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Investing Basics: Key Terms & Strategies

This document provides an overview of basic investing terms and strategies. It defines key concepts like investment, risk, passive and active investment strategies. It also outlines different asset classes one can invest in, such as stocks, bonds, and mutual funds. The document emphasizes the importance of diversification in managing risk and achieving adequate diversification with 40 different stocks. It concludes with some investing tips, such as using a 401k, buying low-cost mutual funds, and adopting a long-term buy-and-hold strategy.

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sarah123
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168 views8 pages

Investing Basics: Key Terms & Strategies

This document provides an overview of basic investing terms and strategies. It defines key concepts like investment, risk, passive and active investment strategies. It also outlines different asset classes one can invest in, such as stocks, bonds, and mutual funds. The document emphasizes the importance of diversification in managing risk and achieving adequate diversification with 40 different stocks. It concludes with some investing tips, such as using a 401k, buying low-cost mutual funds, and adopting a long-term buy-and-hold strategy.

Uploaded by

sarah123
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd

The Basics of

Investing:
Know what to do with your
money or what others are
doing with your money!
Investment Terms to Know
• Investment: The commitment of funds to one or
more assets that will be held over some future time
period
• Risk: The chance that the actual return will be different
from the expected return
• Passive Investment Strategy: A strategy that
determines initial investment proportions and assets and
makes few changes over time
• Active Investment Strategy: A strategy that
seeks to change investment proportions and/or assets in
the belief that profits can be made
More Terms to Know
• Direct Investing: Investors buy and sell securities
themselves, typically through brokerage accounts.
• Indirect Investing: The buying and selling of the
shares of investment companies, which, in turn, hold
portfolios of securities
Why Should I Invest?
• Retirement: Investment in the long-term which
means you can ride the market
• Large Purchases (House): Invest in safer
securities (Short-term)
• School: Invest in safer securities, the sure
investments
What Can I Invest In?
• Money Market • Equity Securities:
Securities: – Stocks
– Treasury Bill • Derivative Securities:
– Negotiable CDs – Options
• Fixed-Income – Future Contracts
Securities:
– Bonds
– Asset-Backed
Securities
Diversification is KEY
• Diversification is the key to the
management of portfolio risk because it
allows investors to significantly lower
portfolio risk without adversely affecting
return!
• International diversification is important
• A portfolio with 40 different stocks is said
to be adequately diversified
Investing Tips
• USE 401K
• Flee the Bank – There are higher yielding
investments out there, don’t settle for a
low return on your investment
• Buy low expense Mutual Funds – Don’t
pay too many fees
• Buy and hold – Avoid high commission
fees and higher taxes
IMPORTANT INVESTING
FACTS TO KNOW
• Only 33% of money managers outperform
the market!
• Historically Stocks return 11%, Bonds 5%
• Passive Investment is the best way for
most investors

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