This document discusses different stages of investing including putting money in savings accounts, beginning investing in low-risk stocks, systematic monthly investing, strategic portfolio management, and speculative investing. It also covers reasons for investing such as beating inflation, increasing wealth, the fun and challenge of investing, and diversifying risk. Finally, it outlines characteristics of stocks, different types of stocks, factors that influence stock prices, and short-term and long-term investment techniques.

1. Chapter 11: Investing for your future
An aspect of Personal Finance!

2. Stages of Investing
• Stage 1: Put and take account
• Stage 2: Beginning Investing
• Stage 3: Systematic Investing
• Stage 4: Strategic Investing
• Stage 5: Speculative Investing
• Pgs 303-305

3. Put and Take Account
• This account is known as an emergency
fund. This is when you first start to earn a
paycheck, and you put money in and take it
out to pay your bills.

4. Beginning Investing
• Investing-is the use of savings to earn a
financial return.
• This is when your savings are permanent
and you can afford to invest, in this stage
you want to invest in conservative low risk
stocks to avoid losing your money.

5. Systematic Investing
• Once you are comfortable with your
beginning investments, you then start
investing on a regular planned basis. You
regularly set aside a certain amount of
money each month to invest.
• At this stage your goals are long range

6. Strategic Investing
• This is the careful management of
investment alternatives to maximize the
growth of your portfolio.
• When the growth potential of one
investment seems to be declining you move
our money to a another type of investment.

7. Speculative Investing
• In this stage you can make or lose a great
deal of money in a short period of time.
• Beginning investors should avoid
speculative investing because they cannot
afford to take a loss that is likely to occur.

8. Reasons to Invest
Pgs 306-308

9. Investing to beat Inflation
• Inflation-is a rise in the general level of
prices.
• Investors should seek investments for a
long term that will grow faster then the
prices of goods and services.

10. Investing Increases Wealth
• Financial success grows from the assets that
you build up over time. Investing helps you
accumulate wealth faster than if you simply
saved your excess cash.
• Investing in stocks and bonds, you are
participating in helping the business buy
and sell new products and you receive
dividends from the profits

11. Investing is Fun and Challenging
• Risk- is the chance that an investment’s
value will decrease.
• The greater the risk the greater the return.
Those that are willing to take a greater risk
will receive higher return.
• The best method is to choose somewhere
between high risk and no risk

12. Diversification
• Diversification-spreading the risk among
many types of investments, in other words
don’t put all your eggs in one basket.
• You want to spread your money in case on
stock doesn’t work you won’t lose all your
money.

13. Types of Risk
• Interest-rate risk-is that the return on an
investment will not keep up with inflation
• Political risk-government actions that affect the
business conditions.
• Market risk-affects many types of investments at
once, is caused by business declines, sudden
national or world events, or interest rate
fluctuations.
• Company/industry risk-produced by the effects
that affect only one company or industry.

14. Investment Strategies
Pgs. 308-311

15. Criteria for Choosing an
Investment
• Safety (minimal risk of loss)
• High Liquidity (getting your money quickly)
• High dividends or interest
• Growth in value that exceeds inflation rate
• Reasonable(low) purchase price (or initial cost)
• Tax benefits (saving or postponing tax liability)

16. Wise Investment practices
• Define your financial goals, clearly define goals that
are specific and measurable
• Go slowly, gather the information you need to make
wise investment decisions
• Follow through, Act on your important goals now,
• Keep good records, in order to keep a clear view of
your future goals
• Seek good investment advice, don’t be afraid to ask
questions
• Keep investment knowledge current, keep up on
current events and the financial markets.
• Know your limits, understand your risk tolerance and
the amount of money you can afford to risk.

17. Chapter 12: Investing in Stocks
A lesson in Personal Finance

18. Characteristics of Stock
• Stockholders-also known as shareholders, are the
owners of the corporation
• Dividends-are the part of the corporation’s profits
that are paid to stockholders.
• Capital Gain- this is an increase in the value of the
stock above the price initially paid
• Common Stock- stock that pays a variable
dividend and gives the holder voting rights
• Proxy-a written authorization to transfer his or her
voting rights to someone else
• Preferred Stock-the type of stock that pays a fixed
dividend and carried no voting rights.

19. Classifying Stock investments
• Income Stocks Vs. Growth stocks
• Income stocks-stocks that have a consistent
history of paying high dividends
• Growth stocks-stocks in corporations that
reinvest their profits into businesses so that
they can grow

20. Continued
• Less Established vs. Blue Chip Stocks
• Less Established-stocks in young often
small corporations that have higher overall
risks.
• Blue Chip-stocks of large well established
corporation with a solid record of
profitability

21. Continued
• Defensive vs. Cyclical Stocks
• Defensive- stock that remains stable and
pays a dividend during an economic decline
• Cyclical-stock that does well when the
economy is stable or growing, but often do
poorly during a recession.

22. Determining a Stocks Worth
• Stock value
• Par value-is an assigned dollar value to a
stock
• Market value-the price for which the stock
is bought and sold in the marketplace

23. Stock Price: What to Consider
• The Company
• Interest rate Risk
• The Market
• Earnings per share

24. Types of markets
• Securities exchange-marketplace where
brokers who are representing investors meet
to buy and sell securities
• Over-the-counter-network of brokers who
buy and sell securities of corporations that
are not lister on a securities exchange

25. Continued
• Bull Market-prolonged period of rising
stock prices and the general feeling of
investor optimism
• Bear Market-prolonged period of falling
stock prices and the general feeling of
investor pessimism.

26. Short Term Techniques
• Buy on Margin
• Short Selling
• See page 342

27. Reading the Stock Listings
• Pages 346-347

28. Long Term Techniques
• Buy and Hold
• Dollar-Cost Averaging
• Direct Investment
• Reinvesting Dividends
• See pages 343-346