INB - Investment Basics Module Overview

Investment Basics

Introduction

Develop attitudes and actions that make successful wealth building possible. John Jacob Astor, who was a fur magnate, real-estate developer, and investor, once said that "Wealth is largely a result of habit." In this module, we will learn the attitudes and actions that make successful wealth-building possible. If they become habits, then wealth will surely follow. Beginning with the basics, we will learn about markets, steps to investing, and some of the investment choices. We'll discuss how the stock market began in the US and some of its more notable ups and downs. Critical to our understanding of investing we will learn about the relationship between risk and return and the time value of money.

Essential Questions

  • What is meant by "the time value of money?"
  • How are risk and return related to investment?
  • How are securities and other investments bought and sold?
  • How do I choose investments?

Key Terms

investing: the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in form of interest, income, or appreciation of the value of the instrument

SEC: Securities and Exchange Commission is an independent federal agency that oversees the exchange of securities to protect investors

NYSE: Established in 1792 on Wall Street in New York City, this securities market is one of the world's largest. America's 10 largest corporations, including Exxon, Ford, General Electric, and Wal-Mart, are traded on the NYSE

NASDAQ: National Association of Securities Dealers Automated Quotations a computerized data system to provide brokers with price quotations for securities traded over the counter.

AMEX: American Stock Exchange is a stock exchange in New York known for listing companies smaller than that of the New York Stock Exchange (NYSE)

OTC: The trading of securities outside of an organized exchange. OTC transactions are still subject to the statutory provisions on securities trading

securities: these are financial instruments (such as bonds or stocks) that can be traded freely on the open market

inflation: a rise in the general level of prices of goods and services in an economy over a period of time

interest: a fee paid on borrowed assets. It is the price paid for the use of borrowed money, or, money earned by deposited funds

dividend: payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.

capital gains: profit that results from investments into a capital asset, such as stocks, bonds, or real estate, which exceeds the purchase price. It is the difference between a higher selling price and a lower purchase price, resulting in a financial gain for the investor

investment income: interest, dividends, and realized gains and losses on the sale of securities

investment growth: increase in size, number, value, i.e. your savings grow through the addition of interest

investment liquidity: an investment's ability to be sold without causing a significant movement in the price and with minimum loss of value

growth stock: A stock that has shown better-than-average growth in market price appreciation and is expected to continue to do so

income stock: A stock with a history of paying steady dividends

conservative: cautious, avoiding excess

speculative: an investment that is very risky but could yield great profits

broker: agent, a businessman who buys or sells for another in exchange for a commission

brokerage: a stock broker's business, charges a fee to act as an intermediary between buyer and seller

 

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