This document provides an overview of basic investment terms and strategies. It defines key concepts like investment, risk, passive and active investment strategies. It also outlines different asset classes one can invest in, such as money market securities, fixed income, equity and derivatives. The document stresses the importance of diversification and outlines some investing tips. It notes that only 33% of money managers outperform the market and that stocks and bonds have historically returned around 11% and 5% respectively. It recommends that passive investment is the best approach for most investors.

1. The Basics of
Investing:
Know what to do with your
money or what others are
doing with your money!

2. Investment Terms to Know
• Investment: The commitment of funds to one or
more assets that will be held over some future time
period
• Risk: The chance that the actual return will be different
from the expected return
• Passive Investment Strategy: A strategy that
determines initial investment proportions and assets and
makes few changes over time
• Active Investment Strategy: A strategy that
seeks to change investment proportions and/or assets in
the belief that profits can be made

3. More Terms to Know
• Direct Investing: Investors buy and sell securities
themselves, typically through brokerage accounts.
• Indirect Investing: The buying and selling of the
shares of investment companies, which, in turn, hold
portfolios of securities

4. Why Should I Invest?
• Retirement: Investment in the long-term which
means you can ride the market
• Large Purchases (House): Invest in safer
securities (Short-term)
• School: Invest in safer securities, the sure
investments

5. What Can I Invest In?
• Money Market
Securities:
– Treasury Bill
– Negotiable CDs
• Fixed-Income
Securities:
– Bonds
– Asset-Backed
Securities
• Equity Securities:
– Stocks
• Derivative Securities:
– Options
– Future Contracts

6. Diversification is KEY
• Diversification is the key to the
management of portfolio risk because it
allows investors to significantly lower
portfolio risk without adversely affecting
return!
• International diversification is important
• A portfolio with 40 different stocks is said
to be adequately diversified

7. Investing Tips
• USE 401K
• Flee the Bank – There are higher yielding
investments out there, don’t settle for a
low return on your investment
• Buy low expense Mutual Funds – Don’t
pay too many fees
• Buy and hold – Avoid high commission
fees and higher taxes

8. IMPORTANT INVESTING
FACTS TO KNOW
• Only 33% of money managers outperform
the market!
• Historically Stocks return 11%, Bonds 5%
• Passive Investment is the best way for
most investors