Capital Market power point

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					Capital Market

BETHEL UNIVERSITY SIFE
                What is a capital market
 The capital markets are
  where companies or a
  government can raise
  money.
 Two of the most popular
  markets are in the form of
  stock exchanges.
     New York Stock Exchange
     Nasdaq
 Capital markets provide
  liquidity, the ability to get
  money out of something
  you own, your assets.
 House= Low liquidity
 Stocks= High liquidity
         Why are capital markets important

 Capital markets can be very beneficial when saving for
  retirement.
     Social Security has a good chance of not existing when you are ready
      to retire.
     Must take your future in your own hands
 These markets control prices for every day commodities:
  oil, corn, soybeans, and cotton
 Capital markets average a much higher rate of return,
  10%, over a savings account which averages 4.5%.
 Provides liquidity- Allows you to turn assets into cash
  very quickly.
                       Diversification

 Capital markets allow investors to diversify their
  investments
 It is very important when investing to be diversified.
     As an investor you don’t want all your money in one company,.
     Don’t want all your eggs in one basket. If that company fails
      you are left with nothing.
 Diversify- means to have a variety
   A movie store has a diversification of movies to select from.

   The Nike factory outlet is not diversified. They only have one
    brand.
                                    Stocks

 A stock represents an ownership of a company.
 Each individual stock is a single share of a company.
 Companies issue stock to raise money for a business.
 Stockholders are entitled to share profits and get to
  vote in how the company runs
 If the company makes profits the stock price goes up.
 If the company starts to decline the stock price goes
  down
 Money is easily accessible- Liquidity
       An individual can sell a stock and receive cash with minutes.
 Stocks have an average return of 10% each year.
                  Stock

 Example of if you would bought a stock
 -You buy 100 shares of Wal-Mart stock
 at $55.17.
 -If the price goes up to $89.25 that is a
 increase of $34.08.
 -So multiply $34.08 by the 100 shares
 you own, and you just made $3,408.00
                    What stock to buy?

 Don’t just pick a stock, invest in a company
   Choose from a market or company you have an interest in.

   Research the company

 One method is to pick a young company which you
  think will be profitable
 The company must have a good business model
 Want to look for excellent leadership
     Find companies with not only good CEO, but great managers
 Look for companies who you believe will increase
  profits.
                                 Bonds

What is a bond?                       U.S. Treasury Bond

 A bond is an “IOU” a loan from
    a person to a corporation or of
    a government agency.
   Bonds are issued with a set
    interest rate for a set time.
   Much lower risk than stocks,
    but no chance for high return.
   Bonds pay an average of 5%
    return each year.
   Bond holders are first to get
    paid if company goes bankrupt.
                  Bonds

 Example of how a bond works
    Wal-Mart issues a $10,000 bond that
  matures in 12 months at 4.5%. At the end
  of 12 months they would give you the
  $10,000 dollar and the interest. Multiple
  10,000 and .045 and you get 450. So in 12
  months you made 450 dollars.
                  Investment Portfolio

 An investment portfolio is a collection of
  investments held by an institution or a
  private individual.
 Stocks, Bonds, Real Estate, Savings Account,
  or any asset can combine to make up
  someone’s portfolio
 Very important to diversify your portfolio.
    If you only have stocks what happens if stock market crashes
     and you are ready to retire?
                   Mutual Funds

 Professionally managed investment portfolios
 Mutual funds sell on the open market just like stocks
 Individuals buy shares in portfolios and the managers
  make decisions on the best investments.
 One benefit to mutual funds is small investors have
  access to professional management.
 A downside to mutual funds can be high management
  fees.
 Most people agree that mutual funds are the best way
  to invest.
                      Saving for Retirement
 The current U.S savings rate is
  negative.
     Lowest since great depression,
      this means it is time to start
      saving and stop spending
 No social security means you are
  on your own for retirement
     Most individuals depend on social
      security to survive on after they
      retire.
 $5,000 a year at 5% interest for
  40 years provides you with
  $604,000
 $5,000 a year at 10%for 40 years
  provides you with $2,213,000
 You must have some knowledge
  in capital market to get the 10%
  instead of the 5%
                        Conclusion

 Capital markets provide liquidity and diversification for
    investors.
   $5,000 a year over 40 years can provide you with over $2
    million dollars for retirement.
   Mutual funds are easy way to diversify your portfolio.
   You should start saving for retirement as young as you
    can.
   Risk vs. Return- Stocks can provide greater return but
    carry more of a risk than a bond.
   Saving early, taking calculated risk, and diversifying is
    how you prepare for a wealthy retirement.

				
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