on supply + demand . Demand =“perceived” company health
  15. 15. Brokerage Firm : Place to buy investments: stocks, mut. funds, bonds E*Trade (www.etrade.com) $10 per Trade Minimum Starting Amount $1000 18 Years Old
  16. 16. Finding Stock Info : www.finance.yahoo.com www.finance.google.com www.reuters.com/finance www.money.com Stock Symbol : 1-4 Letter Company Stock ID Stock Market Hours : 9:30am-4:00pm East (6:30am-1:00pm West)
  17. 17. Should I buy and sell short term? a) Investing is investing: It’s not a game, you buy b/c you want to partially own a company, and share in their success. b) Day trading: Is stressful and collectively leads to market volatility c) Capital Gains Tax: You must file taxes on any profits, and taxes are higher if held less than 1yr
  18. 18. 3) Stock Orders : a) Buy : Paying for new shares b) Buying on Margin : Borrowing money from the brokerage to buy stocks ( Adv traders ). c) Sell : Sell shares you currently own d) Sell Short : Selling a stock you don’t own, you’ll buy the stock later to pay off the brokerage ( Adv traders ). e) Limit Order : Buying a stock at a price you set. f) Stop Order : Auto sell a stock at a price you set.
  19. 19. 4) Stock Data : (verify you have this in last week’s notes) Last Trade : Market price for a share Open Trade : Price it opened in morning Daily Range : Today’s high/low range 52 Week Range : Last 12 mo. high/low range a) Market Cap : Stock price X number of shares circulating. Sign of how big the comp is b) Volume : Number of shares sold that day c) Beta : How likely does it swing up/down, 1 is market average, over 1 is more volatile
  20. 20. d) EPS (Earnings Per Share): Net Income ÷ Shares Circulating ( Higher is better , more earnings per share: how much earnings per each share of stock, not all earning always given back to shareholders, sometimes re-invested ) e) PE (Price Earnings Ratio ): Stock Price ÷ EPS ( Lower better , more bang for your buck: how much you are paying for $1 of comp’s current annual earnings, ROI point, if biz grow fast, ROI can be faster ).
  21. 24. Stock Market Basic Formulas Review 1) Market Cap : Calculating the Size of Companies Formula : Stock Price X Number of Shares Example : Stock Price: $200 a Share, Number of Shares: 2 Market Cap=200 X 2 = 400 Market Cap=$400   2) EPS : Earnings (Net Income) Per Share (Bigger Better) Formula : Net Income ÷ Number of Shares (Tip: EPS, E-Earnings go on top of the formula, S-Shares on the bottom) Example : Net Income: $100, Number of Shares: 2 EPS=100 ÷ 2 = 50 EPS=50  
  22. 25. 3) PE Ratio : Price Earnings Ratio (Lower Better) Formula : Price/EPS (Tip: PE, P-Price goes on top of the formula, EPS on the bottom) Example : Stock Price: $200 a Share, EPS: 50 PE Ratio=200 ÷ 50 = 4 PE Ratio=4   Summary: So if 1 share gets you $50 of profit , but it takes you $200 to buy one share , it would take you 4 years to break even ( unless the company grows , which would reduce the time ); another way to see it, PE Ratio shows you how much money you are paying to get $1 of profit . In this example, I’m paying $4 for every $1 of profit.  
  23. 26. Work #17a , Title “ Stock Practice ” Use a calculator, and work with a partner. 1) a) Mattel has 393 million shares circulating, the price of the stock is $13, what is its market cap ? b) Mattel made $560 million in income and has 393 million shares, what is its EPS ? c) Using the stock price of $13, and EPS above, what is the PE ratio?
  24. 27. Work #17a , Title “ Stock Practice 1 ” Use a calculator, and work with a partner. 2) a) Google has 312 million shares circulating, the price of the stock is $387 what is its market cap? b) Google made 3.690 billion in income and has 312 million shares, what is its EPS? c) Using the stock price of $387, and EPS above, what is the PE ratio?
  25. 28. Debrief: Google Market Cap: $120 bil EPS: 11.82 PE: 32 Mattel: Market Cap: $5 bil EPS: 1.42 PE: 9 Div Yield: 5.7%
  26. 29. Work #17a , Title “ Stock Practice 1 ” Use a calculator, and work with a partner. 3) Both read the handout, and write down if you think if Google is over priced? Explain. (GOOG: $533) Also ask your partner what is a PEG ratio if you aren’t sure. 5 Reading/Film Qs Come From These Work Sections
  27. 30. Notes #17a , Title: “ Mutual Funds ” 1) Mutual Funds : A pool of money invested by a professional in a group of stocks ( picked through a specific strategy: lo/hi risk, etc ). a) Net Asset Value (NAV): Price based on the (stock prices) of the pooled investment divided by the number fund shares. Managers of the fund take a fee/commission. Like stocks, you money when you sell the mutual fund or are paid dividends.
  28. 31. Workbook Check (100 Points): Make Sure: 1) Name + Period written on cover AND side of notebook 2) Opener #s are highlighted 3) Plastic bag inside inside cover 4) Schedule/syllabus inside cover 5) Reference sheets inside cover Staple with the staples grappling in.
  29. 32. Homework: 1) Study today’s notes + work sections for a possible workbook quiz . 2) Print 1 st page of stock portfolio AND follow Marketplace Sheet instructions for end of week Marketplace. Workbook Check: If your name is called, drop off your workbook with Mr. Chiang ( if requested, points lost if your workbook is not turned in )

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