Personal FinancePart 3

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 2Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• Before a company can raise capital by issuing stocks or bonds, it must _________ the stock or bond issue with the __________________(SEC).

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 3Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• An investment banking firm assists the corporation in completing the ________ forms and serves as an intermediary between the _______ corporation and the initial investors.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 4Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• A company raises _____ (money) when it _____ stock. Since the corporation has not obligation to pay stockholders back the price of the stock, issuing stock does not create a ____, as does issuing bonds or borrowing money from a financial institution or the government.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 5Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• Stock represents shares of ________ in a corporation. • Usually corporations issue

stock to raise capital (money) to ______ the business.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 6Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

•An investor buys stock through a _______, who earns a commission from both the purchase and the ____ of stock.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 7Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• The share price of stock is likely to _____ because of the _____ publicity and the additional costs and penalties the company will likely incur.

• Depending on how a company handles the problem, the incident may have only a temporary negative impact on its share price.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 8Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• Stockholders receive ______ if the company issues dividends, have ______ rights, and can sell their stock to another investor at any time. They may also receive dividends.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 9Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• Shareholders do not receive interest payments.

• A shareholder has the right to vote for members of the __________and for policy issues, the right to receive ________ dividends if paid, and the right to transfer ownership of his/her shares to someone else through sale, gift, or inheritance (bequest in a will).

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 10Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• A _____, which is a kind of absentee ballot, is written authorization given by a shareholder to someone else, usually the corporate board of directors, to represent him/her and ____ his/her shares at a stockholder's meeting.

• It is usually easier to vote by mail through a ____ than to attend the annual meeting in person.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 11Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

A share of ownership in a company

Owner of the stock

Usually a stockholder owns a very small part of a company

http://www.youtube.com/watch?v=GnJCOof2HJk

Before a company can issue stocks or bonds, it must ___________________ with the SEC (Securities and Exchange Commission)

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 12Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• ________________ held corporations have shares of stock (ownership in the company) outstanding that are held by individual investors as well as pension plans and mutual funds. A company ____________________ from a privately held corporation to a publicly held corporation through an Initial Public Offering (IPO) of stock. Investment banks will underwrite the IPO and provide the company with the money they needed to raise and then offer the shares to the public in what is known as the ___________________ market.

• Shareholders have the right to _________ at the annual meeting of the corporation. If they are unable to attend, they can vote online or by mail via ______________.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 13Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 14Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• Dividends are part of the company's _____ that are distributed to shareholders. They may be in the form of ____, company ______, or other ________.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 15Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• A company is not required to _______ any of its ______ to shareholders as dividends. In fact, newer companies usually do not pay dividends because they ________ any profits back into the company to ____ and _____ the business.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 16Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• A dividend reinvestment plan is designed to help the shareholder acquire additional shares (or partial shares if there is not enough money) of the stock by immediately __________________ the dividend in the same company’s stock as soon as the dividend is ______________. The shareholder is still responsible for paying taxes on the dividends earned.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 17Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• Current events (for example, a war or major oil spill), investor confidence, and interest rate levels can all affect the financial markets in general as well as a specific company's ________ or __________ prices. Diversification is an investing technique that can affect the value of an investor's portfolio but _______ the price of securities.

• ______________ news about corporate earnings will make the stock price _________

• _________________ publicity due to problems with a product or lawsuits which would cost the company money will cause the price to fall.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 18Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• In recent years, the stock of many high-tech companies reached a very high price in a short period of time, then declined in value as the company failed, eventually declaring bankruptcy. A stock that trades for less than $1.00 is called a "penny stock." Investing in penny stocks is considered a ___________ risk because there is a high chance that the issuing company may default.

• __________ chip stocks are of well-known companies with a long record of profit growth and or dividend payment and a reputation for quality management, products, and services. Some examples of blue chip stocks: General Electric and Dupont.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 19Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 20Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• A stock __________ is when the existing stock divides into a larger number of shares and the price of each share is then reduced accordingly, i.e., a 2-for-1 split on 40 shares that is worth $80 would result in 80 shares at $40 at the time of the split. Among other reasons, companies often decide to declare a stock split when they want to bring in ________ investors and do not want to issue more stock. Or, they believe that by bringing _________ the price of the stock through a stock split, that they will increase activity and interest in the corporation’s stock.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 21Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

If someone was an aggressive investor, what types of investment tools would they primarily have in their portfolio?

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 22Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Investments are purchased from a stock exchange(except for real estate and some speculative investments)

In other words, a pharmacy is to drugs as the American Stock Exchange is to securities. The _____________ equities market in the world is the NY Stock

Exchange.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 23Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Brokerage firms _________________ the buying and selling of investments on the stock exchange

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 24Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Will usually charge a ________ for completing a buy/sell transaction

Additional fees may include:

Total fees are often _______,

but an individual must have the knowledge and time to monitor

their investments

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 25Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Financial advisors are _________________

for the time and knowledge they

provide investors.

Most charge _______ using one of these

methods.

In addition to fees, financial advisors may

earn ______________

paid by the company.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 26Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• ________________ is a speculative method whereby an investor ______________ up to 50% of the money needed from a brokerage firm in order to buy a wanted stock and pays a fee for the privilege.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 27Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Important to research the financial advisor and firm he/she works for

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 28Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona