LAP: QS-045LAP: QS-045

InvestmentsInvestments

ObjectivesObjectives

Discuss strategies for selecting investments.Discuss strategies for selecting investments.

Explain the strategy of diversification.Explain the strategy of diversification.

Discuss strategies for selecting Discuss strategies for selecting investments.investments.

ObjectiveObjective

• You can make the right You can make the right investment choices on investment choices on your own.your own.

• Knowledge will help you Knowledge will help you make wise investment make wise investment decisions.decisions.

KnowledgeKnowledge

Invest wisely by following some simple investing Invest wisely by following some simple investing strategies:strategies:

StrategiesStrategies

• Invest for the long Invest for the long term.term.

• Invest in growth Invest in growth stocks.stocks.

• Invest regularly. Invest regularly.

• Stay in the market for a long Stay in the market for a long period of time.period of time.

• Consider the risk/return tradeoff.Consider the risk/return tradeoff.

• Benefit: significant growthBenefit: significant growth

• Avoid these pitfalls:Avoid these pitfalls:

““Herd mentality”Herd mentality”

““Recency bias”Recency bias”

Invest for the Long TermInvest for the Long Term

• Characteristics of growth stocks:Characteristics of growth stocks:

Appreciate steadily over timeAppreciate steadily over time

Carry a moderate-to-high riskCarry a moderate-to-high risk

Bring a moderate-to-high returnBring a moderate-to-high return

Invest in Growth StocksInvest in Growth Stocks

stocks

• Companies that offer growth stocks:Companies that offer growth stocks:

Large-cap (over $8 billion)Large-cap (over $8 billion)

Mid-cap (between $1 billion and Mid-cap (between $1 billion and $8 billion)$8 billion)

Small-cap (less than $1 billion)Small-cap (less than $1 billion)

• Company executives put money Company executives put money back into the firm.back into the firm.

• Sales and EPS grow at a rate Sales and EPS grow at a rate greater than that of the market.greater than that of the market.

• Quality growth stocksQuality growth stocks

Solid fundamentalsSolid fundamentals

Long-lasting companiesLong-lasting companies

• Benefit: steady growth over a Benefit: steady growth over a long period of time long period of time

Invest in Growth StocksInvest in Growth Stocks

• Make it a habit.Make it a habit.

• Use dollar cost averaging.Use dollar cost averaging.

Invest RegularlyInvest Regularly

• Reinvest dividends.Reinvest dividends.

• Benefits: greater earnings Benefits: greater earnings and compounded interestand compounded interest

Explain the strategy of diversification.Explain the strategy of diversification.

ObjectiveObjective

Spreading out your investments to minimize riskSpreading out your investments to minimize risk

DiversificationDiversification

• By type—stocks or bondsBy type—stocks or bonds

Ways to DiversifyWays to Diversify

stocks

Savings Bond

• By sector/industryBy sector/industry

• By cap-size—large, small, By cap-size—large, small, or “mid”or “mid”

Update your portfolio:Update your portfolio:

MaintenanceMaintenance

• When you changeWhen you change

• When the company’s When the company’s fundamentals changefundamentals change

Rebalance as portfolio Rebalance as portfolio becomes more aggressive.becomes more aggressive.

• Growth investing—good strategy?

• Walgreens vs. CVS

• Management decisions and company fundamentals

It’s FundamentalIt’s FundamentalQuick CaseQuick Case

MarkED

Acknowledgments

Original DevelopersChristopher C. Burke

and Mary C. Hollaway, MarkED

Version 1.0

Copyright © 2007MarkED Resource Center

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