a quick introduction to investing by ceo sarah deming september 8 2009 n.
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Investing for Dummies

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  1. A quick introduction to investing by CEO Sarah Deming September 8, 2009 Investing for Dummies

  2. Why Invest, Anyway? • Why do the rich stay rich? Why can people retire before being eligible for social security? • In the long-run, the Dow (DJIA) has significantly out performed the risk-free investment (the t-bill)

  3. Different Type of Investments • Equities/Common Stock • Core vs. Growth • Fixed Income • Definition • Different Ways to Invest • Alternative Investments • Options, Real Estate, Hedge Funds, ect.

  4. Equities (Stocks) • The WIC portfolio is made up largely of Core (60%) and Growth (25%) Equities

  5. Core Stocks • “Big and boring is the key to core investments” • Stable, large, blue-chip companies • Large Market Capitalization (<10 Billion) • Consistent, large ROE (return on equity) • Steady Rate of Growth • Dividends • Examples in our portfolio: • Boeing, General Electric, Proctor & Gamble

  6. Growth Stocks • “Glamour Stock” • Shares in a company whose earnings are expected to grow at an above-average rate relative to the market • More risky, greater chance of a higher return • Commonly Technology Companies • No Dividends • Examples: • Hansen, Amgen, Applied Materials, Nintendo

  7. Indexes • Dow Jones Industrial Average • “When the market is up today” • Price-weighted average of 30 large, significant stocks • Most watched index • Standard & Poor’s 500 • Leading indicator of U.S. equities • Reflects the risk/return characteristics of the large cap universe

  8. Fixed Income • A type of investment that yields a regular (fixed) return—primarily, bonds. • Bonds are debt (stocks are equity) • Bonds are used to diversify portfolios • Issuers of bonds are generally corporations and governments • Government bonds are the safest investments and are used as “risk-free” instruments

  9. Investing in Fixed Income • Bond funds is a common way to invest in fixed income. Bond funds are primarily invested in a variety of bonds and other debt instruments with a specific focus. • Examples of bond funds WIC holds are Vanguard Total Market Fund and PIMCO Low Duration. • Corporate Bonds • Municipal Bonds (tax advantages) • U.S. Treasury Bills

  10. Alternative Investments • Often require large amount of investment • Risky but have a high return • Limited Regulations, complex, low liquidity • Examples Include: • Private Equity • Real Estate • Infrastructure • Commodities • Hedge Funds

  11. Financial Ratios • Financial ratios are a good quick way of understanding a company’s basic finances without examining the Income Statement, Balance Sheet, and Cash Flow Statements. • Profitability: • Return on Assets (ROA) • Return on Equities (ROE) • Debt: • Debt Ratio

  12. Financial Ratios (Continued) • Valuation Ratios: • Price to Book • Price/Earnings (P/E) • Dividend Yield

  13. Learn More? Resources! • Since there are no investing classes at Whitman, the best way to learn about investing is to educate yourself (and come to WIC meetings) • Resources: • Investopedia • Wall Street Journal • Yahoo and Google Finance • Morningstar