Introduction chapter 1 Objectives of the course and text To understand the investments field as currently practiced Gain familiarity with the institutions and language of Wall Street so as to facilitate the development of an effective personal investment strategy ID: 769260
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Slide1
Introduction
(chapter 1)Slide2
Objectives of the course and text
To
understand the investments field as currently practiced
Gain familiarity with the institutions and language of Wall Street so as to facilitate the development of an effective personal investment strategy.
To
help you make investment decisions that will enhance your economic
welfare
To
create realistic expectations about the outcome of investment decisions
Acquire
a framework for understanding the returns on all financial assets, including stocks, bonds and financial derivatives
.Slide3
Buy High, Sell Low?!
It is obvious that investors should buy low and sell high in order to build wealth over time.
So why do investors frequently buy high and sell low?
The investment process involves analytical analysis of investment alternatives that are filtered through a decision process that is fraught with psychological biases.
To be a successful investor, you should be able to use the analytical tools and control your emotions and psychological biases!Slide4
Investment Industry Jobs
Jobs
Brokers
Traders
Portfolio managers
Financial planners
Investment bankers
Security analysts
Working at
Commercial banks
Savings and credit unions
Securities firms
Investment banks
Companies
Credit rating agencies
Mutual funds
Life insurance companies
Securities exchangesSlide5
Key Investment Concepts
A portfolio
Diversified (hopefully!) collection of stocks, bonds and other assets.
Individual investments are often evaluated on how they change the characteristics of the portfolio.
Risk
Chance of economic loss.
Sometimes measured as a variation in return.
Expected Return
Anticipated gain of a specific period of time.
Often evaluated as compensation for taking certain types of risks. Slide6
The Tradeoff Between
Expected Return and Risk
Investors manage risk at a cost - lower expected returns (ER)
Any level of expected return and risk can be attained
Risk
ER
Risk-free Rate
BondsSlide7
Getting information - Newspapers
Barron’s
http://www.barrons.com/
Biting market commentary once a week, portfolio analysis and databank.
Investor’s Business Daily
http://www.investors.com/default.asp
Founder William O’Neal dispenses stock picking, charting, and momentum strategies. Big on investor education.
The Wall Street Journal
http://online.wsj.com/home/us
The
daily paper when it comes to financial news and information. Print subscribers get interactive access at a bargain price.
USA Today
http://www.usatoday.com/money/front.htm
Don’t underestimate “McPaper’s” Money Section when it comes to business, economic, and financial news. It’s terrific!Slide8
Getting information - Magazines
Business Week
http://businessweek.com/index.html
Timely business news and analysis, useful business school, career and small business information.
The Economist
http://www.economist.com/
Offers analysis and opinion on the business and political events of the week.
Forbes
http://forbes.com/
Terrific commentary on economics and financial markets from an all-star stable of regular columnists.
Fortune
http://www.fortune.com/fortune
Famous for
Fortune
500 company list. Interesting advice on career development.
Kiplinger's Personal Finance
http://www.kiplinger.com
Provides practical guidance on saving, investing, planning for retirement, and major purchases.
Money
http://money.cnn.com/
Interesting market commentary, company and mutual fund analysis aimed at novice investors.
Smart Money
http://www.smartmoney.com/
Serves the need for personal finance information for affluent, sophisticated, professional, and managerial Americans.Slide9
Getting information - Online
CBS MarketWatch
http://cbs.marketwatch.com
Focused on financial news and information. Individual investors can find news, commentary, advice, and stock price information.
The Motley Fool
www.fool.com
An online forum designed to "educate, amuse and enrich investors." A constant stream of witty investment advice on active message boards.
MSN Money
http://moneycentral.msn.com/home.asp
Investing highlights for customized portfolios, market reports, mutual fund directory, retirement and personal finance.
TheStreet.com
www.thestreet.com
A full menu of stock analysis, market commentary, and biting satire.
U.S. Securities and Exchange Commission
http://www.sec.gov/
This is the place to find free access to official SEC filings by individual companies, obrain information about individual brokers, or file a complaint about shady business practices
Yahoo! Finance
http://finance.yahoo.com/
A terrific web site with U.S. markets, world markets, quotes, financial news, and data.Slide10
The Investment Decision ProcessTwo-step process:Security analysis and valuation
Necessary to understand security characteristicsPortfolio managementSelected securities viewed as a single unitHow and when should it be revised?