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