Using Securities Markets for Financing & Investing Opportunities

Size: px
Start display at page:

Download "Using Securities Markets for Financing & Investing Opportunities"

Transcription

1 Chapter Nineteen Using Securities Markets for Financing & Investing Opportunities McGraw-Hill/Irwin Copyright 2010 by the McGraw-Hill Companies, Inc. All rights reserved.

2 WARREN BUFFETT Berkshire Hathaway With a net worth of $50 billion, Buffett was the richest person in the world in Got his big break when he gained control of Berkshire Hathaway. He invests in undervalued companies with strong management. Profile 19-2

3 The BASICS of SECURITIES MARKETS The Function of Securities Markets LG1 Securities markets are financial marketplaces for stocks and bonds and serve two primary functions: 1. Assist businesses in finding long-term funding to finance capital needs. 2. Provide private investors a place to buy and sell securities such as stocks and bonds. 19-3

4 TYPES of SECURITIES MARKETS Securities markets are divided into primary and secondary markets: - Primary markets handle the sale of new securities. - Secondary markets handle the trading of securities between investors with the proceeds of the sale going to the seller. Initial Public Offering (IPO) -- The first offering of a company s stock. The Function of Securities Markets LG1 19-4

5 INVESTMENT BANKERS and INSTITUTIONAL INVESTORS Investment Bankers -- Specialists who assist in the issue and sale of new securities. Institutional Investors -- Large organizations such as pension funds or mutual funds that invest their own funds or the funds of others. The Role of Investment Bankers LG1 19-5

6 STOCK EXCHANGES Stock Exchange -- An organization whose members can buy and sell securities on behalf of companies and individual investors. Over-the-Counter (OTC) Market -- Provides companies and investors with a means to trade stocks not listed on the national securities exchanges. NASDAQ -- A telecommunications network that links dealers across the nation so they can exchange securities. Stock Exchanges LG2 19-6

7 TOP STOCK EXCHANGES NYSE Euronext Stock Exchanges LG2 NASDAQ London Stock Exchange Tokyo Stock Exchange Deutsche Borse 19-7

8 The SECURITIES and EXCHANGE COMMISSION Securities Regulations and the SEC LG2 Securities and Exchange Commission (SEC) - - The federal agency responsible for regulating the various stock exchanges; created in 1934 through the Securities and Exchange Act. Prospectus -- A detailed registration statement that includes extensive economic and financial information that must be sent to prospective investors. 19-8

9 PROGRESS ASSESSMENT Progress Assessment What s the primary purpose of a stock exchange? Can you name the world s largest stock exchange? What does NASDAQ stand for? How does this exchange work? 19-9

10 WAGGING the DOG Making Ethical Decisions After 35 years at Laddie Come Home, you re ready to retire as CEO and your compensation package includes a bonus if the company s stock price reaches a certain amount. Another company would like to acquire the company at a price that exceeds the bonus level. If you encourage the board to sell the company, many jobs could be lost. What do you do? 19-10

11 The WIDE, WIDE WORLD of INVESTING Reaching Beyond Our Borders With apprehensions after the financial crisis of , why would we want to invest in less familiar global stocks? Analysts suggest investing money globally. From , markets in China and Brazil outperformed the U.S. Reviewing suggestions in the text are a good idea if you want to invest globally

12 LEARNING the LANGUAGE of STOCKS Learning the Language of Stocks LG3 Stocks -- Shares of ownership in a company. Stock Certificate -- Evidence of stock ownership. Dividends -- Part of a firm s profits that the firm may distribute to stockholders as either cash or additional shares

13 ADVANTAGES of ISSUING STOCKS Advantages & Disadvantages of Issuing Stock LG3 Stockholders are owners of a firm and never have to be repaid their investment. There s no legal obligation to pay dividends. Issuing stock can improve a firm s balance sheet since stock creates no debt

14 DISADVANTAGES of ISSUING STOCK Advantages & Disadvantages of Issuing Stock LG3 Stockholders have the right to vote for a company s board of directors. Issuing new shares of stock can alter the control of the firm. Dividends are paid from after-tax profits and are not tax deductible. The need to keep stockholders happy can affect management s decisions

15 TWO CLASSES of STOCK Issuing Shares of Common Stock LG3 Common Stock -- The most basic form; holders have the right to vote for the board of directors and share in the profits if dividends are approved. Preferred Stock -- Owners are given preference in the payment of company dividends before common stock dividends are distributed. Preferred stock can also be: - Callable - Convertible - Cumulative 19-15

16 PROGRESS ASSESSMENT Progress Assessment Name at least two advantages and disadvantages of issuing stock as a form of equity financing. What are the major differences between common stock and preferred stock? 19-16

17 LEARNING the LANGUAGE of BONDS Learning the Language of Bonds LG4 Bond -- A corporate certificate indicating that an investor has lent money to a firm. The principal is the face value of the bond. Interest -- The payment the bond issuer makes to the bondholders to compensate them for the use of their money

18 ADVANTAGES of ISSUING BONDS Advantages & Disadvantages of Issuing Bonds LG4 Bondholders are creditors, not owners of the firm and can t vote on corporate matters. Bond interest is tax deductible. Bonds are a temporary source of funding and are eventually repaid. Bonds can be repaid before the maturity date if they contain a call provision

19 DISADVANTAGES of ISSUING BONDS Advantages & Disadvantages of Issuing Bonds LG4 Bonds increase debt and can affect the market s perception of the firm. Paying interest on bonds is a legal obligation. If interest isn t paid, bondholders can take legal action. The face value of the bond must be repaid on the maturity date

20 BOND RATINGS Rating Advantages & Disadvantages of Issuing Bonds LG4 Moody s Standard & Poor s Description Aaa AAA Highest Quality Aa AA High Quality A A Upper-Medium Grade Baa BBB Medium Grade Ba BB Lower-Medium Grade B B Speculative Caa CCC, CC Poor Ca C Highly Speculative C D Lowest Grade 19-20

21 DIFFERENT CLASSES of CORPORATE BONDS Different Classes of Bonds LG4 Corporations can issue two classes of bonds: 1. Unsecured bonds (debenture bonds): not backed by specific collateral. 2. Secured bonds: backed by collateral (land or equipment)

22 SPECIAL FEATURES in BOND ISSUES Special Bond Features LG4 Sinking Fund -- Reserve account set up to ensure that enough money will be available to repay bondholders on the maturity date. Callable bonds permit bond issuers to pay off the principal before the maturity date. Convertible bonds allow bondholders to convert their bonds into shares of common stock

23 PROGRESS ASSESSMENT Why are bonds considered a form of debt financing? What does it mean if a firm issues a 9% bond due in 2025? Explain the difference between an unsecured and secured bond. Why are convertible bonds attractive to investors? Progress Assessment 19-23

24 BUYING SECURITIES Stockbroker -- A registered representative who works as a market intermediary to buy and sell securities for clients. Online trading services, such as TD Ameritrade, ETrade, and Scottrade, offer securities trading services online to buy and sell stocks and bonds. How Investors Buy Securities LG

25 PRIMARY INVESTMENT SERVICES CONSUMERS NEED Major Services Consumers Seek from Financial Advisers LG5 Savings and investing advice Help with 401k plans Retirement planning Tax planning Estate planning Education expense planning Source: Investment Company Institute

26 FIVE INVESTMENT CRITERIA 1. Investment risk Choosing the Right Investment Strategy LG5 2. Yield 3. Duration 4. Liquidity 5. Tax consequences 19-26

27 AVERAGE ANNUAL RETURN of ASSET CLASSES ( ) Choosing the Right Investment Strategy LG5 Investment Return Small company stocks 12.2% Large company stocks 9.5% Corporate bonds 6.0% Long-term government bonds 5.8% Treasury bills 4.1% Source: Ibbotson Associates and Morningstar

28 PROGRESS ASSESSMENT Progress Assessment What s the key advantage of investing through online brokers? What s the key disadvantage? What s the primary purpose of diversifying investments? 19-28

29 PERCEPTIONS of the MARKET Investing in Stocks LG6 Bulls: Investors who believe stock prices are going to rise. Bears: Investors who expect stock prices to decline

30 BEAR MARKET DECLINES in the S&P 500 Investing in Stocks LG6 Time Period % Drop in Prices % % % % % Source: Stock Traders Almanac

31 SELECTING STOCKS Investing in Stocks LG6 Capital Gains -- The positive difference between the price at which you bought a stock and what you sell it for. Investors can also choose stocks according to their strategy: - Blue-chip stocks - Growth stocks - Income stocks - Penny stocks 19-31

32 STOCK SPLITS Stock Splits LG6 Stock Splits -- An action by a company that gives stockholders two or more shares of additional stock for every share that s outstanding. Splits cause no change in the firm s ownership structure and no change in the investment s value. Firms can never be forced to spilt their stocks

33 BUYING STOCK on MARGIN Buying Stock on Margin -- Borrowing some of the stock s purchase cost from the brokerage firm. Margin is the portion of the stock s purchase price that the investor must pay with their own money. Buying Stock on Margin LG6 If a broker issues a margin call, the investor has to come up with money to cover losses

34 UNDERSTANDING STOCK QUOTATIONS Understanding Stock Quotations LG

35 TOP FINANICIAL NEWS and RESEARCH SITES Understanding Stock Quotations LG6 Yahoo Finance AOL Money and Finance MSN Money Forbes Dow Jones & Co. Source: Entrepreneur Magazine, March

36 IMPORTANT BOND QUESTIONS First-time bond investors generally ask two questions: - Do you have to hold a bond until the maturity date? - How can I assess the investment risk of a particular bond issue? Junk Bonds -- Bonds that have a high risk and high default rates. Investing in Bonds LG

37 INVESTING in MUTUAL FUNDS and EXCHANGE-TRADED FUNDS Mutual Fund -- An organization the buys stocks and bonds and then sells shares in those securities to the public. The fund pools investors money and buys stocks according to the fund s purpose. Exchange-Traded Fund (ETF) -- Collections of stocks and bonds that are traded on securities exchanges but themselves are traded more like stocks than mutual funds. Investing in Mutual Funds & Exchange- Traded Funds LG

38 PERCENTAGE of HOUSEHOLDS OWNING MUTUAL FUNDS Investing in Mutual Funds & Exchange- Traded Funds LG8 Year % of Households % % % % % Source: Investment Company Institute

39 THREE VARIETIES of ETFs Investing in Mutual Funds & Exchange- Traded Funds LG8 ETF Description Traditional Most common; include large U.S. stocks, small U.S. stocks, international stocks, or investment-grade bonds. Niche Focus on an individual sector like healthcare, high-yield bonds, or a single country. Exotic Invest in unusual, more volatile sectors such as commodities like gold and concepts like clean technology. Source: Schwab and ETrade

40 UNDERSTANDING MUTUAL FUND QUOTATIONS Investing in Mutual Funds & Exchange- Traded Funds LG

41 INVESTING with INTEGRITY Thinking Green A number of socially responsible investment funds (SRIs) are prospering. SRIs invest only in companies with exceptional environmental, social and governance practices. SRIs are good investments for long-term investors - they re lower risk than alternative investments

42 GROWTH of SOCIALLY RESPONSIBLE INVESTING Investing in Mutual Funds & Exchange- Traded Funds LG8 Year Number of SRIs Total Net Assets $10 Billion $90 Billion $170 Billion $210 Billion $260 Billion Source: Charles Schwab on Investing

43 COMPARING INVESTMENTS Investing in Mutual Funds & Exchange- Traded Funds LG

44 PROGRESS ASSESSMENT What s a stock split? Why do companies sometimes split their stock? Progress Assessment What does buying stock on margin mean? What are mutual funds and ETFs? What s the key benefit to investors in investing in a mutual fund or ETF? 19-44

45 KEY STOCK MARKET INDICATORS Understanding Stock Market Indicators LG9 Dow Jones Industrial Average -- The average cost of 30 selected industrial stocks. Critics say the 30-company Dow is too small a sample and suggest following the S&P 500. S&P 500 tracks the performance of 400 industrial, 40 financial, 40 public utility, and 20 transportation stocks

46 MARKET TURMOIL The stock market has its shares of ups and downs: - October 29, Black Tuesday; the market lost 13% of its value. - October 19, The market suffered its worst one-day drop when it lost 22% of its value. - October 27, Fears of an economic crisis in Asia cause widespread panic and losses. Investing Challenges in the 21 st Century Market LG

47 TURMOIL in the 2000s The market collapsed into a deep decline in with the dot-com bubble burst. - Investors lost $7 trillion in market value. In , the collapse of the real estate market sent financial markets into panic. - The U.S. government made significant investments in private banks and offered a large stimulus package to reenergize the economy. Investing Challenges in the 21 st Century Market LG

48 WHO S at FAULT for the ECONOMIC CRISIS? Wall Street - Issued exotic securities; paid excessive compensation based on bonuses; and investment banks got the SEC to relax capital requirement. Main Street - Americans lived beyond their means; lenders gave favorable loans to homebuilders; greedy homeowners took out equity loans; and teaser mortgage rates let people live large. Washington - Gramm-Leach-Billey Act allowed commercial and investment banks to partner; housing interest rates were kept low; and Community Reinvestment Act forced lending to people with bad credit. Investing Challenges in the 21 st Century Market LG2 Source: Fortune Magazine,

49 GAMBLING with INVESTORS SECURITY Legal Briefcase Fannie Mae bought huge numbers of mortgages and bundled them into securities they sold. Loans were riskier and more complex. Borrowers didn t fully understand and unqualified borrowers were granted loans they couldn t afford. As borrowers defaulted on loans, real estate prices fell. Financial institutions were left with loans that wouldn t be repaid

50 PROGRESS ASSESSMENT What does the Dow Jones Industrial Average measure? Why is it important? Why do the 30 companies comprising the Dow change periodically? Explain program trading and the problems it can create. Progress Assessment 19-50

Using Securities Markets for Financing and Investing Opportunities

Using Securities Markets for Financing and Investing Opportunities Chapter 19 Using Securities Markets for Financing and Investing Opportunities McGraw-Hill/Irwin Copyright 2014 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Nineteen NAME that COMPANY

More information

Saving and Investing. Chapter 11 Section Main Menu

Saving and Investing. Chapter 11 Section Main Menu Saving and Investing How does investing contribute to the free enterprise system? How does the financial system bring together savers and borrowers? How do financial intermediaries link savers and borrowers?

More information

Bond Mutual Funds. a guide to. A bond mutual fund is an investment company. that pools money from shareholders and invests

Bond Mutual Funds. a guide to. A bond mutual fund is an investment company. that pools money from shareholders and invests a guide to Bond Mutual Funds A bond mutual fund is an investment company that pools money from shareholders and invests primarily in a diversified portfolio of bonds. Table of Contents What Is a Bond?...

More information

Chapter 11. Stocks and Bonds. How does this distribution work? An example. What form do the distributions to common shareholders take?

Chapter 11. Stocks and Bonds. How does this distribution work? An example. What form do the distributions to common shareholders take? Chapter 11. Stocks and Bonds Chapter Objectives To identify basic shareholder rights and the means by which corporations make distributions to shareholders To recognize the investment opportunities in

More information

Chapter. Investing in Bonds. 13.1 Evaluating Bonds 13.2 Buying and Selling Bonds. 2010 South-Western, Cengage Learning

Chapter. Investing in Bonds. 13.1 Evaluating Bonds 13.2 Buying and Selling Bonds. 2010 South-Western, Cengage Learning Chapter 13 Investing in Bonds 13.1 Evaluating Bonds 13.2 Buying and Selling Bonds 2010 South-Western, Cengage Learning Standards Standard 4.0 Investigate opportunities available for saving and investing.

More information

Balanced fund: A mutual fund with a mix of stocks and bonds. It offers safety of principal, regular income and modest growth.

Balanced fund: A mutual fund with a mix of stocks and bonds. It offers safety of principal, regular income and modest growth. Wealth for Life Glossary Aggressive growth fund: A mutual fund that aims for the highest capital gains. They often invest in smaller emerging companies that offer maximum growth potential. Adjustable Rate

More information

Investing in Stocks 14-1. Copyright 2012 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

Investing in Stocks 14-1. Copyright 2012 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Investing in Stocks McGraw-Hill/Irwin Copyright 2012 by The McGraw-Hill Companies, Inc. All rights reserved. 14-1 Invest in stocks Learning Objectives Identify the most important features of common and

More information

March 16, 2015 What is a Mutual Fund? Mutual Funds

March 16, 2015 What is a Mutual Fund? Mutual Funds March 16, 2015 What is a Mutual Fund? Mutual Funds Professionally managed portfoliosmade up of stocks, bonds and other investments Pools money from many investors Securityis a tradable asset of any kind

More information

Investing Offers Rewards And Poses Risks. Investment Basics: The Power of Compounding. How Do Americans Invest Their Savings? (HA)

Investing Offers Rewards And Poses Risks. Investment Basics: The Power of Compounding. How Do Americans Invest Their Savings? (HA) How Do Americans Invest Their Savings? (HA) Learning how to save money for future use is an important first step in reaching your long-term goals. But saving alone is not enough. You will also need to

More information

Answers to Concepts in Review

Answers to Concepts in Review Answers to Concepts in Review 1. (a) In the money market, short-term securities such as CDs, T-bills, and banker s acceptances are traded. Long-term securities such as stocks and bonds are traded in the

More information

ACTIVITY 20.1 THE LANGUAGE OF FINANCIAL MARKETS: DEFINITIONS

ACTIVITY 20.1 THE LANGUAGE OF FINANCIAL MARKETS: DEFINITIONS ACTIVITY 20.1 THE LANGUAGE OF FINANCIAL MARKETS: DEFINITIONS AMEX: The acronym stands for American Stock Exchange, formerly an independent market but now part of the New York Stock Exchange; the AMEX s

More information

Bonds and preferred stock. Basic definitions. Preferred(?) stock. Investing in fixed income securities

Bonds and preferred stock. Basic definitions. Preferred(?) stock. Investing in fixed income securities Bonds and preferred stock Investing in fixed income securities Basic definitions Stock: share of ownership Stockholders are the owners of the firm Two types of stock: preferred and common Preferred stock:

More information

Chapter 14: Savings and Investing Savings and Investing

Chapter 14: Savings and Investing Savings and Investing Savings and Investing Consumers can use any money left over from purchasing goods and services toward savings or investing. Saving means putting money aside for future use. Investing is using savings to

More information

Chapter 11: Financial Markets Section 3

Chapter 11: Financial Markets Section 3 Chapter 11: Financial Markets Section 3 Objectives 1. Identify the benefits and risks of buying stocks. 2. Describe how stocks are traded. 3. Explain how stock performance is measured. 4. Describe the

More information

1 Regional Bank Regional banks specialize in consumer and commercial products within one region of a country, such as a state or within a group of states. A regional bank is smaller than a bank that operates

More information

INVESTMENT DICTIONARY

INVESTMENT DICTIONARY INVESTMENT DICTIONARY Annual Report An annual report is a document that offers information about the company s activities and operations and contains financial details, cash flow statement, profit and

More information

THE STOCK MARKET GAME GLOSSARY

THE STOCK MARKET GAME GLOSSARY THE STOCK MARKET GAME GLOSSARY Accounting: A method of recording a company s financial activity and arranging the information in reports that make the information understandable. Accounts payable: The

More information

Bonds, in the most generic sense, are issued with three essential components.

Bonds, in the most generic sense, are issued with three essential components. Page 1 of 5 Bond Basics Often considered to be one of the most conservative of all investments, bonds actually provide benefits to both conservative and more aggressive investors alike. The variety of

More information

INTERACTIVE BROKERS DISCLOSURE STATEMENT FOR BOND TRADING

INTERACTIVE BROKERS DISCLOSURE STATEMENT FOR BOND TRADING INTERACTIVE BROKERS DISCLOSURE STATEMENT FOR BOND TRADING THIS DISCLOSURE STATEMENT DISCUSSES THE CHARACTERISTICS AND RISKS OF TRADING BONDS THROUGH INTERACTIVE BROKERS (IB). BEFORE TRADING BONDS YOU SHOULD

More information

Securities Markets: Trading Financial Resources BUSN

Securities Markets: Trading Financial Resources BUSN 1 Securities Markets: Trading Financial Resources What are the different types of securities issued by a corporation? How are securities issued in the primary market and traded in the secondary market?

More information

Interest Rates and Bond Valuation

Interest Rates and Bond Valuation Interest Rates and Bond Valuation Chapter 6 Key Concepts and Skills Know the important bond features and bond types Understand bond values and why they fluctuate Understand bond ratings and what they mean

More information

Understanding Fixed Income

Understanding Fixed Income Understanding Fixed Income 2014 AMP Capital Investors Limited ABN 59 001 777 591 AFSL 232497 Understanding Fixed Income About fixed income at AMP Capital Our global presence helps us deliver outstanding

More information

Traditionally pension schemes invested in four main asset classes: Shares (Equities or Stocks), Bonds, Property and Cash.

Traditionally pension schemes invested in four main asset classes: Shares (Equities or Stocks), Bonds, Property and Cash. Asset Classes Traditionally pension schemes invested in four main asset classes: Shares (Equities or Stocks), Bonds, Property and Cash. Shares (also called Equities or Stocks) are shares bought in quoted

More information

Athens University of Economics and Business

Athens University of Economics and Business Athens University of Economics and Business MSc in International Shipping, Finance and Management Corporate Finance George Leledakis An Overview of Corporate Financing Topics Covered Corporate Structure

More information

- Short term notes (bonds) Maturities of 1-4 years - Medium-term notes/bonds Maturities of 5-10 years - Long-term bonds Maturities of 10-30 years

- Short term notes (bonds) Maturities of 1-4 years - Medium-term notes/bonds Maturities of 5-10 years - Long-term bonds Maturities of 10-30 years Contents 1. What Is A Bond? 2. Who Issues Bonds? Government Bonds Corporate Bonds 3. Basic Terms of Bonds Maturity Types of Coupon (Fixed, Floating, Zero Coupon) Redemption Seniority Price Yield The Relation

More information

January 2008. Bonds. An introduction to bond basics

January 2008. Bonds. An introduction to bond basics January 2008 Bonds An introduction to bond basics The information contained in this publication is for general information purposes only and is not intended by the Investment Industry Association of Canada

More information

High-yield bonds. Bonds that potentially reward investors for taking additional risk. High-yield bond basics

High-yield bonds. Bonds that potentially reward investors for taking additional risk. High-yield bond basics High-yield bonds Bonds that potentially reward investors for taking additional risk Types of high-yield bonds Types of high-yield bonds include: Cash-pay bonds. Known as plain vanilla bonds, these bonds

More information

THE BERWYN FUNDS. Shareholder Services Ultimus Fund Solutions, LLC P.O. Box 46707 Cincinnati, Ohio 45246-0707 800-992-6757

THE BERWYN FUNDS. Shareholder Services Ultimus Fund Solutions, LLC P.O. Box 46707 Cincinnati, Ohio 45246-0707 800-992-6757 THE BERWYN FUNDS Shareholder Services Ultimus Fund Solutions, LLC P.O. Box 46707 Cincinnati, Ohio 45246-0707 800-992-6757 Berwyn Fund (BERWX) Berwyn Income Fund (BERIX) Berwyn Cornerstone Fund (BERCX)

More information

Investing Test - MoneyPower

Investing Test - MoneyPower Investing Test - MoneyPower Multiple Choice Identify the choice that best completes the statement or answers the question. 1. A pharmacy is to drugs as the American Stock Exchange is to: a. Interest c.

More information

Chapter 10. Fixed Income Markets. Fixed-Income Securities

Chapter 10. Fixed Income Markets. Fixed-Income Securities Chapter 10 Fixed-Income Securities Bond: Tradable security that promises to make a pre-specified series of payments over time. Straight bond makes fixed coupon and principal payment. Bonds are traded mainly

More information

I. Introduction. II. Financial Markets (Direct Finance) A. How the Financial Market Works. B. The Debt Market (Bond Market)

I. Introduction. II. Financial Markets (Direct Finance) A. How the Financial Market Works. B. The Debt Market (Bond Market) University of California, Merced EC 121-Money and Banking Chapter 2 Lecture otes Professor Jason Lee I. Introduction In economics, investment is defined as an increase in the capital stock. This is important

More information

Investor Knowledge Quiz. A helpful guide to learning more about investing.

Investor Knowledge Quiz. A helpful guide to learning more about investing. Investor Knowledge Quiz A helpful guide to learning more about investing. An overwhelming 97 percent of investors realize they need to be better informed about investing. And nearly half said they could

More information

ALLOCATION STRATEGIES A, C, & I SHARES PROSPECTUS August 1, 2015

ALLOCATION STRATEGIES A, C, & I SHARES PROSPECTUS August 1, 2015 ALLOCATION STRATEGIES A, C, & I SHARES PROSPECTUS August 1, 2015 Investment Adviser: RidgeWorth Investments A Shares C Shares I Shares Aggressive Growth Allocation Strategy SLAAX CLVLX CVMGX Conservative

More information

education booklet CORPS Introduction to corporate bonds STOCKCROSS FINANCIAL SERVICES

education booklet CORPS Introduction to corporate bonds STOCKCROSS FINANCIAL SERVICES education booklet CORPS Introduction to corporate bonds STOCKCROSS FINANCIAL SERVICES corporate bonds Definition Corporate Bonds represent debt certificates issued by a corporation to raise funds for various

More information

Virtual Stock Market Game Glossary

Virtual Stock Market Game Glossary Virtual Stock Market Game Glossary American Stock Exchange-AMEX An open auction market similar to the NYSE where buyers and sellers compete in a centralized marketplace. The AMEX typically lists small

More information

Chapter 14. Investing in Stocks. McGraw-Hill/Irwin. Copyright 2007 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 14. Investing in Stocks. McGraw-Hill/Irwin. Copyright 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 14 Investing in Stocks McGraw-Hill/Irwin Copyright 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Investing in Securities Securities include a broad range of investments. Stocks.

More information

Bond Valuation. Capital Budgeting and Corporate Objectives

Bond Valuation. Capital Budgeting and Corporate Objectives Bond Valuation Capital Budgeting and Corporate Objectives Professor Ron Kaniel Simon School of Business University of Rochester 1 Bond Valuation An Overview Introduction to bonds and bond markets» What

More information

Web. Chapter FINANCIAL INSTITUTIONS AND MARKETS

Web. Chapter FINANCIAL INSTITUTIONS AND MARKETS FINANCIAL INSTITUTIONS AND MARKETS T Chapter Summary Chapter Web he Web Chapter provides an overview of the various financial institutions and markets that serve managers of firms and investors who invest

More information

Bonds and Yield to Maturity

Bonds and Yield to Maturity Bonds and Yield to Maturity Bonds A bond is a debt instrument requiring the issuer to repay to the lender/investor the amount borrowed (par or face value) plus interest over a specified period of time.

More information

Chapter 3 - Selecting Investments in a Global Market

Chapter 3 - Selecting Investments in a Global Market Chapter 3 - Selecting Investments in a Global Market Questions to be answered: Why should investors have a global perspective regarding their investments? What has happened to the relative size of U.S.

More information

INVESTMENT CHOICES. Dr. Suzanne B. Badenhop Professor/Extension Specialist

INVESTMENT CHOICES. Dr. Suzanne B. Badenhop Professor/Extension Specialist INVESTMENT CHOICES Dr. Suzanne B. Badenhop Professor/Extension Specialist INVESTING 101 What is your investment objective? What is your age? What is your time horizon What is your risk comfort level? What

More information

How To Invest In Stocks And Bonds

How To Invest In Stocks And Bonds Review for Exam 1 Instructions: Please read carefully The exam will have 21 multiple choice questions and 5 work problems. Questions in the multiple choice section will be either concept or calculation

More information

An Alternative Way to Diversify an Income Strategy

An Alternative Way to Diversify an Income Strategy Senior Secured Loans An Alternative Way to Diversify an Income Strategy Alternative Thinking Series There is no shortage of uncertainty and risk facing today s investor. From high unemployment and depressed

More information

Chapter Objectives. Chapter 9. Financial Markets and Institutions. What are the two major classes of investment alternatives? Why invest?

Chapter Objectives. Chapter 9. Financial Markets and Institutions. What are the two major classes of investment alternatives? Why invest? Chapter Objectives Chapter 9. Financial Markets and Institutions To identify the basic investment alternatives To understand the nature of securities market, distinguishing between organized exchanges

More information

A Primer for. Investing in Bonds. By the Editors of Kiplinger s Personal Finance magazine. In partnership with. for

A Primer for. Investing in Bonds. By the Editors of Kiplinger s Personal Finance magazine. In partnership with. for A Primer for Investing in Bonds By the Editors of Kiplinger s Personal Finance magazine In partnership with for Bonds Table of Contents 1 How Bonds Work 2 Types of Bonds 3 Unlocking the Potential of Bonds

More information

Bond Valuation. FINANCE 350 Global Financial Management. Professor Alon Brav Fuqua School of Business Duke University. Bond Valuation: An Overview

Bond Valuation. FINANCE 350 Global Financial Management. Professor Alon Brav Fuqua School of Business Duke University. Bond Valuation: An Overview Bond Valuation FINANCE 350 Global Financial Management Professor Alon Brav Fuqua School of Business Duke University 1 Bond Valuation: An Overview Bond Markets What are they? How big? How important? Valuation

More information

Investments GUIDE TO FUND RISKS

Investments GUIDE TO FUND RISKS Investments GUIDE TO FUND RISKS CONTENTS Making sense of risk 3 General risks 5 Fund specific risks 6 Useful definitions 9 2 MAKING SENSE OF RISK Understanding all the risks involved when selecting an

More information

Introduction To Financial Markets & Investing

Introduction To Financial Markets & Investing Introduction To Financial Markets & Investing Matthew Lawson, M.D. Getting Started A true story Internal Medicine Intern Recently married Husband has Financial Planner assigned through his employer Neither

More information

investing stocks and bonds

investing stocks and bonds investing stocks and bonds our mission The mission of The USAA Educational Foundation is to help consumers make informed decisions by providing information on financial management, safety concerns and

More information

Important Information about Investing in Bonds

Important Information about Investing in Bonds Robert W. Baird & Co. Incorporated Important Information about Investing in Bonds Baird has prepared this document to help you understand the characteristics and risks associated with bonds and other fixed

More information

Bonds and Mutual Funds

Bonds and Mutual Funds CHAPTER10 Bonds and Mutual Funds $ What You ll Learn When you have completed this chapter, you will be able to: Section 10.1 Describe the characteristics of corporate bonds. Identify the reasons corporations

More information

Asset Something of value to an individual or a company. The major financial asset classes are stocks, bonds, and commodities.

Asset Something of value to an individual or a company. The major financial asset classes are stocks, bonds, and commodities. THE FINANCIAL MARKETS OBJECTIVES: Students will be able to: Understand the trade-off between risk and reward in investing Identify and define the three major financial asset classes Explain what factors

More information

Investing: Risks and Rewards

Investing: Risks and Rewards Investing: Risks and Rewards Key Terms Stock Dividends Capital Gain Common Stock Preferred Stock A stock is an investment in the ownership of a corporation, represented by shares of the business Things

More information

Stock Market Definitions

Stock Market Definitions Stock Market Definitions Alpha Alpha is a mathematical measurement of the amount of return expected from an investment. Alpha measures a fund's performance after adjusting for the fund's systematic risk

More information

investor s guide BOND BASICS

investor s guide BOND BASICS investor s guide BOND BASICS CONTENTS What Are Bonds? 1 Why Invest in Bonds? 1 Key Bond Investment Considerations 2 How to Invest 13 Investment Strategy Considerations 17 For More Information 19 Glossary

More information

CHAPTER 14. Investing in Securities. Beginning to Invest in Stocks. When Should You Sell a Stock? Personal Finance

CHAPTER 14. Investing in Securities. Beginning to Invest in Stocks. When Should You Sell a Stock? Personal Finance CHAPTER 14 Investing in Stocks Personal Finance 7e Kapoor Dlabay Hughes 14-1 Why Corporations Issue Common Stock To raise money to start or expand a business. To help pay for ongoing business expenses.

More information

General Investment-Related Terms

General Investment-Related Terms General Investment-Related Terms 12b-1 Fee: A fee assessed on certain mutual funds or share classes permitted under an SEC rule to help cover the costs associated with marketing and selling the fund. 12b-1

More information

Investor Knowledge Quiz. A helpful guide to learning more about investing.

Investor Knowledge Quiz. A helpful guide to learning more about investing. Investor Knowledge Quiz A helpful guide to learning more about investing. FINRA and Investor Education FINRA, the Financial Industry Regulatory Authority, is an independent, not-forprofit organization

More information

Chapter 3. How Securities are Traded

Chapter 3. How Securities are Traded Chapter 3 How Securities are Traded Primary vs. Secondary Security Sales Primary: When firms need to raise capital, they may choose to sell (or float) new securities. These new issues typically are marketed

More information

Lecture Notes on MONEY, BANKING, AND FINANCIAL MARKETS. Peter N. Ireland Department of Economics Boston College. irelandp@bc.edu

Lecture Notes on MONEY, BANKING, AND FINANCIAL MARKETS. Peter N. Ireland Department of Economics Boston College. irelandp@bc.edu Lecture Notes on MONEY, BANKING, AND FINANCIAL MARKETS Peter N. Ireland Department of Economics Boston College irelandp@bc.edu http://www2.bc.edu/~irelandp/ec261.html Chapter 2: An Overview of the Financial

More information

Is it time to hire a professional to manage your bonds?

Is it time to hire a professional to manage your bonds? Is it time to hire a professional to manage your bonds? Today s bond markets are more complex Finding the right bonds can be difficult. The bond markets are large and complex, and it takes a lot of homework

More information

City National Rochdale High Yield Bond Fund a series of City National Rochdale Funds

City National Rochdale High Yield Bond Fund a series of City National Rochdale Funds City National Rochdale High Yield Bond Fund a series of City National Rochdale Funds SUMMARY PROSPECTUS DATED JANUARY 31, 2015, AS SUPPLEMENTED MAY 1, 2015 Class: Institutional Class Servicing Class Class

More information

PFIN 12: Buying and Selling Investments 78

PFIN 12: Buying and Selling Investments 78 PFIN 12: Buying and Selling Investments 78 12-1 Researching Investments OBJECTIVES Describe the types of financial information found in magazines, newspapers, and newsletters. Describe the type of data

More information

How Securities Are Traded. Chapter 3

How Securities Are Traded. Chapter 3 How Securities Are Traded Chapter 3 Primary vs. Secondary Security Sales Primary new issue issuer receives the proceeds from the sale first-time issue: IPO = issuer sells stock for the first time seasoned

More information

A stock is a share in the ownership of a company. Stock represents a claim on the company s assets and earnings.

A stock is a share in the ownership of a company. Stock represents a claim on the company s assets and earnings. Stock Market Basics What are stocks? A stock is a share in the ownership of a company. Stock represents a claim on the company s assets and earnings. As an owner (shareholder), you are entitled to your

More information

A guide to investing in high-yield bonds

A guide to investing in high-yield bonds A guide to investing in high-yield bonds What you should know before you buy Are high-yield bonds suitable for you? High-yield bonds are designed for investors who: Can accept additional risks of investing

More information

When firms need to raise capital, they may issue securities to the public by investment bankers.

When firms need to raise capital, they may issue securities to the public by investment bankers. CHAPTER 3. HOW SECURITIES ARE TRADED When firms need to raise capital, they may issue securities to the public by investment bankers. Primary market is a market for new securities. Secondary market is

More information

Investments. To meet your financial goals you will need a plan. Part of this plan is to create a portfolio.

Investments. To meet your financial goals you will need a plan. Part of this plan is to create a portfolio. Investments To meet your financial goals you will need a plan. Part of this plan is to create a portfolio. This portfolio reflects what type of risk you are willing to accept. Within this portfolio, you

More information

CHAPTER 9 DEBT SECURITIES. by Lee M. Dunham, PhD, CFA, and Vijay Singal, PhD, CFA

CHAPTER 9 DEBT SECURITIES. by Lee M. Dunham, PhD, CFA, and Vijay Singal, PhD, CFA CHAPTER 9 DEBT SECURITIES by Lee M. Dunham, PhD, CFA, and Vijay Singal, PhD, CFA LEARNING OUTCOMES After completing this chapter, you should be able to do the following: a Identify issuers of debt securities;

More information

A guide to investing in high-yield bonds

A guide to investing in high-yield bonds A guide to investing in high-yield bonds What you should know before you buy Are high-yield bonds suitable for you? High-yield bonds are designed for investors who: Can accept additional risks of investing

More information

Stocks: An Introduction

Stocks: An Introduction Stocks: An Introduction Page 1 of 7, see disclaimer on final page Stocks: An Introduction What are stocks? Stock equals ownership A stock represents a share of ownership in a business. When you hold one

More information

City National Rochdale Intermediate Fixed Income Fund a series of City National Rochdale Funds

City National Rochdale Intermediate Fixed Income Fund a series of City National Rochdale Funds City National Rochdale Intermediate Fixed Income Fund a series of City National Rochdale Funds SUMMARY PROSPECTUS DATED JANUARY 31, 2015, AS SUPPLEMENTED MAY 1, 2015 Class: Class N Institutional Class

More information

http://www.investopedia.com/university/bonds/ Thanks very much for downloading the printable version of this tutorial.

http://www.investopedia.com/university/bonds/ Thanks very much for downloading the printable version of this tutorial. Bond Basics Tutorial http://www.investopedia.com/university/bonds/ Thanks very much for downloading the printable version of this tutorial. As always, we welcome any feedback or suggestions. http://www.investopedia.com/contact.aspx

More information

Beginner s Guide to Bonds

Beginner s Guide to Bonds Beginner s Guide to Bonds Chapter 1.1-1.4 www.trader.ge Bonds Chapter 1.1 / A Basic Description Welcome to this first chapter on Bonds which will give a brief introduction to the history of bonds and explain

More information

Prospectus Baird Funds

Prospectus Baird Funds Prospectus Baird Funds May 1, 2014 Baird Ultra Short Bond Fund (Institutional Class: BUBIX) (Investor Class: BUBSX) Baird Short-Term Bond Fund (Institutional Class: BSBIX) (Investor Class: BSBSX) Baird

More information

Investor Knowledge Quiz. A helpful guide to learning more about investing.

Investor Knowledge Quiz. A helpful guide to learning more about investing. Investor Knowledge Quiz A helpful guide to learning more about investing. FINRA and Investor Education FINRA, the Financial Industry Regulatory Authority, is an independent, not-forprofit organization

More information

INVESTING IN DEBENTURES?

INVESTING IN DEBENTURES? INVESTING IN DEBENTURES? Independent guide for investors reading a prospectus for unlisted debentures This guide is for you, whether you re an experienced investor or just starting out. About ASIC The

More information

Investments at a glance

Investments at a glance Investments at a glance Canadian Securities Administrators Securities regulators from each province and territory have teamed up to form the Canadian Securities Administrators, or CSA for short. The CSA

More information

JA Take Stock In Your Future Session Two

JA Take Stock In Your Future Session Two JA Take Stock In Your Future Session Two Objectives You will be able to: Identify pieces of information from a stock table (Section 2); Use that information to distinguish if the stock would be a suitable

More information

Investment Basics and Vehicles

Investment Basics and Vehicles A WorkLife4You Guide Investment Basics and Vehicles Whether you are planning for retirement, your child s education, or you d like to make some investments in the market, there are some investment basics

More information

Outline. Securities Markets. Markets. Money and Capital Markets. Markets Orders Positions Information

Outline. Securities Markets. Markets. Money and Capital Markets. Markets Orders Positions Information Outline Securities Markets Economics 71a Spring 2007 Mayo, Chapter 3 Lecture notes 2.3 Markets Orders Positions Information Primary markets Markets New issues (IPO s, corporate and public debt) Secondary

More information

OAKTREE HIGH YIELD BOND FUND

OAKTREE HIGH YIELD BOND FUND OAKTREE HIGH YIELD BOND FUND Institutional Class OHYIX Advisor Class OHYDX Before you invest, you may want to review the Fund s prospectus, which contains more information about the Fund and its risks.

More information

How Wall Street Works Nightly Business Report

How Wall Street Works Nightly Business Report Notes from the PBS video How Wall Street Works Nightly Business Report The New York Stock Exchange located on Wall Street in New York City, is traders can buy and sell stocks and bonds. Two major types

More information

TD ASSET MANAGEMENT USA FUNDS INC. TDAM U.S. Equity Shareholder Yield Fund. TDAM U.S. Large Cap Core Equity Fund

TD ASSET MANAGEMENT USA FUNDS INC. TDAM U.S. Equity Shareholder Yield Fund. TDAM U.S. Large Cap Core Equity Fund TD ASSET MANAGEMENT USA FUNDS INC. TDAM U.S. Equity Shareholder Yield Fund TDAM U.S. Large Cap Core Equity Fund TDAM Global Equity Shareholder Yield Fund TDAM Global All Cap Fund TDAM U.S. Small-Mid Cap

More information

Franklin Templeton Variable Insurance Products Trust

Franklin Templeton Variable Insurance Products Trust Statement of Additional Information May 1, 2016 Franklin Templeton Variable Insurance Products Trust Franklin Flex Cap Growth VIP Fund Franklin Founding Funds Allocation VIP Fund Franklin Global Real Estate

More information

Why Learn About Stocks?

Why Learn About Stocks? Language of the Stock Market Family Economics & Financial Education 1.12.2.F1 Why Learn About Stocks? O ne hears about the stock market on a daily basis. Not necessarily because they want to, but because

More information

2016 2010 South-Western, Cengage Learning

2016 2010 South-Western, Cengage Learning Chapter 2 Investing in Stocks 2.1 Evaluating Stocks 2.2 Buying and Selling Stocks Lesson 2.1 Evaluating Stocks Learning Objectives LO 1-1 Describe features of stock and types of stocks. LO 1-2 Explain

More information

INVESTMENT TERM GLOSSARY

INVESTMENT TERM GLOSSARY A Accrued Interest - Interest that has been earned but not yet credited to a bond or other fixed-income investment, such as a certificate of deposit. Active Management The use of professional investment

More information

Topics in Chapter. Key features of bonds Bond valuation Measuring yield Assessing risk

Topics in Chapter. Key features of bonds Bond valuation Measuring yield Assessing risk Bond Valuation 1 Topics in Chapter Key features of bonds Bond valuation Measuring yield Assessing risk 2 Determinants of Intrinsic Value: The Cost of Debt Net operating profit after taxes Free cash flow

More information

CHAPTER 16. Stocks and Bonds

CHAPTER 16. Stocks and Bonds CHAPTER 16 Stocks and Bonds SECTION 1: Stocks Financial Markets Stocks and bonds are bought and sold in a financial market. Financial markets channel money from some people to other people. They bring

More information

C H A P T E R Investing in Bonds 441

C H A P T E R Investing in Bonds 441 Investing in Bonds C H A P T E R 16 Tom scratched his head for a moment. This was something entirely new to him. His broker was recommending a car and junk? And who were all these people that his broker

More information

INVESTMENT TRANSLATED INTO HUMAN WORDS

INVESTMENT TRANSLATED INTO HUMAN WORDS INVESTMENT JARGON TRANSLATED INTO HUMAN WORDS Hi, The world of finance loves jargon, but it s overly confusing. Let s clear the air. Here s a concise walk-through of terms that are common, but often not

More information

Seix Total Return Bond Fund

Seix Total Return Bond Fund Summary Prospectus Seix Total Return Bond Fund AUGUST 1, 2015 (AS REVISED FEBRUARY 1, 2016) Class / Ticker Symbol A / CBPSX R / SCBLX I / SAMFX IS / SAMZX Before you invest, you may want to review the

More information

Basic Investment Terms

Basic Investment Terms Because money doesn t come with instructions.sm Robert C. Eddy, CFP Margaret F. Eddy, CFP Matthew B. Showley, CFP Basic Investment Terms ANNUITY A financial product sold by financial institutions pay out

More information

Retirement. on the Brain. Basics Of The Financial Markets. Standard Retirement Services, Inc.

Retirement. on the Brain. Basics Of The Financial Markets. Standard Retirement Services, Inc. Retirement on the Brain Basics Of The Financial Markets Standard Retirement Services, Inc. Basics Of The Financial Markets What are the markets? Why does everyone follow the Dow? How do mutual funds work?

More information

Average Annualized Return as of 11/30/2015 1. YTD 1 Year 3 Years 5 Years

Average Annualized Return as of 11/30/2015 1. YTD 1 Year 3 Years 5 Years Investment Options at a glance Current performance may be lower or higher than performance data shown. Performance data quoted represents past performance and is not a guarantee or prediction of future

More information

Types of Stock. Common Stock most common form of stock. Preferred Stock. Companies may customize other classes of stock.

Types of Stock. Common Stock most common form of stock. Preferred Stock. Companies may customize other classes of stock. Stock Market Basics What are Stocks? Stock is ownership in a publicly traded company. Stock is a claim on the company s assets and earnings. The more stock you have, the greater your claim as an owner.

More information

Investor Guide to Bonds

Investor Guide to Bonds Investor Guide Investor Guide to Bonds threadneedle.com Introduction Why invest in bonds? Although your capital is normally considered safe in a traditional deposit account, low interest rates have eroded

More information

Financial Markets And Financial Instruments - Part I

Financial Markets And Financial Instruments - Part I Financial Markets And Financial Instruments - Part I Financial Assets Real assets are things such as land, buildings, machinery, and knowledge that are used to produce goods and services. Financial assets

More information

Chapter 6 Interest rates and Bond Valuation. 2012 Pearson Prentice Hall. All rights reserved. 4-1

Chapter 6 Interest rates and Bond Valuation. 2012 Pearson Prentice Hall. All rights reserved. 4-1 Chapter 6 Interest rates and Bond Valuation 2012 Pearson Prentice Hall. All rights reserved. 4-1 Interest Rates and Required Returns: Interest Rate Fundamentals The interest rate is usually applied to

More information