COA 4131 1st Edition Lecture 22 Outline of Current Lecture I. Four Steps in Investing Current LectureA. Four Steps in Investing a. Impulse items all at the check out line i. Candy, gum, magazines, soda bottlesb. Current Yieldi. Market pricec. Yield i. Bonds as an investment d. Total Returni. Dividends or interestii. Can be something else that you cannot predicte. Investment Riski. Theoretical risk of loss from an inflation of a possible investmentf. Selecting Investments and Allocating Assetsi. Asset allocation1. Put them in the categoriesii. Diversity1. Always want to spread the risk in the different categories 2. Don’t want to buy a gorgeous huge mansion that you put all of your money in and don’t have any money anywhere else and can’t afford anything else iii. Portfolio1. Mix of investments2. So much in mutual funds, bonds, investments, ect3. As you get older you become more conservativea. Less time in time horizon to be risky 4. Look at all of investments as a group 5. Want a broad range g. Speculationi. Step 4 in investingii. The volatility is 1. Unsure of these 2. Have to predict iii. General public start at this step and think that things they find in their attic will make them rich1. It’s possible, but such a small chance2. Really risky iv. Can be jumps and metals, some stock you never heard ofh. Growthi. Step 3 in investingii. Growth is what you want1. What is growing and are they doing it in the right wayiii. Apple made a lot of growth in a small amount of time iv. Moe’s is a huge growth story1. Past 2 years they’ve blown up 2. Restaurants come and goa. People plan what they want to eat about 12 hours in advancev. Chipolte is a good one too vi. Starbucks and coffee shops i. Safety and incomei. Step 2 in investingii. Stocks that give you dividends 1. Coca Cola, General Electrics, Johnson & Johnsonj. Security i. Step 1 in investing ii. You want secure items 1. CDs, U.S. government bonds, ectiii. Safe things that you won’t lose k. Managing Investmentsi. How much should be invested?1. Makes more sense to have a fairly big chunk of money2. Save a chunk and feel you are ready ii. How long should investments be held?1. Way easier to buy it2. Hardest thing is to know when to sell it3. Philosophy is to buy and holda. Give it time to breath b. Time is on your side c. Buying fast and selling fast is a problemi. Need to let it grow 4. Who should be involved in investment decisions and processing buy and holds?a. Spread investment decisions by asking other people b. Spread your knowledge and their knowledgei. Find out as much as you can c. May have to hire professionals to buy and sell your stocksi. Can’t do it yourselfii. Can have a direct deposit taken out from your job 5. Investment charta. Bonds are considered more conservative and safer b. Large cap means the company is worth over a billion dollars i. Large and secure companyii. Want some of these c. International stocks more of a risk depending where it is d. Emerging marketsi. South America, Asia, Africa ii. Some places in
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