Types of Investments

Today and tomorrow we will be watching a section of Dave Ramsey's video on Types of Investments and discussing what different types of investments mean.

First, check your Market Watch game here: http://www.marketwatch.com/game/khs2014 


Using Microsoft Word, answer the following questions:

Money Markets

• A C.D. is a __________ __ ___________, typically at a bank.
• Money market mutual funds are ____________ risk money market accounts with check writing privileges. 
• These are great for __________ _________.

Single Stocks

• Single stock investing carries an extremely _______ degree of risk.
• When you buy stock, you are buying a small piece of __________ in the company.
• Your return comes as the company increases in _________ or pays you, its owner, some of the profits (_______________).

Bonds

• A bond is a _________ instrument by which the company owes _______ money.
• Your return is the fluctuation in price and the _________ rate paid.  
• Few individuals do well with _______ _________ purchases.

Mutual Funds

• Investors pool their ___________ to invest.
• Portfolio managers manage the pool or ___________.
• Your __________ comes as the ____________ of the fund is increased.
• Mutual funds are good ____________ term investments.

Real Estate

• Least ________ consumer investment.
• You should have lots of ________ before using real estate as an ______________.

Annuities

• Annuities are _______ accounts with an _________ company.
• _______ annuities are at a low interest rate of around 5%, aren't really fixed, and are a ________ investment.
• _______ annuities are mutual funds sheltered by the annuity covering, thereby allowing the mutual fund to grow tax-deferred.

Horrible Investments

• Gold
• _______ & Futures
• Day __________
• Viaticals

Diversification and Dollar Cost Averaging

You probably remember our discussions of the importance of diversification when investing.  It follows the idea of "Don't put all your eggs in one basket" -- meaning if you put all of your eggs [investments] into one basket, and that basket gets destroyed, you lose everything.  By putting a some of your eggs in one basket [savings], some of your eggs in another basket [individual stocks], some of your eggs in another basket [mutual funds] and some of your eggs in another basket [real estate] -- you are more stable in the long run.

Today we are going to begin discussing Dollar Cost Averaging -- a process by which you buy a regular dollar amount worth of something [i.e. a mutual fund] at regular intervals [i.e. monthly] regardless of the price at that time.

For example: Imagine that you are going to invest $100 per month in a certain stock.  This month the stock is at $10 per share so you will be able to buy 10 shares.  Next month the stock is at $11 per share so you will only be able to buy 9.09 shares.  The following month the stock drops to $9 per share so you are able to get 11.11 shares.  In month 4 the stock is up to $16 so you can only afford 6.25 shares.  You now own 36.25 shares of stock worth an estimated  $580 -- and you have invested only $400.  Obviously if stocks suddenly dropped back to the $10 per share where you started, your stocks would only be worth $362.50, but the stock market has a pretty strong track record of upward movement over time.  Even so, don't forget the concept of diversification... and don't invest money you can't afford to lose.

Now I always suggest consulting multiple sources of information prior to investing.  Here's an example of reasons NOT to use Dollar Cost Averaging.  I disagree with his reason, but it's good to listen to varied opinions.

The Basics of Investing

Today we will begin discussing investment strategies and the Stock market:

• Today we will watch a brief cartoon about how the New York Stock Exchange works.  It's a bit choppy in parts, but I think it's a great explanation of how the Stock Exchange works -- and has worked since the cartoon was made... about 60 years ago!

• Finally we will begin researching individual stocks that you have an interest in.  For example, if you wear a certain clothing brand, drink a certain beverage, or play a particular video game, those might give you some places to start.  
• Go to http://finance.google.com
• Find 9 different stocks that you have an interest in
• Complete the following information about your stocks (you will receive a worksheet -- or you can download a copy here)

Individual Stocks:

• Company Name:
• Stock Symbol:
• Current Stock Value: $
• 52-Week Low: $
• 52-Week High: $
• News about this company: 

Make a note on your page about which stocks seem like they have the most earning potential -- and explain why.