Jason Matteo Technical Director. Goals… Understand the basics of investing and of investment methods and strategies Learn from each other building your.

WEEKLY TOPICS

Jason MatteoTechnical Director

Goals…• Understand the basics of investing

and of investment methods and strategies

• Learn from each other building your

knowledge and your network

• Get Bloomberg certified

• Have fun

Weekly Lessons Each week will have a brief topic related to investing

9/5- Basic Overview

9/12- Bloomberg Professional Certification

9/19- Example Online Broker Overview

9/26- Technical vs. Fundamental Analysis

10/3- The Power of Compounding, Dividends, DRIPs

10/10- Mutual Funds & ETFs

10/17- Bonds

10/24- Options

11/7- Futures

11/14 -Forex

Disclaimer

All information is intended for educational/informational purposes only and is not a recommendation or endorsement of any particular investment or investment strategy

I am not an expert and I will not pretend to be. My goal is for everyone to benefit from each other by shared knowledge

9/5 Investment Basics

Questions to be answered:How should one invest? And why?Invest in what? How does one

invest? What

are the mechanics?

Basics Saving

provides funds for emergencies and for making specific purchases in the near future

InvestingFocuses on

increasing net worth and achieving long-term financial goals

Investing

Buying an investmentPutting money into an asset that generates

a return Speculation

Not the same as an investmentPurchasing assets, equity or debt because

of an assumed valueEx: Gold coins, baseball cards, gems

What to Invest In – The Basics

Asset Classes Stocks Bonds Cash

There are others but these

are the fundamental asset classes. Start with these before getting fancy.

Asset Classes

• Stocks– Ownership in a corporation

• Bonds– Corporate and government debt – Must be repaid

• Cash– Checking, savings accounts– Money market accounts– CDs– US Treasury Bills

Types of Stock

Common stock Preferred stock

Convertible

Investing in Stocks Common Stock

Purchasing a part of the company

Possible dividends and capital appreciation

Many are limited liability

Companies may repurchase their own stock

Types of Common StockBlue-Chip StocksGrowth StocksIncome StocksSpeculative StocksCyclical StocksDefensive Stocks

BASIC STOCK TERMS

Basic Terms

Earnings per Share: The amount of profit to which each share is entitled

Going Public: Slang for when a company is planning an IPO.

IPO: Short for Initial Public Offering. An IPO is when a company sells stock in itself for the first time.

Basic Terms

Market Cap: The amount of money you would have to pay if you bought every share of stock in a company. Multiply outstanding shares by stock price

Share: A share represents an investor's ownership in a "share" of the profits, losses, and assets of a company.

Basic Terms Ticker Symbol: A short group of letters

that represents a particular stock (e.g., ”Google" is referred to as ”GOOG".)

Underwriter: The financial institution or investment bank that is doing all of the paperwork and orchestrating a company's IPO.

Basic Terms

Bull MarketA market in which prices are rising

Bear MarketA market in which prices are falling

RecessionA period of temporary economic declineAKA the past 5 years…

Mutual Funds vs. Individual Stock and Bond Trading

Mutual FundsProfessional

management of investing

Minimal transaction costs

May offer higher returns

Many to choose from

Individual Stock and Bond TradingRequires time and

expertiseHigher transaction

costsLess likely to have

proper diversification

Types of Bonds

CorporateDebenture

Federal GovernmentTreasury Bonds (T-Bonds, Treasuries)

Municipal bondsGeneral obligationRevenue

Bonds

InvestingProduce steady incomeIf held until maturity, bonds are a safe

investment with low risk Par Value

Face value or return at maturity Coupon interest rate

Percentage of par value paid out annually

Types of Bonds Corporate Bonds

Allow firms to borrow money

Treasury and Agency BondsAgency bonds are

virtually risk-free with higher interest rates than Treasuries

Municipal BondsTax-exemptSerial maturitiesNot entirely risk free

Junk BondsLow-rated or high-

yieldGreater risk of defaultCallable (issuer can

call them back and reissue at an altered interest rate)

Risk

In finance, typically defined as standard deviation of returns.

What are the risks for:StocksBondsCash

Asset Allocation What percent of your money should be in each

asset class?For example:

○ 70% stock, 25% bonds, 5% cash, or○ 30% stock, 65% bonds, 5% cash

The answer depends upon:Your investment objectiveYour tolerance for risk

Common rule-of-thumb% stock = 100 - your age

Risk – By Asset Class

Worst Annual ReturnSince 1925

Average Annual Return Since 1925

Stocks-43.4%

(-67.6% worst 12 mo.)9.6%

(162.9% best 12 mo.)

Bonds -7.8% 5.5%

Cash .1% 3.7%

Sources: personal.fidelity.com, Morgan Stanley, www.efficientfrontier.com, Federal Reserve – St. Louis

“Typical” Portfolio Allocations

Stocks Bonds Cash

Conservative 20% 55% 25%

Moderately Conservative 40% 50% 10%

Moderate 60% 35% 5%

Moderately Aggressive 70% 25% 5%

Aggressive 80% 15% 5%

Summary Asset allocation is the single biggest

determinate of portfolio results Major asset classes

StocksBondsCash

How you allocate your investments depends upon the returns you need and risk you can take

Rule-of-thumb: %stock = 100 - age

Where and how do I start?(Starting an account, resources for learning)

Keep learning! Make sure you understand the basics

Investopedia (www.investopedia.com)Motley Fool (www.fool.com)Investor Guide (www.investorguide.com)These sites also have introductions to certain investing

strategies

Books (learn from the greatest investors)How to Make Money in Stocks (William O’Neil)Beating the Street (Peter Lynch)Lessons from the Great Stock Traders of All Time (John Boik)The Warren Buffet Way (Robert Hagstrom)The Intelligent Investor (Benjamin Graham)

Brokerages

Need a medium to trade through (brokerages)

Choosing a brokerfull service vs. discount

○ Fees (Commission)○ Services○ Minimum balance

http://www.stockbrokers.com/compare

Brokerages

Videos

http://www.investopedia.com/video/play/what-are-stocks/

http://www.investopedia.com/video/play/what-moves-stock-prices/

http://www.investopedia.com/video/play/what-is-the-dow-jones-industrial-average/

Next Meeting 9/12

Bloomberg Professional Certification

Bloomberg Professional Service and the Bloomberg Terminal

Bloomberg

Named for Bloomberg L.P. founder Michael Bloomberg.

Current mayor of NYC for a little while longer…until Anthony Weiner aka Carlos Danger “the peter tweeter” wins the upcoming election.

Bloomberg Terminal• Computer system that allows users to

monitor and analyze real-time financial market data movements

• The system also provides news, price quotes and an immense database

• Most financial firms use it• http://

www.youtube.com/watch?v=ALNjoN-taog

Bloomberg Terminal (cont.)

Bloomberg (cont.)

• It costs $1500 a month• We have two here at UF, one in Hough

Hall and one on 3rd floor Library West• FREE for students!• The certification is free also!

Getting Started

http://businesslibrary.uflib.ufl.edu/bloomberg

Go to Club West. The terminal is located on the 3rd Floor behind the services desk next to the microfilm area

Ask a receptionist about it and they will type in a magic password so you can use it

Certification

Certification

Takes about 8 hours, I was able to knock it out all in one sitting, but you can work on it a little at a time

Bring headphones so you can watch the videos with sound and not piss off everyone in the library

There is a sign in sheet where you can reserve time slots if someone else is currently using the machine

Why Get Certified

Its cool and you learn a lot. Using double monitors automatically makes you feel more important

You can put something else on your resume other than your name

Many companies use it so the fact you even know what it is AND have used it before will make recruiters SMILE

“Yay he knows how to use Bloomberg!”

Next Meeting 9/19

Example online broker overview

Random Ass Videos

$#!* People Say About Investing

Stock Market Rap

E-Trade Baby 2

E-Trade Baby

Technical vs. Fundamental Analysis

Their Main Differences

At the most basic level, a technical analyst approaches a security from the charts, while a fundamental analyst starts with the financial statements.

http://www.investopedia.com/video/play/fundamental-versus-technical-analysis/

Fundamental Analysis

Looks at financial data: revenues, profits and losses, business trends

Seek growth factors. Examine macroeconomic factors such

as a company's business sector and the overall economy in relation to a company's lines of business

Technical Analysis

Looks only at price and volume action All information about a stock is reflected

in the share price Analyzing the price movements will

predict where a stock price will go from here

Indicators: MACD, crossovers, divergence, RSI etc.

Pros and Cons

Proponents of fundamental analysis think technical analysis is voodoo mumbo jumbo and doesn’t work.

If fundamental analysis works so well then why isn’t everyone rich?

Conclusion

A wise investor will understand and take into consideration both methods of analysis.

Next Meeting 10/3

The Power of Compounding, Dividends, DRIPs

The Power of Compounding, Dividends, DRIPs

“Compounding interest is the most powerful force in the universe”

-Albert Einstein

http://www.investopedia.com/video/play/what-is-compound-interest/

The Rule of 72

A rule stating that in order to find the number of years required to double your money at a given interest rate, you divide the compound return into 72. The result is the approximate number of years that it will take for your investment to double.

http://www.investopedia.com/video/play/rule-of-72/

Dividend

A cash payment (usually quarterly) to shareholders out of its profits.

Comic Relief

If you had bought $1000.00 worth of Nortel stock one year ago, it would now be worth $49.00.

With Enron, you would have $16.50 of the original $1,000.00.

With WorldCom, you would have less than $5.00 left.

If you had bought $1,000.00 worth of Budweiser

(the beer, not the stock)

one year ago, drank all the beer, then turned in the cans for the 10 cent deposit, you would have $214.00.

Based on the above, my current investment advice is to drink heavily and recycle.

DRIPs

Dividend Reinvestment Plan Broker automatically uses dividend to

purchase more shares of the company Most online brokers offer them for free. Best part is you do not have to pay

transaction commission (still have to pay taxes though )

Drawbacks

Frequent purchases of fractional shares becomes somewhat complicated for tax purposes and documentation

However most online brokers do a good job at automatically generating statements and tax forms

Next Meeting 10/10

Mutual Funds & ETFs