📘 I.
TYPES OF INVESTMENTS
1. Stocks
● Represents ownership in a company.
● Entitles the investor to a share of the company's profits (dividends) and possibly voting
rights.
2. Bonds
● A loan from the investor to a company/government.
● The borrower pays back with interest over a fixed period.
3. Mutual Funds
● A pool of money from many investors used to buy stocks, bonds, etc.
● Managed by professional fund managers.
4. Real Estate
● Investment in land or buildings for profit via resale or rental income.
5. Savings/Certificates of Deposit (CDs)
● Money deposited for a fixed time, earning fixed interest.
● Higher interest for longer terms; penalties for early withdrawal.
6. Collectibles
● Rare, unique items that may increase in value over time (e.g., art, coins, baseball cards).
📈 II. STOCK MARKET PERFORMANCE INDICATORS
1. Dow Jones Industrial Average (DOW)
● Tracks 30 leading industrial “blue-chip” stocks.
2. S&P 500
● Tracks 500 companies; more diverse than the DOW, offering a more accurate market
view.
3. NASDAQ
● Tracks mostly technology and growth-oriented stocks.
● Known for high volatility.
📉 III. MARKET TRENDS
● Bull Market 🐂: Prices are rising, investors are confident and buying.
● Bear Market 🐻: Prices are falling, investors are pessimistic and selling.
💼 IV. BROKERS AND EXCHANGES
A. Broker
● Licensed professional who buys/sells stocks for clients and earns a commission.
B. Types of Stock Exchanges
Exchange Key Features
NYSE Oldest and largest, strict listing requirements, high average
stock price.
American Stock Exchange Less strict, good for small/young companies.
(AMEX)
Regional Exchanges Cater to specific geographic areas (e.g., Boston, Philly).
NASDAQ Electronic exchange, includes many young tech
companies, more volatile.
⚖️V. RISK VS. RETURN
● Stocks generally offer higher returns but come with higher risk.
● Greater risk = potential for greater reward, but also greater loss.
● Diversification reduces risk by spreading investments across assets.
⏳ VI. INVESTMENT STRATEGIES
A. Short-Term Strategies
1. Buying on Margin
○ Borrowing part of the money from a broker to buy stock.
○ Requires a 50% margin.
2. Short Selling
○ Selling stocks you don’t own, hoping prices will drop so you can buy back cheaper.
○ Profit is made on the difference.
B. Long-Term Strategies
1. Diversification
○ Investing in various asset types to minimize loss risk.
2. Dollar-Cost Averaging
○ Investing fixed amounts regularly, regardless of stock price.
○ Helps reduce the impact of market volatility over time.
3. Buy and Hold
○ Purchase stocks and hold them for years, benefiting from price appreciation and
dividends.
VII. GOVERNMENT REGULATION
● A regulatory pyramid exists to protect investors:
○ Begins with individual brokers,
○ Includes SEC (Securities and Exchange Commission),
○ Up to Congress.
📚 VIII. SOURCES OF INVESTMENT INFORMATION
1. Prospectus
○ A formal document offering details about a security offering to inform investors.
2. Annual Report
○ Includes financial statements, company performance, and outlook.
3. Financial Publications & Websites
○ Wall Street Journal, Fortune, Yahoo Finance, MSN Money – provide current news
and analysis.
💳 IX. HOW TO BUY AND SELL INVESTMENTS
● Full-service broker: Offers personal advice.
● Discount broker: Cheaper but with limited advice.
● Online broker: Most cost-efficient, for self-directed investors.
● Investment advisor: Gives tailored guidance for portfolio building.
