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7/27/2019 Investment Slide 1.ppt
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Investment Fundamentals and
Portfolio Management
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Objectives Summarize reasons why people invest, what is
required before beginning, how returns are earned,
and some ways to obtain funds to invest.
Determine your own investment philosophy.
Recognize the variety of investments available.
Identify the major factors that affect the return on
investment.
Specify some strategies of portfolio management forlong-term investors.
List three guidelines to use when deciding the best
time to sell investments.
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Establishing Investment Goals
Financial goals should be specific andmeasurable.
Why are you accumulating these funds?
How much do you need? How will you get it?
How long will it take you to reach your goal?
How much risk are you willing to assume?Are you willing to sacrifice current consumption
to invest for the future?
Is it realistic to try and save this amount?
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Steps to Create a Personal Investing PlanStep 1
My investment goals are:
____________________
____________________
Step 2By ___________, I will
have obtained $_______.
Step 3
I have $__________
available to invest.
Date _____________
Step 4
Possible investment alternatives:
1._________________
2._________________
3._________________
4._________________
Step 5
Risk factors for each alternative
1.____________________
2.____________________
3.____________________
4.____________________
Step 6
Projected return on each alternative
1.__________
2.__________
3.__________
4.__________
Step 7
Investment decision
1._______________
2._______________
3._______________
Step 8
Final decision
1._______________
2._______________
Step 9
Continue evaluating choices.
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Preparations for Investing
Achieve financial goals
Increase current income
Gain wealth and financial security
Have funds available for retirement
WHY PEOPLE INVEST:
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Preparations for Investing
Live within means
Continue savings program
Establish lines of credit
Carry adequate insurance
Establish investment goals
PREREQUISITES TO INVESTING:
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Interest
Dividends
Rent
Capital gain/loss
Rate of return or yield
Preparations for Investing
INVESTMENT RETURNS:
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Performing a Financial Checkup
Learn to live within your means
pay off high interest credit card debt
Provide adequate insurance protection Start an emergency fund
three to nine months of living expenses
Have other sources of cash for emergencies line of credit
cash advance
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Value of Having a
Long-Term Investing Program
Many people dont start investing because
they only have a small amount to invest
but....
Small amounts invested regularly
become large amounts over time
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Factors That Affect
Investment Decisions
Safety - minimal risk of loss
Risk - uncertainty about the outcome
inflation risk
interest rate risk
business failure risk
market risk
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Income From Investments
Safest
CDs
savings bonds
T-bills Higher potential income
municipal bonds
corporate bonds preferred stocks
mutual funds
real estate
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Investment Growth and Liquidity
Growth
increase in value
common stock growth stocks retain earnings
bonds, mutual funds and real estate
Liquidity ease and speed to convert an asset to cash
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Business-cycle timing
Dollar-cost averaging
Portfolio diversification
Asset allocation
Management StrategiesLong-Term
Investors
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Investment Alternatives
What is a mutual fund?
investors money is pooled and invested by a
professional fund manager you buy shares in the fund
provides diversification to reduce risk
funds range from conservative
to extremely speculative
match your needs with
a funds objective
(continued)
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Sources of Investment Information
Newspapers
Business Periodicals
Government Publications
Corporate Reports
Statistical Averages
Investor Services and newsletters
Standard and Poors stock reports
Value Line
Moodys investment service
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Investment Philosophies
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Best Time to Sell
Take profits
Cut losses
If wouldnt buy it now, sell it