Chapter 13 Investments
Investment Strategies
Retirement Planning
The Stock Market
Other Investments
Estate Planning
Investment
Characteristics
Return – the income that an investment
produces
Liquidity: how easily it is turned into
cash
Volatility- the degree to which an
investment’s return or value may
change
Risk- the possibility of variation in the
return on your investment
Simple Interest
• Interest paid one time per year at the end
of the year on the average balance on the
account.
Compounded Interest
• Interest paid on the principle and also
previously earned interest.
Rule of 72
A quick way to evaluate an interest rate.
Divide the interest rate into 72 and you
get the number of years it takes for the
money to double.
ex. An account paying 6% will double in
72/6 = 12 years
ex. An account paying 4% will double in
72/4 = 18 years
STOCKS
Why is a stock issued?

When a company wants to raise money to
start or expand its business
What is a share of stock?
A piece of the company
 When you purchase stock in a company
you will receive a stock certificate. (This
your proof of ownership.)

WHERE CAN I BUY ONE?
Stock Exchanges
National Corporations are usually traded on
the “floor” of the New York Stock Exchange
(NYSE) or the American Stock Exchange
(AMEX).
 The NASDAQ is not a physical space for
trading. It is a telecommunications network
done electronically.

Where else?
Over the Counter Stock OTC: A network
of stock brokers who buy and sell the
securities of corporations that are not
listed on the securities exchange.
Usually OTC stocks are small
businesses not able to make it on the
other lists they’re called unlisted stocks
Common vs. Preferred
Stock
Preferred
*Pays a fixed dividend
*More conservative
*Less risk
*If the company goes
bankrupt, the
preferred
stockholders get
paid first
Common
*Dividends depend on
profits earned and
vary from year to
year
*Can vote for Board of
Directors
Bonds
A bond is a written pledge that it will
repay a specified amount of $ with
interest
InterestA % that is multiplied on the principle
(base amount)
Types of Bonds
Corporate- issued by corporation to
raise money to continue, or improve the
business
Municipal Bonds-State/local
government:

A security issued by the state or local
government for major products such as
airports, school, toll roads
More Bonds
Treasury Securities- Federal Government
U.S. Savings BondsLoan to the government
 Tax Advantage
CONSIDERED TO BE RISK FREE

Stock Terminology
Odd lot: Fewer than 100 shares of stock
Round lot: 100 or multiples of 100
shares of stock
Who regulates?
Securities Exchange Commission
(SEC): regulates laws concerning
trading stocks and bonds.
What are some
conditions that may
cause a stock’s price to
rise or fall?
Stock split
Weak economy
Buy-out or merge
Lay-offs
Low earnings
New product
* The market price
of common stock is
determined by the
demand for the
stock.
Diversification
A strategy of making a variety of
investments in order to reduce your
exposure to risk.
How can I begin my
portfolio?
You have to learn and make intelligent
decisions.
Look at reliable media sources
Take a course in financial planning
Take part in an investment club- a
group of people who meet regularly to
learn and make investments together
Listen to professional advisors
Financial News
Business Sections of local newspapers
Evening news programs (Wall Street
Week)
CNN
Wall Street Journal – most widely
known financial newspaper
Internet