Copyright 2007 Thomson South-Western Chapter 12 Buying and Selling Investments.

Copyright 2007 Thomson South-Western

Chapter 12

Buying and Selling Investments

Sources of Information

• Magazines

• Newspapers

• Investor newsletters

• Company reports

• Internet

12-1 Researching Investments

Staying informed can help you make better investment choices.

Using Research Data


COMPARISON FIGURES

FIGURE DESCRIPTION

Current stock price This price is the amount investors are willing to pay for a share of ownership in the company

Number of employees Changes can reflect growth or downsizing

Market cap The total value of a company in the stock market

Revenue The amount of money received from business activities

Net income or profit Money earned after deducting expenses

Profit margin Profit shown as a percentage

P/E ratio Compares the selling price of a company's common stock to the annual profits per share

Current ratio A measure of a company's ability to pay its current debts from current assets

Advice From Professionals

• Stockbrokers

• Financial planners

• Employees of banks and credit unions

• NASD Web site Broker Check feature


Building Communications Skills

Persuasive Messages• A persuasive message tries to convince the

reader to take (or not take) some action• The message should be concise, clear, and

convincing • Begin by gaining the reader’s attention

• Give solid reasons for the person to take (or not take) action


Trading Securities

• Primary market

• Secondary market– Securities exchanges

• New York Stock Exchange (NYSE)• American Stock Exchange (AMEX)

– Over-the-counter market

12-2 Buying and Selling Securities

Direct Investing

• Allows you to buy stock directly from a corporation

• You can reinvest dividends

• There are no brokerage fees

• Stock dividends and stock splits increase holdings


Brokerage Services

• Full-service brokers

• Discount brokers

• Online brokers

• Commissions and fees


Full-service stockbrokers offer advice about what to buy.

Stock Transactions

• Market order

• Limit order

• Stop order

• Discretionary order


Market Timing

• Selling short

• Buying on margin

• Buy and hold


Ethics

Churning • Is trading securities primarily to make

money from sales commissions

• Is illegal under SEC rules

• Is considered unethical

• Problems can be reported to the SEC using an online form


Focus on...

Full-Service or Discount Brokers• Full-service and discount brokers

compete for business

• Full-service brokers have higher fees but offer more services

• Discount brokers have lower fees but offer fewer services


Technology Corner

Blogs • Online locations with

– Short articles or comments on a particular subject area

– Text and sometimes video or audio

– One or several authors

• Several blogs are related to investing• Some blogs are free; others charge a fee


Independent Agencies

• Federal Deposit Insurance Corporation

• National Credit Union Administration

• National Association of Securities Dealers

• Pension Benefit Guaranty Corporation

12-3 Regulatory Agencies

Government Agencies

• Securities and Exchange Commission

• U.S. Department of the Treasury

• U.S. Financial Literacy and Education Commission

• Internal Revenue Service

• Federal Reserve System


Success Skills

Leadership• Leadership is the ability to influence others • A leader is able to achieve goals by managing

a team • Leaders earn the respect of others

• Developing leadership skills can help you be successful at school and at work


Focus on...

Sarbanes-Oxley Act• Is also known as the Public Company

Accounting Reform and Investor Protection Act

• Was passed in July 2002 in response to scandals in large companies

• Created new and stronger standards for U.S. public companies and for accounting firms


Copyright 2007 Thomson South-Western Chapter 12 Buying and Selling Investments.

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Transcript of Copyright 2007 Thomson South-Western Chapter 12 Buying and Selling Investments.