CSM 204 Chapter 13 LectureOutline of Previous LectureI. Opportunity Costs of Housing CostsII. Apartment RentingIII. House RentingIV. Owning a New HomeV. Owning a Previously Owned HomeVI. Owning a CondominiumVII. Owning a CooperativeVIII. Owning a Manufactured HomeIX. Renting your ResidenceX. Home OwnershipXI. The Home Buying ProcessXII. Determining NeedsXIII. Finding and Evaluating a PropertyXIV. Pricing and FinancingXV. Fixed Rate MortgagesXVI. Other Financing MethodsXVII. Closing the DealXVIII. Selling your HomeOutline of Current LectureI. Establishing Investment GoalsII. Performing a Financial CheckupIII. Managing a Financial CrisisIV. Getting Money to InvestV. Factors Affecting Your Investment ChoiceVI. Components of RiskVII. More Factors Affecting Investment ChoicesVIII. Asset CategoriesIX. A Personal Plan for InvestingX. Your Role in the Investment ProcessXI. Sources of Investment InformationXII. Investor Services and NewslettersXIII. Quiz 3-1These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.Current LectureChapter 13: Investing FundamentalsEstablishing Investment GoalsWhat will you use money for?How much will you need?How will you get the money?How long will it take?Are there obstacles?Will you make sacrifices?What if you don’t reach the goal?Performing a Financial CheckupPay your bills on timeBalance your budget including an amount for investmentsPay off credit cardsStart an emergency fundHave access to other cash for emergenciesManaging a Financial CrisisEconomics and the business cycleIncrease your emergency fundKnow what you oweReduce spendingPay off credit cardsNotify creditors of any problemsMonitor value of investmentsConvert investments to cashGetting Money to InvestPay yourself first and make investing automaticSave extra funds like giftsParticipate in your employer’s retirement planMake installment payments to yourselfBreak a habitGet a part-time jobMake a special effort 1-2 months per yearFactors Affecting Your Investment ChoiceSafety vs. riskThe safer it is, the lower your returns are going to beConservativeVery Conservative0-1%Moderately Conservative4-6%Moderate6-8%AggressiveModerately Aggressive8-10%Very Aggressive10-20%Risk return trade-offComponents of RiskInflation riskEven though you may be getting a higher actual dollar amount at the end of your investment, it may buy the same amount or less by the time you actually receive your returnsInterest rate riskThe interest rate could rise after you investBusiness failure riskThe business you invested in could go out of business or failMarket riskSystematicThings that affect the market as a wholeHas to do with the world or market in crisisUnsystematicThings that affect a segment of the market, does not affect the market as a wholeBreaches in security such as with Target or Home DepotGlobal investment riskThings that affect the market may not happen in the US, but could happen anywhere in the worldMore Factors Affecting Investment ChoicesInvestment incomeBought bonds that pay interest or stocks that have large dividendsMore conservativeInvestment growthBuy at a low price and selling at a high price laterInvestment LiquidityHow fast can I convert my investment into cash?Asset AllocationDeciding how to divide up our moneyTime FactorYour AgeAsset CategoriesStocks (equities)Can hold them as individual stocks or as mutual fundsBondsGovernmentCorporateMutual fundsReal estateSpeculative investmentsA Personal Plan for InvestingEstablish realistic goalsDetermine that amount of money neededSpecify the amount of money available to fund your investmentsList different investments you want to evaluateEvaluate risk and potential return for eachReduce investments to a reasonable numberChoose at least two different investmentsContinue to evaluate your investment programYour Role in the Investment ProcessEvaluate potential investmentsSeek assistance if neededMonitor the value of investmentsKeep accurate and current recordsConsider tax consequences of sellingSources of Investment InformationThe internetNewspapersNews programsBusiness periodicalsCorporate reportsInvestor services and newslettersInvestor Services and NewslettersStandard and Poor’s Stock ReportValue LineMergentMorningstarLipper ReportsNYSENASDAQQuiz 3-11. False2. Government Bonds3. Options4. Asset allocation eliminates risk (2)5.