20 1 Learning Objectives Explain why you should manage your personal finances and develop a personal investment program Describe how the factors of safety risk income growth and liquidity affect your investment program ID: 637478
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Chapter Twenty
Understanding Personal Finances and Investments
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Learning Objectives
Explain why you should manage your personal finances and develop a personal investment program
Describe how the factors of safety, risk, income, growth, and liquidity affect your investment program
Understand how securities are bought and sold
Recognize how you can reduce investment risk and increase investment returnsIdentify the advantages and disadvantages of savings accounts, bonds, stocks, mutual funds, and real estate investmentsDescribe high-risk investment techniquesUse financial information to evaluate investment alternatives
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Managing Your Personal Finances
Be familiar with the three steps to Managing Your Personal FinancesDefine
Personal Budget
What are warning signs your credit card spending is excessive?20 | 3Slide4
Managing Your Personal Finances (cont’d)
Discuss Investment Goals and
Personal Investment
What must
Goals be? What are some questions to consider when establishing goals?What are the Advantages of Long-Term Investing?20 | 4Slide5
Managing Your Personal Finances (cont’d)
What does A Personal I
nvestment Program
involve?
Define Financial PlannerWhat does the textbook suggest you do to help you accumulate money needed to fund an investment plan?20 | 5Slide6
Important Factors in Personal Investment
Be familiar with the factors you must consider when matching potential investments to goalsSafety and Risk
Investment
I
ncomeInvestment GrowthInvestment LiquidityBe prepared to discuss the textbook’s recommendations about managing investments during a financial crisis20 | 6Slide7
How Securities Are Bought and Sold
Know how Securities are generally bought and sold
Define
Primary
MarketSecondary MarketAccount ExecutiveFull-Service BrokerDiscount BrokerWhen choosing an account executive, what problems may arise?
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How Securities Are Bought and Sold (cont’d)
Be prepared to go through the steps involved in a typical stock transaction on the NYSE
Know the difference between a
Market Order
and a Limit OrderWhat are Commissions?How do commissions vary between different brokerage firms?20 | 8Slide9
Regulation of Securities Trading
What is a Regulatory Pyramid?
Be prepared to discuss its
Four Levels
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Factors That Can Improve Your Investment Decisions
What variables will affect H
ow you manage your
Portfolio
Your personalized Asset AllocationDefineAsset allocationThe time factorAgeKnow which investments are risky and which are low-riskWhat is Your Role in the investment process?
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Traditional Investment Alternatives
Know the advantages
and
disadvantages
of investing inBank AccountsCorporate BondsConvertible BondsGovernment bondsTreasury BillsTreasury Notes Treasury Inflation-Protected Securities (TIPS)Treasury Bonds Savings Bonds (EE bonds)
Municipal
Bonds
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Traditional Investment Alternatives (cont’d)
Be able to compare investing in different types of stock
Common Stock
Stock Dividend
Dividend PaymentsCapital GainMarket ValueStock SplitsPreferred StockCumulative Preferred StockConvertible Preferred Stock20 |
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Mutual Funds
Define Mutual Funds and Exchange Traded F
unds
Closed-End
FundsOpen-End FundsExchange-Traded FundBe able to define and calculate Net Asset Value20 | 13Slide14
Mutual Funds (cont’d)
Define
Load Funds
No-Load
FundsYearly Management FeeManaged FundsIndex FundsFamily of Funds20 | 14Slide15
Mutual Funds (cont’d)
Be familiar with Types of Mutual Fund InvestmentsAggressive growth stock funds
Global stock funds
Growth stock funds
High-yield (junk) bond fundsIncome stock fundsIndex fundsLifecycle fundsLong-term U.S. bond fundsRegional fundsSector stock fundsSmall-cap stock funds20 | 15Slide16
Real Estate
What are the Advantages and
Disadvantages
of investing in Real Estate?Be prepared to discuss the Real Estate Checklist in your textbook20 | 16Slide17
High-Risk Investment Techniques
Define Buying
L
ong
Selling ShortBuying Stock on MarginMargin RequirementBe familiar with high-risk investment choicesStock optionsDerivatives CommoditiesPrecious metalsGemstonesCoinsAntiques and collectibles20 |
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Sources of Financial Information
Discuss Sources of Financial InformationThe Internet
Newspaper Coverage
Professional
Advisory ServicesBrokerage Firm Analysts’ ReportsBusiness PeriodicalsCorporate ReportsWhat are Security Averages?20 | 18