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P
U
RO
SECURITIES
MARKETS
INVESTOR
A person, company or institution which
uses either its own savings or loan
finance to acquire financial assets such
as shares and bonds.
Warren Buffett
$58.5 Billion
INVESTING
Expend money with the expectation of achieving
a profit or material result by putting it into
financial schemes, shares, or property, or by using
it to develop a commercial venture.
INSTITUTIONAL
INVESTORS
PRIVATE
INVESTORS
INSTITUTIONAL
INVESTORS
Insurance companies,
pension funds, mutual
funds, bank trust
departments
Have large amount of
capital
Minimize risk in
investing money on
securities markets
Typically invest in large
projects and companies
PRIVATE INVESTORS
individuals, venture
capital companies, and,
sometimes family and
friends
Accept risk- Do not
accept risk
Invest their own money
on shares...
Small amount of capital
Less priority on stock
trading volume
STOCKS
2 ways
Preferred stocks: Shares that give their
owners first claim on a companys dividends
and assets.
Blue chip stocks: Equity instruments issued by
large, well- established companies and paying
relatively stable dividends.
VARIATIONS OF TRADES
1. Margin trading
Borrowing money from brokers to buy stock
paving
interest on the borrowed money and leaving the
stock with the broker as collateral.
1. Margin trading
Advantages
Disadvantages
Own more shares with Risk also increases
the same capital
Make more profit if the If the shares price falls,
price of shares rises
you have to not only
lose your investment but
also pay back the loan
1. Margin trading
At first
50%margin ->
buy 200
$1000-> buy 100
shares
shares ($10/share)
Interest: 10%
($100/year)
$20/share
By the end ->100x20=$2000
of the year Profit: 20001000=$1000
$20/share
->
200x20=$4000
Profit: 400010001100=$1900
VARIATIONS OF TRADES
2. Short selling
Selling stock borrowed from a broker
with the intention of buying it back later
at a lower price. Repaying the broker and
pocketing the profit.
2. Short selling
Advantages
Buy the shares at
lower price
Disadvantages
have to buy
shares at the
If the shares higher price
price does not than expected
Make profit from the fall, you will
shares you do not
be at loss
Pay the
own
brokers
commission
2. Short selling
VARIATIONS OF TRADES
3. Option trading
A stock option: purchase right to buy or sell a
specified number of shares (often 100) of a stock
at a predetermined price during a specified
period of time.
3. Option trading
Advantages
Disadvantages
VARIATIONS OF TRADES
A call option: stock option giving the holder the
right to buy shares at a given price.
A put option: stock option giving the holder the
right to sell shares at a given price.
A
CALL
OPTION
$5000
buy the stock
CALL
OPTION
A PUT OPTION
CORPORATE BONDS
Raise money from investors to finance its
business activities
The company issuing the bonds (the issuer)
pay you interest
pay back the money youve invested (your
principal) on a certain date
Advantages
Disadvantages
Regular interest
payments
Fixed-term
investment
Safety
SOLUTIONS
Financial performance over time
Ability to pay interest on debts
Check your ranking in the list of
creditors
Investin
g
Investor
Stocks
Institutional
investor
Private investor
Preferred stocks
Blue-chip stocks
Variatio
ns of
trades
Margin trading
Corpora
te
Bonds
Option trading
Short selling