Personal Finance Test 3

Front 1

Investment is for the...

Back 1

long term

Front 2

Saving is for the

Back 2

short term

Front 3

what are the three top stock market companies in the U.S.?

Back 3

1. New York Stock Exchange

2. NASDAQ (Technology)

3. Chicago Board (Commodities)

Front 4

When should you invest?

Back 4

after you have completed baby steps 1-6

Front 5

What step is investing or building wealth?

Back 5

6. Build Wealth/Give

Front 6

when you have income that has been freed up you should...?

Back 6

invest and save

Front 7

What example did Ramsey use when it comes to saving and investing?

Back 7

Bicycle example, when you reach the top you are balanced and you can cruise down

Front 8

What are the basics of investing?

Back 8

-keep it simple, (kiss principle)=wealthy=simple processes

-gather info. and put money into something you understand

-financial advisor's need a heart of a teacher not a salesman

-stay away from get rich quick schemes

-don't invest for tax savings

-making money=motive

-never invest with borrowed money- raises risk and only a payment left

-diversify- spread it around- never put all your money in one investment

-invest in what you know/understand- take your time

-check your statement monthly or regularly

Front 9

What example did Ramsey use in regard to characteristics of stocks?

Back 9

he talked about his children and how they were polar opposites, and how this relates to not putting all your eggs in one basket

Front 10

single stocks are

Back 10

not a good idea, because there is no diversification.

Front 11

mutual funds are

Back 11

good, just know what to buy

Front 12

penny stocks are

Back 12

cheap, and there's are reason why

Front 13

when the risk goes up, the...

Back 13

better the return

Front 14

what is a cookie jar investment?

Back 14

0% risk, 0 return, don't do this

Front 15

invest in...

Back 15

yourself, business, and mutual funds

Front 16

Saving and investing profitable returns could take

Back 16

-saving- 5 years or less

-investing- 5 years or more

Front 17

Two things you can count on...

Back 17

-inflation

-taxes

Front 18

liquidity is

Back 18

has more availability and less return (Cookie Jar) (Savings Account)

Front 19

a great investment is...

Back 19

a home (real estate), not liquid, can sell cheap, little risk, value growing, debt goes down

Front 20

What are the three main types of investments?

Back 20

1. CD's- certificate of deposit, like a savings account, fees if you take it out early

2. Money Market Account- (ER FUND)- write checks= good!

3. Single Stock- high risk, 10% of nest egg only

Front 21

day trading?

Back 21

78% lose money, "big fish", big risk, not steady or predictable

Front 22

what does it mean if you buy a stock?

Back 22

-piece of ownership (Share)

-example: 50/50

-value- winning or losing

Front 23

profits=

Back 23

$

Front 24

dividends=

Back 24

check for part of company money

Front 25

bonds=

Back 25

debt instrument, company owes you, not good, 8% average for a single bond, interest on these, return is a flux on the price

Front 26

when stocks and bonds go up around the world, we (U.S.)...

Back 26

go down (lose value)

Front 27

mutual funds...

Back 27

-pool of funds, return value included

Front 28

International Stock Fund...

Back 28

-GE, IBM, and AT&T

-share of ownership (Diversification)

-growth stocks (growing), go up and down

Front 29

money manure example:

Back 29

one big pile, it stinks, spread it around, stinks less

Front 30

buy low...

Back 30

sell high

Front 31

bull market?

Back 31

-good, making money

Front 32

bear market?

Back 32

-things are bad, not making money

Front 33

mutual funds...

Back 33

go up and down, you have to leave it for a longer time

Front 34

DOW Jones?

Back 34

measure of what stock market is doing, depends on the news.

Front 35

What happens after disasters such as 9/11 and Pearl Harbor?

Back 35

-goes down, by a years time it goes back to normal, the economy is resilient

Front 36

use a broker until you are...

Back 36

experienced

Front 37

what is the average for mutual funds according to Ramsey?

Back 37

12%

Front 38

What are the 4 different kinds of mutual funds?

Back 38

1. growth stock mutual funds (mid cap)

2. Growth Income (Blue Chip Funds)- large cap

3. Aggressive Growth- Small cap

4. Overseas Fund

*long term, 5 year track record or more, Rule of 72

Front 39

Rule of 72?

Back 39

-how long for investment to double

Front 40

Real Estate rules of investing?

Back 40

-liquid, need to have money or you will crash

-do not pay full price at the buy

-buy slowly or you will go bankrupt

-negotiate

Front 41

what are fixed annuities- insurance company savings account?

Back 41

-fixed- low interest rate

-variable- mutual fund inside annuity, coat keeps the taxes off of it (with a fee), grows, guaranteed principle, 8%, do not do with a 403B, already protected

Front 42

What does Ramsey say are bad ideas?

Back 42

-gold- never a standard, when the economy crashes, it is not a basic necessity

-commodities in futures- stupid tax

-day trading- get rich quick- 88% lose money, 98% lose all money, nonsense

-viaticals- fraud, one of the top 10 scams, dont look for short cut, keep it simple, it will take time

Front 43

Advice from a billionaire?

Back 43

1. have a giving spirit

2. read "Tortoise and the Hare"- we are a culture of hares, very few tortoises (always wins).

-buy used cars

-1 generation rich

-conservative- does not want to impress, get rich slowly

-start young

-invest consistently after rid of debt, college done, ER fund

Front 44

pension plans have been replaced with...

Back 44

401K plans, most companies

Front 45

what is the most common retirement plan for employees?

Back 45

401K- employee makes decision about which one to chose

Front 46

after you graduate and start a job you should put money in this ASAP and decide how to invest?

Back 46

401K

Front 47

Before retirement you should first have a

Back 47

mortgage down payment, and college for kids invested

Front 48

look at history for

Back 48

the future

Front 49

Chart of 1926-2012 statistics

Back 49

-US Treasury- 3.5%

-Long term US govt. bonds- 5.7%

-Long term US Corporate bonds- 6.1%

-Large company stocks- 9.8%

-Small company stocks- 11.9%

Front 50

What was the article about on Dave Ramsey?

Back 50

many see him as a good at giving advice on budgeting, saving, and controlling debt, but not saving. They do not agree with his 12% stock investment return advice

Front 51

what is risk?

Back 51

possibility that actual outcomes may deviate from expected outcomes

Front 52

what is an investment?

Back 52

possibility that actual returns may deviate from expected returns (uncertainty)

Front 53

Almost everyone will need to take a risk in investments in order to have sufficient funds to retire and reach other long term financial goals?

Back 53

true

Front 54

how much do you need to save in order to retire?

Back 54

3 million

Front 55

how much do you need to invest in order to have 3 million for retirement?

Back 55

depends on rate of returns of investments

Front 56

studies have shown that young adults are aversed to risk when it comes to investing, it shows that...

Back 56

young adults do not plan on investing, because the stock market is too risky

Front 57

can you reach goals without risk?

Back 57

-most don't have income needed to invest in a higher rate of return, so no

Front 58

which stocks have the higher rate of return?

Back 58

small company stocks

Front 59

why do people not invest in small company stocks?

Back 59

most cannot tolerate the risk

Front 60

Small company stocks statistics?

Back 60

-2008- small company stocks dropped 36.72%, because many pulled out and got scared when the recession hit, but it recovered by 2010

Front 61

what should you do when crisis hits?

Back 61

keep money in through it, it will come back

Front 62

most need to invest in order to..

Back 62

reach long term goals

Front 63

past does not always predict the...

Back 63

future

Front 64

What are the 7 simple rules of investing (Video)?

Back 64

1. investments=goals

2. Stick to plan

3. Diversify

4. Rebalance on a regular basis or yearly

5. understand what you own- read up on it

6. ignore the noise

7. keep your cost down- high cost is not always better

Front 65

which is better, index funds or actively managed funds?

Back 65

actively managed

Front 66

characteristics of index funds?

Back 66

-15% returns

-company on auto pilot

-cheaper- don't hire someone

-0.2%

-less effort

Front 67

Characteristics of actively managed funds?

Back 67

-better- 30% returns

-only 37%

Front 68

Which is better? ETF's or Traditional Mutual Funds?

Back 68

traditional

Front 69

characteristics of ETF's?

Back 69

-exchange traded funds

-pre-packaged portfolio

-trade throughout the day- more flexible

-sell instantly

-microscopic fees

-pay commissions to someone without commissions

Front 70

characteristics of traditional mutual funds?

Back 70

-do research

-low-cost=beat return

-easier to buy and sell

-no commissions

-not overpaying

-share price equality

Front 71

mutual funds basics video?

Back 71

-not a stock or bond

-set up to corporation

-set up with managers

-stocks=most risky

-bonds

-money market (least risky)

-index fund- match benchmark- fees low

-sold with a cost

-commissions/fees

-check prospectus first

Front 72

investing in bonds video

Back 72

-best

-IOU govt. bond- future=interest earned

-higher quality, lower amount paid

-US treasury bonds are safest

- small vs. large companies (more)

-longer maturity=better

-municipal bonds- tax exempt

-inflation- worth less

-interest rate risk, credit risk, and prices fluctuate

-market timing

-invest in stocks

Front 73

what to do when the market drops? video

Back 73

-long haul over the short term, portfolio tells you what to do, rebalance

Front 74

Statistics for January 1973-December 2012?

Back 74

-most will have this amount of time to retire

-best average returns- treasury, long term govt. bonds, and long term corporate bonds

1. Treasury- smooth climb, no variability, low risk- $7,959 from 1,000 in 1973)

2. Long term govt. bonds- more risk/high return, $29, 709 (2012)

3. Corporate bonds- default risk, more risk- $30, 309 (2012)

4. Large Company stock- more risk, residual owners last to be paid in distress, $41, 635 (2012)

5. Small Company Stocks- high risk/high return- $167,702

Front 75

asset allocation?

Back 75

-spread assets over several different asset classes, diversify portfolio.

Front 76

diversification?

Back 76

reducing portfolio risk, combining assets with returns, low correlations.

Front 77

form portfolios?

Back 77

-combination of asset classes with different characteristics.

Front 78

combination low risk assets?

Back 78

-higher risk assets

Front 79

if assets returns does not equal

Back 79

perfectly positively correlated risk reduction

Front 80

portfolio returns maybe lower than returns for the high risk assets, but risk may go down more than...

Back 80

returns do.

Front 81

correlations?

Back 81

-statistical measure of how returns of securities move relative to each other

-higher correlation=lower diversification benefits of combination the assets in a portfolio

-lower correlation= greater the potential diversification

Front 82

In order to increase returns, add higher risk/return asset class?

Back 82

small company stocks,

-large -50%

- small- 10%

-corporate bonds- 40%

Front 83

Types of Bonds:

Back 83

1. short term

2. medium "

3. long "

4. government

5.corporate

6.international

Front 84

US stock types

Back 84

1.large

2. small

3. growth

4. value

5. large cap growth

6. small cap growth

Front 85

International stock types

Back 85

1. Developing Countries

2. Less developing countries

3. Developed countries-large cap

4. Developed " -large cap value

5. South America

6. Asia

7. Europe, etc.

Front 86

Tips:

Back 86

-Don't let confusion stop you

-individualize to you

-not investing is wrong

-get started- ASAP

-past performance does not guarantee future results

-historical returns guide you

-no guarantees

Front 87

Before you begin investing, first...

Back 87

1. pay off high interest debt

2. ER Fund established- exception- if your company matches 401K, do this

3. most companies will match portion of contribution for retirement plan

Front 88

know your risk...

Back 88

tolerance

Front 89

know your investment...

Back 89

goals

Front 90

Short term goals?

Back 90

-house- low risk investment

-bank cd's

-money market accounts

-short term bonds

Front 91

Long term goals?

Back 91

-stocks

-long term bonds- retirement, higher return potential and higher risk

-early years- saving and investing for retirement

-ride out market turn downs

-invest heavily in stocks (US and International)

-tolerate risk- higher risk stocks- small company, growth, small cap value, etc.

Front 92

Things change over...

Back 92

time

- older- you have a shorter time

- lower risk exposure over time

-cut back on stocks

-more bonds and other lower risk invesments

Front 93

Retired?

Back 93

-less on individual growth and more on investment income

-reduce risk

-focus on: high quality, dividend paying common stocks, preferred stocks, and bonds

Front 94

where to invest?

Back 94

1. Individual Stocks

2. " bonds

3. mutual funds

4. exchange traded funds

5. index funds

6. target date funds

7. long term- retirement, college-kids

8. Tax savings: 401K, IRA's, ROTH IRA's, etc.

Front 95

401K?

Back 95

-companies offers, start there, they match contribution, determined by funds available

Front 96

Other Retirement options?

Back 96

1. Individual stocks/bonds- most don't have interest/time/knowledge needed, most should not try, interesting=small portfolio, and speculative- on a whim/no research

2. Mutual Funds- professionally managed/diversified, morningstar.com= good source or rankings/research, pay attention to fees/expenses - no load funds and fund expense ratios

3. ETF's/ Index Funds- most do not outperform benchmark, index- passive investing, very low expense, good selection=various industries, sectors, countries., keep it simple- broad market index

-etf's- stock exchange brokerage account, easy to open, low cost firms (E*Trade, TD Ameritrade, Scottrade), pay commission, expensive if just small account, must earn over 5% to break even

-index funds- direct from company, no cost, good investment company- low expense (Vanguard and Fidelity), opening is easy, online- automatic setup, even small amount, no transactions cost.

4. Target Date- simplest, makes decision for you (asset allocation and portfolio rebalancing), pick a date, very low cost, no sales commission, fund expense low, couple decisions (investment company and target date), no excuses, and avoid individual because complicated and time, (Vanguard Retirement Funds)

Front 97

Dave R. says that you need how much of your nest egg to retire?

Back 97

8% (1/2 million) invest the rest

Front 98

53% of people have less than _______ in a retirement plan, most guess

Back 98

$25,000

Front 99

You should complete baby steps 1-? in order to begin long term wealth building?

Back 99

4

Front 100

You need to put a _______ around your cookie jar in order to keep your money safe from ________

Back 100

coat, taxes

Front 101

IRA?

Back 101

Individual Retirement Arrangement- what you put in your coat, 401K IRS code

-earned income- eligible

-coat protects investment

-young- have time on your side, later its harder

Front 102

ROTH?

Back 102

-after tax investment- tax free

-ER fund and debt free first

-more choices

-will pay taxes on others

-higher bracket at retirement (income)

-forces you to save more

-after 5 years - 59 years, death/disability, against mortgage

Front 103

SEPP?

Back 103

-self employment= 15% (13.8%)

-max $45,000

-good for small business, few employers, not long, 100% match=expensive

-beginning of business/nature of

-most have gotten rid of pensions

Front 104

Pensions?

Back 104

-traditional

-almost no companies offer this anymore

-problems with it, put nothing in

Front 105

Fund Matching, 401K?

Back 105

-replaced pensions

-dont lose it, if company goes bankrupt

- portable

-safer

-nothing in=nothing

Front 106

ROTH 401K?

Back 106

-tax free

-can not match- ROTH $'s

-money out of check, stuck with it

Front 107

403B?

Back 107

-kissing cousin- 401K

-medical, non-profit, schools

-same as 401K (pre-tax) grows, tax deferred

-can move it

-be careful, lots of trashy products

-earn whats going in it

-pitch ideas- stay with good mutual funds

Front 108

Deferred... (457)

Back 108

-like a 401K

-least favorite

- receive income

-matches good

-grow money with it

Front 109

Roll IRA- leave company?

Back 109

-direct transfer, open new coat- 401K, IRA

-fill out form

-no withholding

-bring it home- held 20% out- penalties

Front 110

ROTH IRA rollover?

Back 110

-pays taxes- $25,000

-only do if you can pay taxes out of pocket

-do free part

Front 111

Retirement Loans?

Back 111

-never borrow against 401K

-cheap money- 5-7%- unplugged from investment (what you borrowed)

-due in full if you leave, death= 60 days for early withdrawl (penalties, etc)

-huge tax bill

-when to take it out? only serious bankruptcy

-dont pull from retirement until eligible

Front 112

Thrift Plan?

Back 112

-C Fund- 60%

-S " - 20

- I " - 20

Front 113

Step 4, you should put ___________$ or _________% into a 401K?

Back 113

100,000 or 15% (7500)

Front 114

For the ROTH IRA you need to be under _____$ in order to qualify?

Back 114

150,000

Front 115

For ROTH, you need ________$ if married?

Back 115

5000

Front 116

do not rely on the ___________ because you dont know if they are going to be there, be responsible for self.

Back 116

government

Front 117

Social Security?

Back 117

-not a retirement plan

-supplement only to good savings plan

-employer pays 7.65% and you pay the same

-goes into system

-robbed because it goes back out to retiree's (current)

-horrible/broken system

Front 118

ROTH, save?

Back 118

-for 30 years- 500/month at 12% in the millions

-works over time- dignitu

Front 119

Statistics?

Back 119

-70% of American's live paycheck to paycheck

-15%- 401K- no match

-5.8%- billions+both= 12 million

-little difference=% makes big difference

Front 120

Baby Steps

Back 120

1. Save 1,000

2.Pay off debt

3. 3-6 ER Fund

4. Invest 15%

5. College

6.Pay off Mortgage

7. Give

Front 121

Saving for kids college?

Back 121

-tax shelter plans-

-not always able to do it...

-scholarships, etc.

-not a right

Front 122

IRA-ESA?

Back 122

-$2,000 year for 18 years

-tax free

-jacket (saves 25,000-30,000)

Front 123

529?

Back 123

-there are a lot, only one good

-no automatic=bad

-you control destiny

-never freezes options with age

-UTMA and UGMA- too much, not as good

Front 124

Bad ideas?

Back 124

-dont use insurance to pay for college (no gerber)

-no savings bonds- sinking fund

-pre-paid tuition- 7%

Front 125

The American dream is to...

Back 125

own a home

Front 126

when doing the debt snowball, do not include...

Back 126

your mortgage

Front 127

average price of a home?

Back 127

220,600

Front 128

Step 6?

Back 128

pay house off early

Front 129

How can you think like a retailer?

Back 129

-make it clean/shine

-extra lighting

-clean closets

-hide stuff from view

-visual perception

-closed up, bake bread

-get out of house

-no cob webs or finger prints

Front 130

Other tips for selling a home?

Back 130

-fix ups- cheap, make a list, do yourself

-curb appeal is everything- 71% of buyers make decision at the curb- needs to look good from the street

-be the client

-paint the front door

-list on the internet- 77% people look here first- pictures included

- do not rely on personal references

-marketing consultant- interview them

-warranty- wont make the sale

-up front technique wont work

Front 131

Do not buy a home until you are...

Back 131

-ER fund

-debt free

-10% down (1/4 of take home pay)

Front 132

Tips for buying a home...

Back 132

- rent cheap/save up

- a home=forced savings plan

-buy title insurance- they pay if not clean

Front 133

if you are a first time home buyer you should use__________ loan?

Back 133

FHA (no insurance)

Front 134

You should get a ____________ or get ripped off??

Back 134

survey

Front 135

Steps to home buying?

Back 135

1. hire and agent

2. pre-qualify

3. meet with agent

4. drive by's by self

5. look with agent

6.

7. meet with lender

8. inspections (300-400)

9. closing

10. keys

Front 136

manual underwriting?

Back 136

-pay bills, $ in bank, stable job, assets, down payment,

Front 137

More tips?

Back 137

-buy before a foreclosure- may get a discount

-buy at the bottom of neighborhood range- wont appreciate it, if not

-home appreciates- good neighborhood- all about location

-buy near water/view- people pay money for this

Front 138

More tips?

Back 138

-overlook ugly-bargain

-some dont have imagination- can fix cheap

-odor- pull up floor/carpet

-be patient, good agent

- attractive from street and good floor plan- ugly at core, dont buy

- certified home inspection- and appraiser opinion- power issues

-trailers/mobile homes/time shares- depreciate in value- faster than car

- 100% down- avoid debt

-save up baby step 3

-1/3 have paid for house- no interest rates

- savings plan early

-pay loan off early

-good market- take advantage with no down payment- no-

-lose options with urgency

-

Front 139

if you are no more than_____% take home pay, ____% down payment, and do a ________ year mortgage...

Back 139

25, 10, and 15 year

Front 140

bad?

Back 140

-adjustable rate- transfer risk to buyer

-interest only mortgage

-reverse mortgage(elderly targeted)

-accelerated/bi-weekly- every two weeks

Front 141

good?

Back 141

-tax breaks- can itemize

-short sale-

-foreclosure

Front 142

Types of Loans?

Back 142

1. conventional- private- Fannie Mae- comforming mortage, insured by you, PMI foreclosure insurance, only if you have 20% down

2. FHA- HUD- insured by govt. small down payment, 3%, for 1st time home buyers, do not recomend

3. VA Loan- benefit Veteran- lots of fees

4. Owner financing- great way, pay early, take less

Front 143

Other tips?

Back 143

-do not buy quickly

-wait until financially ready: ER fund, 10% down, 15%, payment, no more than 25% of take home pay

Front 144

Retirement Savings Spread sheet criteria?

Back 144

-current age

-years to retirement

-retire age

-life expectancy

-long term rate of inflation - 3.1% (1926-2007)

-salary growth rate (4.1%)

-retire need % of salary

Variable

-current annual salary

-age when save begins

-retire contribution

-rate of return- work years

-rate of return- during retirement

Output

-salary- last working year

-project 1st year retire, inc. needed

-project retire funds needed

-project retire funds available

-surplus or short fall

Calculations

-yearly, earn interest, after first year, and need contribution

-needed: ? runs with inflation (long run), only can change variable inputs, what % needed to save enough, older you get, the more you need.

Front 145

What is the primary message conveyed in Ch.4 of the book?

Back 145

Trust No One

Front 146

What should you do prior to considering risky investments? Is this message consistent with what Dave Ramsey teaches

Back 146

Research and yes

Front 147

When investing there are two kinds of money, what are they and which provides the best returns, long run, on average?

Back 147

Large and small company, small is best

Front 148

Describe the 3 things that financial markets reward?

Back 148

1.Volume

2.Patience

3. Risk

Front 149

What is the relationship between interest rates and bond prices?

Back 149

when interest rates go up , bond prices go down

Front 150

What are treasury bills?

Back 150

the safest short term securities in the world, and free of state and local income tax, can purchase, sell, them via a program called Treasury Direct. Easier

Front 151

Treasury Notes?

Back 151

intermediate, bonds issued with lives between two and ten years, compare nicely to cd's, interest is exempt from all taxes, can be bought through Treasury Direct at a minimum of $100.

Front 152

Treasury Bonds?

Back 152

same as treasury notes, only with maturities in excess of 10 years.

Front 153

Which is better, treasury notes, bonds or bills?

Back 153

treasury notes

Front 154

which has the highest level of risk, treasury notes, bonds, or bills? why?

Back 154

Bonds, because its hard to predict

Front 155

What is the world's safest investment? Why is it safer than treasury bonds?

Back 155

Inflation Adjusted Bonds, because they have a fixed rate for a time period of years, face value rises with inflation, long term risk is eliminated, such as default, deflation.

Front 156

what are municipal bonds? how does their tax status differ from most other bonds?

Back 156

-non-taxable, interest on bonds issued by state and local govt. or agencies is usually exempt from federal income tax and from the state's local income tax as well.

-general obligation bonds, backed by full faith and credit of a state or local govt. not just as revenues from a hospital or toll road are individually safe. (county sewage authorities,etc.)

Front 157

are bond funds a recommended investment? why or why not?

Back 157

No, bc you are paying for something you don't need, treasuries are already safe, you don't need to diversify and free of taxes. Also because their are too many people who want to be paid, so you do not make much.

Front 158

Chicken hearted?

Back 158

1. getting a high rate of interest doesn't help if you don't save money in the first place.

2. It's important for us c.h. souls to understand true risk.

Front 159

what are the three compelling reasons to invest in stocks?

Back 159

1.unlike bonds, stocks offer at least the potential of keeping up with inflation, even if that potential is by no means always realized.

2.over the long run, and it may be a very long run, stocks will out perform the safer investments.

3. if all goes well, stocks can act as a tax shelter.

Front 160

can the share price of individual stocks go to zero? can the stock market lose a sig. amount of value?

Back 160

?

Front 161

how does the avg. long run return on stocks compare to the average long run return on bonds?

Back 161

-stocks- single dollar would have grown to 12.7 million or so by 2006, - 8.3% compounded yearly.

-bonds- $97

Front 162

do companies pay out all of their profits in dividends? if not, what do they do with the profits and how does , or should, that benefit stock holders?

Back 162

no

Front 163

what is an index fund? are they recommended investments? Do the try to beat the market?

Back 163

- is a type of mutual fund with a portfolio constructed to match or track the components of a market index, such as the Standard & Poor's 500Index (S&P 500). An index mutual fund is said to provide broad market exposure, low operating expenses and low portfolio turnover.

Front 164

the most sensible way for most people to invest in stocks...(Ch.7, 8,)...

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Ch. 7

1.Only invest money you won't have to touch for many years.

2. Buy low/sell high

3. Diversify over time by not investing all at once.

4. And then, for the most part, just stick with it.

5. Diversify over several stocks in different industries.

6.Ignore the noise

7.Or maybe, you can take advantage of the noise.

8.Be wary of high fliers and stocks that everyone likes, even though they may be the stocks of outstanding companies.

9. Beware the deceptive p/e (price earnings ratio)

10. Don't waste money subscribing to investment letters or expensive services.

11. Invest, don't speculate.

12. Sell only when a stock has gone up so much that you feel it no longer represents a good value.

13. If you have both taxable and tax sheltered portfolio's, keep your riskiest holdings outside your tax-sheltered accounts.

Ch.8

14. Never buy anything from a broker who calls you up cold.

15. Minimize your transaction cost. This is the one piece of the investment equation you can control, and it is hugely important.

16. Do your homework

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dollar cost averaging?

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Invest in a stock or in a market, in = $amounts on a regular basis. You buy more shares when the fund is low and fewer when it is high. Forces you to buy more shares when they are low, fewer when high.

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splits?

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Exchanged your dollars for twice as many half dollars or four times as many quarters or ten times as many dimes. corporations hope to gain from splits from splits are: to lower the price of the stock to make it look cheaper, to create the aforesaid sense of excitement and forward motion, and to increase the number of shares outstanding, and hence the trading volume and liquidity of the stock.

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stock dividends?

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small split, it is hoped no prospective buyers will even notice it has taken place. not real dividends, it is psychological, prior to the dividend, 100% of company was divided among the shareholders. to keep shareholders happy, they are given 3% more shares, now they have exactly what they had before 100%, it just divided into slightly smaller pieces. pay no tax, it adds no value to your holdings.

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dividend reinvestment plans?

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-given the choice of receiving their (real) dividend either in cash or in stock,

-have to declare full amount as income.

-if you take stock instead of cash, then the company takes your income and others and it can go back into the market and buys its own stock for you with your money or else it sells it direct to you from corporate treasury.

-forced to save money you might have other wise spent and you pay no brokerage commission to buy the stock.

-helps keep stock up, or raises new capital without having to pay underwriting fees and going through lengthy SEC Prospectus procedures.

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index funds?

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a type of mutual fund with a portfolio constructed to match or track the components of a market index, such as the Standard & Poor's 500 Index (S&P 500). Anindex mutual fund is said to provide broad market exposure, low operating expenses and low portfolio turnover.

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mutual funds?

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an investment program funded by shareholders that trades in diversified holdings and is professionally managed.

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closed end funds?

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A closed-end fund (CEF) or closed-ended fund is a collective investment model based on issuing a fixed number of shares which are not redeemable from the fund. Unlike open-end funds, new shares in aclosed-end fund are not created by managers to meet demand from investors.

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exchange traded fund?

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An ETF, or exchange traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETFtrades like a common stock on a stockexchange. ETFs experience price changes throughout the day as they are bought and sold.

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Sermonette? (CH.11)

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-It doesn't matter what you do to invest or save, you will find that, by the prevailing American ethic, you will never have enough.

-D.H. Lawrence- More money, more money, behind the horse and dollhouse

-someone pays off their debt, and the voices get louder wanting more money

-more is never enough.

-Stone Age Economics- Marshall Sahlins- Zen strategy- a people can enjoy an unparalled material plenty- with low standard of living.

-you can live well, poor or rich

- you don't know what your missing if you have never had it. But once you had the finer things, it becomes a necessity to the luxury.

-price earnings ratios or dividend rates- who am I? what am I trying to do with my life? Is money the means or the end?

-self-knowledge= choosing the proper investment course

-guilt over gambling family money

-keep you from getting burned

-International funds