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Financial Literacy: Buying and Selling Investments

Chapter 12: Buying and Selling Investments Sources of Investing Information -Magazines – Forbes, Business Week, Fortune – News Magazines: Time, Newsweek, US News & World Report -Newspapers -Wall Street Journal and Barron’s -Investor Newsletters -Standard & Poor’s Stock Reports, Moody Investors Service, and Value Line Investment Survey -Company Reports -Annual Report -Prospectus -Internet – Bloomberg, CNN Money, Kiplinger, Morningstar, Reuters Key Figures Current Stock Price- amount investors are willing to pay for a share of ownership in the company -Number of Employees – Increases in the number of employees can reflect growth or downsizing -Market Cap – The total value of a company in the stock market -Revenue – amount of money received from business activities -Net Income or Profit – amount of money earned after deducting all the business’s expenses -Profit Margin- profit shown as a percentage P/E Ratio – price-earning ratio compares the selling price of common stock to the annual profits per share -Current Ratio – measure of a company’s ability to pay its current debts from current assets Stockbrokers Full Service Brokers – qualified stock broker who provides advice about what securities to buy and sell.Discount Brokers – qualified stock broker who buys and sells securities at a reduced rate but only provides advice for a fee sometimes.Online Brokers – brokers that charge low fees with the least amount of service; no investment advice or management of assets and only sometimes research reports.

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Financial Planners an adviser who helps people make investment decisions to stated goals How are Financial Markets Designed? Primary Market – where IPOs or new issues of securities are sold usually directly from the company Secondary Market – where previously issued securities are sold Securities Exchange – are places for brokers to buy and sell securities for their clients Over the Counter Market – is a network of dealers and brokers who buy and sell securities not listed on an exchange Direct Investing – involves buying securities directly from a corporation Reinvesting – involves getting stock dividends instead of cash dividends

How are Stocks Bought and Sold? Set up an account Choose your venue (full-service, discount, online, bank, etc. ). Provide ID. Access your account online. Make minimum or regular monthly deposit Place Transactions A market order is a request to buy or sell a stock at the current market price. A limit order is a request to buy or sell a stock at a specific price. A stop order is a request to sell a stock when it reaches a certain price. A discretionary order allows the broker to buy or sell a stock to get the best price.

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