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Chapter 12 Buying and Selling Investments

Chapter 12 Buying and Selling Investments. What Are Sources of Investing Information?. Magazines Newspapers Investor newsletters Annual reports Prospectus Internet. 12-1 Researching Investments and Markets. What Professional Advice Is Available?.

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Chapter 12 Buying and Selling Investments

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  1. Chapter 12 Buying and Selling Investments

  2. What Are Sources of Investing Information? • Magazines • Newspapers • Investor newsletters • Annual reports • Prospectus • Internet 12-1 Researching Investments and Markets Slide 2

  3. What Professional Advice Is Available? • A stockbroker buys and sells securities on behalf of others. • Full-service brokers • Discount brokers • Online brokers • A financial planner helps people make investment decisions to meet goals. • Banks and credit unions sell securities that they endorse. 12-1 Researching Investments and Markets Slide 3

  4. How Are Financial Markets Designed? • Securities can be traded in the primary or secondary markets. • The primary market is where new issues of securities are sold. • The secondary market is where previously issued securities are sold. 12-1 Researching Investments and Markets Slide 4

  5. How Are Financial Markets Designed? • Securities exchanges are places for brokers to buy and sell securities for their clients. • Over-the-counter market is a network of dealers and brokers who buy and sell securities not listed on an exchange. • Direct investing involves buying securities directly from a corporation. • Reinvesting involves getting stock dividends instead of cash dividends. 12-1 Researching Investments and Markets Slide 5

  6. Focus On . . . • Full Service or Discount Brokers? • Discount brokers: • Charge a smaller fee • May charge extra for information • Full service brokers: • Give sound investment advice for a higher fee • When making a choice, consider: services, fees, location of nearest brokerage office, minimum deposits, etc. 12-1 Researching Investments and Markets Slide 6

  7. How Are Stocks Bought and Sold? • 1. Set up an account. • Choose your venue (full-service broker, discount broker, bank, etc.) • Provide identification. • Access your account online. • Make minimum or regular monthly deposit. 12-2 Buying and Selling Securities Slide 7

  8. How Are Stocks Bought and Sold? • 2. Place transactions. • A market order is a request to buy or sell a stock at the current market price. • A limit order is a request to buy or sell a stock at a specific price. • A stop order is a request to sell a stock when it reaches a certain price. • A discretionary order allows the broker to buy or sell a stock to get the best price. 12-2 Buying and Selling Securities Slide 8

  9. How Do You Know When to Buy or Sell? • Set aside cash so you can buy and sell stock when you need to. • If you don’t have cash, you can use credit. • Selling short involves selling stock that has been borrowed from a broker and replacing it later. • Buying on margin involves borrowing money from your broker to buy stock. 12-2 Buying and Selling Securities Slide 9

  10. Buying Patterns • Buy and hold is a plan to purchase and keep stock for the long term. • Stock turning is making regular and systematic changes in stock ownership based on trends in the economy. • Watch-and-wait investing involves making a comparative analysis of securities periodically. 12-2 Buying and Selling Securities Slide 10

  11. Success Skills • Reading the Stock Listings • To make wise investment choices, track the progress of your investments in stock listings. 12-2 Buying and Selling Securities Slide 11

  12. What Regulatory Agencies Help Consumers? • Banks, brokerage companies, and other financial businesses are controlled by agencies created by Congress. • Agencies provide oversight to ensure that investors’ rights are protected. 12-3 Regulatory Agencies and Laws Slide 12

  13. What Regulatory Agencies Help Consumers? • Federal Deposit Insurance Corporation • National Credit Union Administration • Financial Industry Regulatory Authority • Pension Benefit Guaranty Corporation • Commodity Futures Trading Commission • Office of Thrift Supervision • Office of the Comptroller of the Currency • Securities and Exchange Commission • Department of the Treasury • Internal Revenue Service • The Fed 12-3 Regulatory Agencies and Laws Slide 13

  14. What Are Financial Reform Laws? • Sarbanes-Oxley (SOX) sets standards for public companies and accounting firms for the reporting of finances. • Created in response to financial scandals at large companies. • Requires improved financial reporting, audits, and accounting services. 12-3 Regulatory Agencies and Laws Slide 14

  15. What Are Financial Reform Laws? • Wall Street Reform Act aims tocreate and maintain a stable financial system. • New consumer agency • Credit scores • Interchange fees • Liar loans • Mortgage help • New oversight • FDIC takeovers 12-3 Regulatory Agencies and Laws Slide 15

  16. Building Communications Skills • Persuasive Messages • Be concise, clear, and convincing. • Apply logical and appealing arguments. • In first paragraph, give one good reason why the reader should keep reading. • In the middle paragraph, explain your position and give evidence to support it. • In the final paragraph, give the reader a reason to take action or accept your position. 12-3 Regulatory Agencies and Laws Slide 16

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