Investors

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					                                      Investors

Discuss with your group:

        If you had enough money to maintain your lifestyle, would you still go to work? Why/Why
         not?


        With your group, brainstorm some ideas of how to get money without having to go to work
         everyday.


Activity One - Vocabulary
Work with your group and match the terms to the definitions.


Term                                                          Definition
Investment Vehicles                       1. An area of the economy in which businesses share the
                                             same or a related product or service.
Industry                                  2. The ability to turn an asset in to cash quickly.
                                             Sometimes known as "marketability".
Sector                                    3. Generally speaking, borrowing money (capital) in order
                                             to increase return of investment.
Asset Class                               4. The chance that an investment's actual return will be
                                             different than expected (especially negative).
Risk                                      5. Giving funds to another party for safe-keeping
                                             (especially a bank).
Liquidity                                 6. Very general term. Any method you can use to invest.


ROI (Return on Investment)                7. Removing funds from an account, plan, pension or trust.


Leverage                                  8. A category used to describe a company's main business
                                              activity. Usually the largest source of a company's
                                              revenues. Eg, fast-food/manufacturing.
Deposit                                   9. This shows how profitable an investment is. Usually a
                                              percentage or a ratio
Withdrawal                                10. Different forms of investment, especially stocks, bonds
                                              and cash.
Activity Two – Investment Vehicles
Look at the different investment vehicles and their descriptions and features. Work as a group and
try to match them up.


Activity Three – Role Play
In this role play you will be either an investor or a broker.


If you are an investor, you should try to invest your money in a way that will protect your money,
but also make it grow. The different brokers sell different investments, so shop around to find the
ones you want.


If you are a broker, you should be trying to match the investors with a suitable investment vehicle.
Remember – the more they invest with you, the more money you can make!
 Investment
                               Description                           Main Features
  vehicles
                 A pool of money collected from many         -Gives small investors access
Mutual Funds     investors. Operated by money managers       to a diverse range of products.
 (Managed        who invest the funds according to a         -Minimum investment and
  Funds)         strategy.                                   regular contributions.

                 A type of security that shows ownership -The foundation of most other
                 in a corporation and means you own part investment vehicles.
   Stocks
                 of the corporation's assets and earnings.   -Historically have performed
  (shares)
                                                             better    than   most   other
                                                             investments.
                 An aggressively managed fund using          -Illiquid (minimum investment
                 advanced strategies to minimize risk and    of 1 year)
Hedge Fund       maximize returns. Like mutual funds for     -Investors must be accredited
                 the super-rich.                             ($1 million net worth, large
                                                             annual salary)
                 A fixed-income security, where investors -Different lengths of time from
                 loan money to corporations or the 90 days to 30 years.
   Bonds         government for a fixed amount of time. -One of the main three asset
                                                        classes with stocks and cash.

                 Investors deposit funds into an account -Very secure investment, but
                 which generates interest either at a fixed typically low returns.
    Cash         or variable (changing) rate.               -Sometimes cannot access the
                                                            funds for a period of time
                                                            (called a term deposit).
                 Similar to a mutual fund, these funds are -Designed for stable growth.
                 run by a company for their employees. -Very long term.
  Pension
                 They provide money for employees when
   Funds
                 they retire.

                 A security that sells on the stock market, -Very liquid compared to
 Real Estate     but allows investors to invest in real normal real-estate investment.
 Investment      estate. Sometimes run as a mutual fund.    -Revenue often comes from
Trusts (REITs)                                               rent.
Investor 1
You are a single mother/father with 2 children. You have a steady job with a good income, but you
are also paying your mortgage. However, you have saved $2500 that you want to invest in stocks.
You can also deposit $100/month. You don’t have a lot of time to research the market, so you want a
low maintenance investment with fairly low risk.


        Broker Name               Investment Type                   Amount Invested




Investor 2
You are a university student who has just turned 21. For your birthday, your parents have given you
$5000 for you to invest. You’ve heard many people have made a lot of money in the stock market
so you are looking for something that will give you a high ROI. You’ve read a bit about investing
and are hoping to make some easy money.


        Broker Name               Investment Type                   Amount Invested




Investor 3
You are 45 years old, married with 2 children who are nearly finished high school. You have a good
job and have invested regularly in stocks for the last 20 years. You have just liquidized some stocks
and want to put the money into a different vehicle. You are willing to take a few risks, but want to
balance your different investments. You have $15,000 to invest. Talk to some different brokers and
find some investments that sound like they would suit you.


        Broker Name               Investment Type                   Amount Invested
Investor 4
You are an entrepreneur in your mid 30’s. You own a very successful business which has made you
very rich, with a net worth of over $1.2 million. Your income is about $125,000/year. Talk to the
different brokers and use your extensive investment experience to find some investments that have
high ROI with moderate risk.


        Broker Name               Investment Type                   Amount Invested




Investor 5
You are in your late 40’s and have worked hard at your job all your life. Recently you have been
thinking about retirement and realize that you might not have enough money. Your financial advisor
suggested you invest in the stock market, though you feel nervous about the idea. You have kept
your money in the bank, but the interest rate on your account wasn’t high enough. You have saved
$50,000 which you need to invest to make money in the next 15 years or so.


        Broker Name               Investment Type                   Amount Invested




Investor 6
You are in your mid 30’s and have some investing experience, though mostly in the real-estate
market. You have quite a bit of money to invest, but traditional real-estate is not liquid enough, as
you might need the cash in the near future. You have $75,000 to invest so talk to some brokers and
see what you think would be the best place for your money.


        Broker Name               Investment Type                   Amount Invested
Broker 1
You are a broker for a mutual fund management group. Your group offers the following funds:

Balanced Fund: A mix of cash (50%), blue chip stocks (30%) and mining stocks (20%). The fund
has had returns of 6.5% over the last 5 years, though last year the performance was only 1.5%.

Stock Fund: This fund invests solely in stocks, the majority in blue chips (55%) with the rest in
industrials (30%) and the rest in the mining sector (15%). It has been running for three years and
has averaged 7.9% over that time. Last year it returned 11%.

Growth Fund: This fund is aimed at producing maximum returns, though it comes with more risk.
It invests only in S&P 500 companies which have maintained strong growth over long periods. This
fund has been going for 3 years and has returned 12.3% on average. Lat year it returned 15%.


All the funds require a minimum of $1000 investment, plus further investments of $100/month.


        Investor Name             Investment Type                  Amount Invested




Broker 2
You are a stock broker. Your main customers are small investors, usually investing less than
$100,000 at a time. The stocks you recommend fall mainly into three categories:
Blue Chip: Low risk stocks in big, stable companies. These stocks also generally have low, but
steady returns.
Medium Risk/Return: These stocks are in quite large companies, and can represent the best value.
They fluctuate (change) more than blue chips but potential profits are higher too.
High Risk/Return: These stocks have the highest potential for earnings. They have high potential
for failure too, so invest with caution.


All stocks need a minimum purchase of $500 worth of stock.


        Investor Name             Investment Type                  Amount Invested
Broker 3
You are a fixed interest securities representative. Your company offers 4.5% term deposits for 12
months. People deposit their money and then are unable to access it for 12 months. During this time
it earns a fixed rate of 4.5%. Any amount can be invested.


You also offer government bonds which offer 5% ROI and typically have a term of 12 months. Each
bond costs $5000.


        Investor Name              Investment Type                   Amount Invested




Broker 4
Your company manages a pension fund. The fund has performed well over the last 10 years,
averaging 6.3% and you expect that trend to continue. The fund has no minimum investment, but
takes 4.5% of the clients monthly salary directly from their paycheck.


Your company is also putting together several private investors to finance a hedge fund. It is
expected to have a ROI of ~23% over 2 years and carries a moderate to high level of risk. To invest,
people must be “accredited” (have a net worth over $1 million and a yearly income of more than
$100,000).


        Investor Name              Investment Type                   Amount Invested
Broker 5
You are a manager of a Real Estate Investment Trust (REIT) which invests in property and collects
money from rent. People can buy stocks in your fund, similar to a mutual fund. The minimum
investment is $5000 with no monthly payments. For the last 5 years, returns have averaged 8%.


       Investor Name              Investment Type                 Amount Invested
                                      Teachers Notes

Lesson Focus: Language used when talking about investments
Level: Advanced and above (business)
Preparation: Photocopy page one and two so each student has one. Copy and cut up page three so
that each group has a complete set. Copy and cut up the “Investors” and “Brokers” cards so that
each student has one role card.


This lesson is pretty heavy and requires some financial knowledge on the part of the teacher (though
these notes provide examples of each term to help you describe them).


Step Time           Description
1       5-7 mins    Introduce the topic and ask students to discuss the first couple of
                    questions with their group. Monitor and assist as required.
2       10-12       Introduce Activity 1. Don’t expect the students to get all of these
        mins        right! The answers are below. Go over the answers as a class.
3       10-15       Introduce activity 2. Each group should get a complete set of cards
        mins        (cut up from page three) and they should work together to match the
                    terms with the descriptions and main features. Again, don’t expect
                    them to get too many right, though financial people should get
                    some.
4       15-20       Distribute the role cards for activity three so that half the class are
        mins        investors and the other half are brokers. It doesn’t matter if there are
                    more than one type of broker/investor. The investors try to find the
                    brokers and find out about the different investment choices they
                    offer. I recommend having all the brokers sit in one area, so they are
                    easier to find. As the students invest and sell investments, they
                    should fill in the tables on their role card, like this:
                    Broker/investor name Investment type Amount invested
                      John Gordon         Balanced fund 1000 plus 100/month
5       2-3 mins    Ask the students what they invested in and the brokers how much
                    money has been invested in their companies. Ask the investors why
                    they chose those investments (financial restraints, high returns, etc).


ANSWERS:
Term                        Definition
Investment Vehicles         6. Very general term. Any method you can use to invest.
                            Eg: stocks, mutual funds, cash, bonds etc…
Industry                    8. A category used to describe a company's main business activity.
                            Usually the largest source of a company's revenues. Eg, fast-
                            food/manufacturing.
Sector                    1. An area of the economy in which businesses share the same or a
                          related product or service. Eg: retail sector, mining sector
Asset Class               10. Different forms of investment, especially stocks, bonds and cash.
                          Much more specific than investment vehicles.
Risk                      4. The chance that an investment's actual return will be different than
                          expected. Investments with high returns are generally high risk.
Liquidity                 2. The ability to turn an asset in to cash quickly. Sometimes known as
                          "marketability". Real estate is not liquid (hard to sell a house) stocks
                          are liquid as they are generally easy to sell.
ROI         (Return   on 9. This shows how profitable an investment is. Usually a percentage or
Investment)               a ratio often given as an average of a number of years (like 5% over
                          the last 3 years).
Leverage                  3. Generally speaking, borrowing money (capital) in order to increase
                          return of investment. Eg: you have $10,000 and borrow $20,000 to
                          buy more shares.
Deposit                   5. Giving funds to another party for safe-keeping (especially a bank).


Withdrawal                7. Removing funds from an account, plan, pension or trust.

				
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