INVESTING

When you hear “investing,” you think of putting your money in

the stock market, but in economics, investing means spending money on human

and physical capital to improve your business, in the hope of making more money in the

future.

INVESTING:

Any marketplace where buyers and sellers participate in the trade of assets

such as bonds, stocks, and securities.

FINANCIAL MARKETS:

1. Bond Market

2. Stock Market

FINANCIAL MARKETS:

(Others: money market, capital market)

A certificate that represents partial ownership of a company or

institution, and that is a financial asset which can be traded.

SECURITY:

A certificate that represents money loaned by you to the government or an institution. The institution agrees to pay

the money back to by a certain date (maturity date) in addition to paying you

a fixed interest rate.

BOND:

The market in which are issued and traded. Bonds can be issued by governments, banks, and large corporations. Governments and institutions sell bonds in order to finance large projects.

BOND MARKET

A type of security that represents partial ownership

in a corporation and represents a claim on part of the corporation’s total value

and earnings. When the value and earnings of the

company increase, the value of your stocks increase.

STOCK:

STOCK MARKETThe market in which shares of publicly held companies are issued and traded.

“GOING PUBLIC”The process of selling shares that were

formerly privately held to new investors for the first time. Otherwise

known as an initial public offering (IPO).

When a company goes public, it means the

general public has the ability purchase shares

for the first time.

“GOING PUBLIC”

Why do you think a company would want

to go public?

DIVIDENDS:The distribution of a company’s

earnings to all shareholders. If you own stocks, you will receive a dividend check in the mail each month with your profit.

Your profit is determined by what percentage of the company you own.This person received a check from Disney for

.35 cents!

CAPITAL GAINS:When you sell your stocks at a higher

price than you purchased them for, thus making a profit.

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$

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DIVERSIFICATION:Buying stocks in a wide variety of

industries. The rationale behind this technique is that a portfolio of different

kinds of investments will, on average, yield higher returns and pose a lower

risk than any individual investment.

MUTUAL FUND:A company that pools money from

many investors and invests the money in stocks, bonds, other

securities, or some combination of these investments. When you

purchase mutual fund shares, you are purchasing an already diversified

stock portfolio.

MUTUAL FUND:Own shares of

multiple companies across a wide variety

of industries!

Your profit is based on the average gains

and losses of all the companies in the mutual fund portfolio.

Don’t think you have the skills to research and

purchase stocks wisely? Hiring a professional

investment broker to do it for you is an option.

They invest your money based on your preferences, and collect a commission

as payment.

STOCK MARKET INDEX:A tool used to measure the changing prices of stocks in a stock market over

time. This is very much like the Consumer Price Index (CPI) used to measure

inflation in the economy. Example: the S&P

500 is a measure of the prices of stocks in

500 major US companies.

KOSPI:The Korea Composite Stock Price Index

or KOSPI is the representative stock market index of South Korea.

STOCK MARKET GAME REFLECTION:

Respond to questions about the stock market game on schoology.