13.1 Investing 13.1 Investing Strategies.Strategies.

SavingSaving : short term goals: : short term goals: examples:?examples:? InvestingInvesting: long term goals: long term goals

Examples?Examples? http://video.cnbc.com/gallery/?video=828664867http://video.cnbc.com/gallery/?video=828664867

How do you know you are How do you know you are ready to invest?ready to invest?

When are you ready to When are you ready to invest?invest?

Have a well-Have a well-planned budgetplanned budget

Emergency Emergency savingssavings

Credit card Credit card debt under debt under control.control.

People invest in many People invest in many ways:ways:

What to consider before What to consider before investing:investing:

Types of RETURNS-Types of RETURNS-Paid at regular times?Paid at regular times?Sell for profit?Sell for profit?Tax advantagesTax advantages??

Do you want LIQUIDITY in Do you want LIQUIDITY in your investments?your investments?

Which is more liquid?Which is more liquid?

Consider how much Consider how much VOLATILTY you can handle.VOLATILTY you can handle.

EVERY INVESTMENT EVERY INVESTMENT INVOLVES INVOLVES RISKRISK::

Conservative risk--- lower returns.Conservative risk--- lower returns.

Greater risk for potential for bigger Greater risk for potential for bigger returns…returns…

Risk LIQUIDITYRisk LIQUIDITY-not being able to sell at -not being able to sell at higher price?higher price?

RISK INFLATION-RISK INFLATION- increases faster than increases faster than your investment value.your investment value.

What are your What are your objectives?objectives?

*Purpose for the money?*Purpose for the money?

*How much can you afford to *How much can you afford to invest? $$$invest? $$$

*What’s your timeline? *What’s your timeline?

less time= more conservativeless time= more conservative

more time= more agressivemore time= more agressive

3 Strategies:3 Strategies:

1) Generate 1) Generate INCOMEINCOME..

2) 2) GrowthGrowth: likely to grow in value : likely to grow in value with time.with time.

3) 3) Tax ReductionTax Reduction: Reduce amount : Reduce amount of taxes owed to government.of taxes owed to government.

Diversify: Use a variety Diversify: Use a variety to reduce risk.to reduce risk.

Investing in the Stock Investing in the Stock MarketMarket

For For Long Term goalsLong Term goals.. Higher Higher RiskRisk for potential higher for potential higher ReturnReturn..

13.3 Stock Market Basics13.3 Stock Market Basics

If a company needsIf a company needs money money, instead of , instead of borrowing from a bank, they may raise borrowing from a bank, they may raise money by money by selling selling SHARESSHARES of of STOCKSTOCK..

(units of ownership)(units of ownership) A person that buys Shares is a A person that buys Shares is a

SHAREHOLDERSHAREHOLDER or partial owner of or partial owner of company.company.

When Ashton joined 2.5 men- When Ashton joined 2.5 men- There was a major issue,There was a major issue,What was all the talk about?What was all the talk about?

PUBLIC VS PRIVATE PUBLIC VS PRIVATE

Public companiesPublic companies: can buy stock in them.: can buy stock in them. Ex: American Eagle, Walmart, Microsoft, Ex: American Eagle, Walmart, Microsoft,

Apple, YUM, McDonalds.Apple, YUM, McDonalds.

PRIVATEPRIVATE companies: owned by privately companies: owned by privately held companies. Can not buy share of held companies. Can not buy share of stock.stock. Ex: M&M Mars, Menards, Hallmark,SubwayEx: M&M Mars, Menards, Hallmark,Subway http://www.forbes.com/lists/2011/21/private-companies-11_land.htmlhttp://www.forbes.com/lists/2011/21/private-companies-11_land.html

When a private company When a private company goes “public”goes “public”

IPOIPO- Initial public offering. Way for company to - Initial public offering. Way for company to raise money. Investors buy shares directly raise money. Investors buy shares directly from the company.from the company.

Twitter Twitter went public Nov 15went public Nov 15thth on NYSE on NYSE http://www.forbes.com/sites/briansolomon/2014http://www.forbes.com/sites/briansolomon/2014

/03/24/is-your-takeout-worth-1-7-billion-grubhu/03/24/is-your-takeout-worth-1-7-billion-grubhubs-ipo-thinks-so/bs-ipo-thinks-so/

http://money.cnn.com/gallery/pf/2012/12/26/best-worst-ipos.fortune/2.htmlhttp://money.cnn.com/gallery/pf/2012/12/26/best-worst-ipos.fortune/2.html

U.S. Stock Exchanges:U.S. Stock Exchanges: where stocks are traded.where stocks are traded.

NYSENYSE- Wall Street, Manhattan, NY- Wall Street, Manhattan, NYregular trading hours are 9:30 a.m. to 4 p.m. regular trading hours are 9:30 a.m. to 4 p.m.

Eastern timeEastern time

AMEXAMEX: New York City, New York : New York City, New York NASDAQNASDAQ: Largest network of exchanges: Largest network of exchanges

Electronically traded. Electronically traded. Trading Sessions (Eastern Time)Trading Sessions (Eastern Time)

Pre-Market Trading Hours from 4:00 a.m. to 9:30 a.m.Pre-Market Trading Hours from 4:00 a.m. to 9:30 a.m.Market Hours from 9:30 a.m. to 4:00 p.m. Market Hours from 9:30 a.m. to 4:00 p.m. After-Market Hours from 4:00 p.m. to 8:00 p.m.After-Market Hours from 4:00 p.m. to 8:00 p.m.

All markets are closed on holidays, Saturday and Sunday.All markets are closed on holidays, Saturday and Sunday. What other times did the markets close???What other times did the markets close???

Why is the Stock Market Why is the Stock Market considered RISKY?considered RISKY?

Do you expect to have money Do you expect to have money invested in stocks in your invested in stocks in your lifetime?lifetime?

Do you already have $ in stocks?Do you already have $ in stocks?

Calculated Guess???Calculated Guess???If I had bought shares of Microsoft in college…If I had bought shares of Microsoft in college…how much would I have today?how much would I have today?

It's Thursday, March 13, It's Thursday, March 13, 1986:1986:

MicrosoftMicrosoft, founded more than a decade , founded more than a decade earlier and already a powerhouse in the earlier and already a powerhouse in the world of personal computer software, world of personal computer software, executes an executes an IPOIPO- - initial public stock initial public stock offeringoffering that will raise $61 million for the that will raise $61 million for the company and leave 30-year-old co-company and leave 30-year-old co-founder Bill Gates unfathomably wealthy.founder Bill Gates unfathomably wealthy.

$2100 investment…$2100 investment… 100 shares at the 100 shares at the $21 ea$21 ea. offering price that day and . offering price that day and

sat on the investment for 25 years, it would have sat on the investment for 25 years, it would have mushroomed into 28,800 shares over the course of mushroomed into 28,800 shares over the course of nine stock splitsnine stock splits and be worth about three quarters of a and be worth about three quarters of a million dollars today.million dollars today.

That's the good news. Here's the disheartening caveat: That's the good news. Here's the disheartening caveat: Had you instead sold your stash on Dec. 1, 1999, when Had you instead sold your stash on Dec. 1, 1999, when Microsoft's stock price reached its peak, you would Microsoft's stock price reached its peak, you would have reaped have reaped

$2100 investment = $1.4 million.$2100 investment = $1.4 million. http://finance.yahoo.com/echarts?s=MSFT+Interactive#chart2:symbol=msft;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;http://finance.yahoo.com/echarts?s=MSFT+Interactive#chart2:symbol=msft;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;

logscale=on;source=undefinedlogscale=on;source=undefined

History of History of MSFTMSFT stock stock (ticker symbol)(ticker symbol)

STOCK SPLITS: 1 share STOCK SPLITS: 1 share splits into 2 shares. splits into 2 shares. (Shown by (Shown by

black triangles) Price of share is now half. More affordable.black triangles) Price of share is now half. More affordable.

““The Dow was up The Dow was up today…”today…”The Dow was down The Dow was down today..today..What does that mean?What does that mean?

The The DJIADJIA consists of 30 major consists of 30 major American companies:American companies:

Ex: Coca Cola, Home Depot, AT&T,Ex: Coca Cola, Home Depot, AT&T, McD, MSFT,VZ, WMT, DIS. McD, MSFT,VZ, WMT, DIS. http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Averagehttp://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average

It is an index that shows how 30 large It is an index that shows how 30 large publiclypublicly owned companies based in the United States owned companies based in the United States have traded during a standard trading session have traded during a standard trading session in the in the stock marketstock market. .

*created in 1896, Named after Charles Dow and *created in 1896, Named after Charles Dow and Edward Jones.Edward Jones.

Stock marketStock market

Investing in the Stock Market

Dow Jones Industrial Average 120 years averages.

DJIA are Blue Chip StocksDJIA are Blue Chip Stocks large, financially sound company that has proved it can large, financially sound company that has proved it can

weather downturns in the market.weather downturns in the market.

3M Company; 3M Company; American Express; American Express; AT&T; AT&T; Bank of America;Bank of America; Boeing Co.; Boeing Co.; Caterpillar Inc.;Caterpillar Inc.; Chevron Corp.;Chevron Corp.; Cisco Systems Inc.; Cisco Systems Inc.; Coca-Cola Co.; Coca-Cola Co.; Du Pont; Du Pont; Exxon Mobil Corp.; Exxon Mobil Corp.; General Electric Co.; Hewlett-Packard Co.; General Electric Co.; Hewlett-Packard Co.; Home Depot Inc.; Home Depot Inc.; IBM; Intel Corp.; IBM; Intel Corp.; Johnson & Johnson; Johnson & Johnson; JP Morgan Chase & Co.;JP Morgan Chase & Co.; Kraft Foods Inc.;Kraft Foods Inc.; McDonald's Corp.; McDonald's Corp.; Merck & Co.; Merck & Co.; Microsoft Corp.; Pfizer Inc.; Microsoft Corp.; Pfizer Inc.; Proctor & Gamble Co.;Proctor & Gamble Co.; Travelers Cos.; Travelers Cos.; United Technologies Corp.;United Technologies Corp.; Verizon Communications Inc.; Verizon Communications Inc.; Wal-Mart Stores Inc.; Wal-Mart Stores Inc.; Walt Disney Co.Walt Disney Co.

Also in DOW JONES INDUSTRIAL AVG.Also in DOW JONES INDUSTRIAL AVG. $$$ more expensive shares. Less risk$$$ more expensive shares. Less risk..

Bull Market: trend of Bull Market: trend of rising market prices.rising market prices.

Bear Market: trend of Bear Market: trend of falling prices.falling prices.

SEC: Security and SEC: Security and Exchange CommissionExchange Commission

Protects investors by:Protects investors by: Requiring companies to Requiring companies to

disclose honest accurate disclose honest accurate information about financial information about financial health.health.

Oversees activities of Oversees activities of stock exchange and stock exchange and anyone else involved in anyone else involved in buying /selling stocks. buying /selling stocks.

First Chairman of SEC:First Chairman of SEC:

Started in 1934- Started in 1934- After the crash of After the crash of ’29.’29.

FDR appointed FDR appointed This man to head This man to head

the SEC. the SEC. Very controversial Very controversial

move. Why???move. Why???

Joe Kennedy:Joe Kennedy:

Kennedy had thrived on Kennedy had thrived on Wall Street. Made millions Wall Street. Made millions in ways that are now in ways that are now considered Illegal.considered Illegal.

Created a scandal. Many Created a scandal. Many people did not trust him.people did not trust him.

FDR said- “FDR said- “It takes a thief It takes a thief to catch a thiefto catch a thief.”.”

INSIDER TRADINGINSIDER TRADING

“INSIDER TRADING”- illegal.

profitable trading in securities that is done using access to privileged (private) information.

Think about companies Think about companies that you help support…that you help support…

What is their What is their ticker symbolticker symbol? ?

Is the company Is the company PrivatelyPrivately held? held? Or Or PUBLICPUBLIC??

So what if….So what if…. you decided to never invest in the you decided to never invest in the

markets after experiencing the markets after experiencing the Crash of 1929?Crash of 1929?

Expect RISK…Expect RISK…

Let’s look at history of stock Let’s look at history of stock market….market….

What makes prices go up What makes prices go up or down?or down?

Price of shares is determined by Price of shares is determined by demand.demand. Lots of people selling shares- price goes Lots of people selling shares- price goes

down. down. Lots of people wanting to buy- share price Lots of people wanting to buy- share price

goes up.goes up.

What was life like in the What was life like in the 1920’s?1920’s?

Unemployment 5.2%Unemployment 5.2% Life expectancy:Life expectancy: Male 53.6 Female Male 53.6 Female

54.654.6 343.000 in military (down from 343.000 in military (down from

1,172,601 in 1919)1,172,601 in 1919) Average annual earnings $1236;Average annual earnings $1236;

Teacher's salaryTeacher's salary $970$970 More educated-Illiteracy rate More educated-Illiteracy rate

reached a new low of 6% of the reached a new low of 6% of the population. More people went to population. More people went to college.college.

* women could vote.* women could vote.* prohibition increased * prohibition increased crime/gangster activity.crime/gangster activity.

ProhibitionProhibition

restriction of the restriction of the production, sale, production, sale, transportation, transportation, importation, and importation, and exportation of alcoholic exportation of alcoholic beverages,beverages,

Having an Having an Income TaxIncome Tax established created enough established created enough revenue that it made revenue that it made Prohibition possible.Prohibition possible.

ProhibitionProhibition

EEighteenth ighteenth Amendment to the Amendment to the ConstitutionConstitution ﾊﾊwwent into effect on ent into effect on January 16, 1920. January 16, 1920.

Social experiment Social experiment that just didn’t that just didn’t work.work.

So why did the market So why did the market CRASH?CRASH?

Many people helped Many people helped businesses grow by businesses grow by purchasing stocks purchasing stocks 1920’s .1920’s .

hopeful of becoming hopeful of becoming rich…many bought shares rich…many bought shares on credit.on credit.

While investors wealth While investors wealth was growing, workers was growing, workers wages were not and wages were not and economy became economy became unbalanced.unbalanced.

Business growth slowed, Business growth slowed, stocks started to fall. stocks started to fall.

September ‘29September ‘29

Investors began to Investors began to realize that prices of realize that prices of stocks were stocks were becoming very becoming very inflated.inflated.

Stock values began Stock values began to decline.to decline.

Black Tuesday Black Tuesday

Most people that Most people that invested in stocks invested in stocks panicked and began panicked and began selling shares.selling shares.

When everyone sells at When everyone sells at once, price plummetsonce, price plummets

Crowds outside wall Crowds outside wall street waiting for news.street waiting for news.

Effects of the crash:Effects of the crash:

Banks closed without Banks closed without warningwarning

Fortunes were wiped Fortunes were wiped out.out.

Some investors killed Some investors killed themselves.themselves.

Millions of people Millions of people from all over the from all over the world who owned world who owned stocks waited stocks waited helplessly as stock helplessly as stock values crashed.values crashed.

HoovervillesHoovervilles Many families lost their Many families lost their

homes because they homes because they could not pay their could not pay their mortgages. mortgages.

These people had no These people had no choice but to seek choice but to seek alternative forms of alternative forms of shelter. shelter.

HoovervillesHoovervilles, named after , named after President Hoover, who President Hoover, who was blamed for the was blamed for the problems that led to the problems that led to the depression, sprung up depression, sprung up throughout the United throughout the United States.States.

Farm foreclosures after Farm foreclosures after crashcrash

Families were Families were often thrown off often thrown off their farms and their farms and lost everything.lost everything.

Penny Penny auctionsauctions occurred as occurred as backlash.backlash.

Meanwhile, in Meanwhile, in Europe….Europe….

A former house painter and A former house painter and decorator started using the poor decorator started using the poor economy to influence people and economy to influence people and getting people to rally behind getting people to rally behind him…him…

won over the bulk of won over the bulk of the German middle-the German middle-class,class, hard hit by the hard hit by the

inflation of the inflation of the 1920s1920s unemployment of the unemployment of the

Depression. Depression. Farmers and war Farmers and war

veterans were other veterans were other groups who supported groups who supported the Nazis.the Nazis.

Who did he blame Who did he blame for the poor for the poor economy?economy?

Hitler’s became Hitler’s became successful-successful-

The Great DepressionThe Great Depression

QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.

Al Capone’s Soup kitchenAl Capone’s Soup kitchen

As 1930 major publicity As 1930 major publicity campaign.campaign.

He opened a free soup He opened a free soup kitchen for the people kitchen for the people who had been thrown out who had been thrown out of work by the deepening of work by the deepening Depression. Depression.

"The soup kitchen was "The soup kitchen was carefully calculated to carefully calculated to rehabilitate his image and rehabilitate his image and to ingratiate himself with to ingratiate himself with the workingman.the workingman.

Elected FDR in 1932Elected FDR in 1932

Promised to deliver Promised to deliver “New Deal” for “New Deal” for Americans.Americans.

Repealed Prohibition Repealed Prohibition because revenue from because revenue from income taxes had income taxes had decreased sharply.decreased sharply.

Put Americans back to Put Americans back to work with several work with several programs.programs.

Delivery to White HouseDelivery to White House

When the freedom of When the freedom of brewing was finally brewing was finally released once again in released once again in 1933, the Budweiser 1933, the Budweiser Clydesdales eight-horse Clydesdales eight-horse hitch-and-wagon took hitch-and-wagon took the first case of post-the first case of post-prohibition beer along prohibition beer along Pennsylvania Avenue to Pennsylvania Avenue to President Roosevelt.President Roosevelt.

Civilian conservation Civilian conservation corpscorps

Building bridges, Building bridges, planted forests,took planted forests,took care of public land,care of public land,

Paid by food, place Paid by food, place to sleep, $30/month--to sleep, $30/month--$25 of which was $25 of which was sent home to sent home to families. families.

Women were not Women were not allowed to join.allowed to join.

WPAWPA

Work Progress Work Progress Administration-Administration-

Put men to work Put men to work building and building and improving highways, improving highways, bridges, damsbridges, dams

Women also worked Women also worked in other types of jobs.in other types of jobs.

Jewel BoxJewel Box

Historic WPA Historic WPA funded Art Deco funded Art Deco styled greenhouse styled greenhouse located in St. located in St. Louis' Forest Park.Louis' Forest Park.

The depression lasted 10 The depression lasted 10 years…..years…..

The economy did not The economy did not experience a boon experience a boon until World War 2.until World War 2.

Need to prepare for Need to prepare for war boosted war boosted economy.economy. FactoriesFactories

suppliessupplies

Exit Slip:Exit Slip: 1)Two things you SAVE for?1)Two things you SAVE for? 2)Two things you INVEST for?2)Two things you INVEST for? 3) At what age will you be ready 3) At what age will you be ready

to invest? Explain.to invest? Explain. 4) How was the depression 4) How was the depression

different from today’s different from today’s Recession? 3 ways. How was it Recession? 3 ways. How was it similar?similar?