INTRODUCTION TO INVESTMENTS - COURSE OUTLINE

  1. THE INVESTMENT SETTING
    1. Risk and Safety of Principal
    2. Current Income vs Capital Appreciation
    3. Liquidity Considerations
    4. Short-Term vs Long-Term Orientation
    5. Tax Factors
    6. Ease of Management
    7. Retirement and Estate Planning
    8. www.investopedia.com
  2. TIME VALUE OF MONEY. MEASURING RISK & RETURN
    1. Future Value of a Single Sum
    2. Present Value of a Single Sum
    3. Future Value of an Annuity
    4. Present Value of an Annuity
    5. [Special Case] Future Value of a Single Sum under Continuous Compounding
    6. [Special Case] Present Value of a Single Sum under Continuous Compounding
    7. Arithmetic Mean
    8. Geometric Mean
    9. Variance
    10. Standard Deviation
    11. Intrinsic Value - What Finance is about.
  3. MUTUAL FUNDS
    1. Investment Company
    2. Pooling Arrangement
    3. Advantages
      1. Diversificat
      2. Professional Supervision
      3. Switching Privileges
      4. Small Amount of Investment
    4. Open-End vs Closed-End
    5. Load vs No-Load
    6. Fund Types & Objectives
    7. Money Market Funds
    8. Net Asset Value (NAV)
    9. Index Funds
    10. Sector Funds
    11. Prospectus
    12. Dollar-Cost Averaging
    13. Mutual Fund Rating Companies
      1. Lipper Analytical Services
      2. Morningstar
      3. Forbes Magazine
      4.  Money Magazine
  4. BONDS AND FIXED INCOME SECURITIES
    1. Corporate Bonds
      1. The Bond Contract. Fixed Rate of Return, Fixed Term, Fixed Par
      2. Par Value
      3. Coupon Rate
      4. Maturity Date
      5. Indenture
      6. Bond Price quotes in financial/investment sources
      7. Call Provisions
        1. Non Callable
        2. Deferred Call
        3. Fully Callable
      8. Inverse Relationship between Bond prices and Interest Rates
      9. Put Provision
      10. Debenture
      11. Sinking Fund Provision
      12. Bond Valuation
      13. Bond Yields
        1. Coupon Yield
        2. Current Yield
        3. Yield-to-Maturity
        4. Yield-to-Call
      14. Bond Ratings
        1. Standard & Poors Corporation
        2. Moody’s
        3. Investment Grade Bonds
        4. Speculative Grade Bonds
      15. Zero Coupon Bonds
      16. US Government Fixed Income Securities
        1. Treasury Bills
          1. Par Value
          2. 3-12 month term.  Short Term Issue.
          3. Sold at a discount from par
        2. Treasury Notes
          1. 2-10 year term.  Intermediate Term.
          2. Par Value
        3. Treasury Bonds
          1. 10-30 year term.  Long Term.
          2.  Par Value
        4. Strips – US Treasury Zero Coupon Bonds
        5. Liquidity of the Treasury securities market.
        6. Quotations on Treasury securities in the Wall Street Journal
      17. US Government Agency Issues
        1. Pass-Through Securities
        2. Securitization
        3. GNMA  - Government National Mortgage Assn. (Ginnie Mae)
        4. FNMA – Federal National Mortgage Assn. (Fannie Mae)
        5. SLMA – Student Loan Marketing Assn. (Sallie Mae)
      18. TERM STRUCTURE OF INTEREST RATES AND THE FEDERAL RESERVE
        1. Term Structure of Interest Rates = The Yield Curve
        2. Graphical Relationship between bond yields and bond maturities
        3. Theories on the shape of the yield curve
          1. Expectations Hypothesis
          2. Liquidity Preference Theory
          3. Market Segmentation Theory
  5. THE FEDERAL RESERVE SYSTEM
    1. Federal Reserve is the nation’s Central Bank
    2. Federal Reserve Board – 12 members
    3. Former Federal Reserve Chairman – Alan Greenspan
    4. Former Federal Reserve Chairman – Ben Bernanke
    5. Current Chairman – Janet Yellen
    6. Responsible for Monetary Policy
      1. Money Supply
      2. Interest Rates
        1. Monetary Policy Tools
          1. Discount Rate (is an interest rate)
            1. Federal (Fed) Funds Rate
          2. Reserve Requirements ($ to be held on deposit at the Fed)
          3. Open Market Operations (OMO)
      3. Federal Open Market Committee (FOMC)
  6. ANALYZING THE ECONOMY
    1. Top Down Analysis
      1. Economic Analysis & the Business Cycle
    2.  Federal Government Economic Policy
      1. Stable Prices (low inflation)
      2. Business Stability at high levels of production (low unemployment)
      3. Sustained Real growth in GDP (actual growth after inflation)
      4. A balance in international payments
    3. Fiscal Policy
      1. Controlled and administered by Congress
      2. Tax & Spend
      3. Deficit
      4. Surplus
    4. Monetary Policy
      1. Controlled and administered by the Federal Reserve System
      2. Money Supply and Interest Rates
    5. Economic Indicators
      1. Leading Indicators
        1. Workweek
        2. Unemployment Claims
        3. Orders for Consumer Goods
        4. Slower Deliveries
        5. Plant and Equipment Orders
        6. Building Permits
        7. Stock Prices
        8. Money Supply
        9. Interest Rate Spread
        10. Consumer Expectations
      2. Coincident Indicators
        1. Employees on Non-Agricultural Payrolls
        2. Personal Income Less Transfer Payments
        3. Industrial Production
        4. Manufacturing and Trade Sales
      3. Lagging Indicators
        1. Average duration of unemployment, in weeks
        2. Ratio, manufacturing and trade inventories to sales
        3. Change in labor cost per unit of output in manufacturing
        4. Average Prime Rate charged by Banks
        5. Commercial and Industrial Loans Outstanding
        6. Ratio, consumer installment credit outstanding to personal income
        7. Changes in Consumer Price Index for services
    6. Bottom-Up Analysis:
      1. Top-Down in reverse.  First pick a stock, check what industry it is part of and assess the industry’s investment potential, then check the condition of the economy and determine if its condition is favorable to that industry.  Investors labeled as Bottom-Up analysts are also called “stock pickers.”
  7. INDUSTRY ANALYSIS
    1. Industry Structure
      1. Pure Competition
      2. Imperfect Competition
      3. Oligopoly
      4. Monopoly
    2. Industry Life Cycle Graph
      1. Development Phase
      2. Expansion Phase
      3. Maturity Phase
      4. Declination Phase
  8. COMPANY ANALYSIS
    1. Earnings, Earnings, Earnings
    2. Stock Dividends
    3. Stock Splits
    4. Stock Valuation
    5. The Required Rate of Return of a Risky Asset (Ke)
    6. Dividend Discount Model
      1. General Model
      2. Constant Growth Model
      3. P/E Ratio Method
    7. Preferred Stocks
      1. Hybrid Security
      2. Participating Preferred
      3. Cumulative Preferred
      4. Valuation = dividend/rate = price
  9. EXCHANGES
    1. The New York Stock Exchange
    2. The American Stock Exchange
    3. The NASDAQ or Over-the-Counter Market
  10. AVERAGES & INDEXES
    1. Dow Jones Industrial Average
    2. Standard & Poor’s 500 Index
    3. Other Indexes
  11. THE SECURITIES BUSINESS
    1. Primary & Secondary Markets
    2. Underwriters & Investment Bankers
    3. Tombstone Ad
    4. Syndicate
    5. Underwriting Methods
      1. Best Effort
      2. Standby
      3. Un-syndicated
      4. Direct Placement
  12. BROKERAGE FIRMS
    1. Well Established Firms
      1. Full-Service Firms
        1. Merrill Lynch
        2. Morgan Stanley
      2. Discount Firms
        1. Charles Schwab
        2. Fidelity Investments
        3. Quick & Reilly
        4. Brown & Company
      3. The Broker
        1. Licensed Professional
          1. The Coveted  Series 7 Exam
          2. Three magic words:  Buy – Sell – Commission
      4. Types of Accounts
        1. Cash
        2. Margin
          1. Maintenance Margin
        3. Trades
          1. Market Order
          2. Limit Order
          3.  Stop (loss) order
          4. Combinations of above
          5. Short Selling
            1. Selling Borrowed securities
            2. Sell High, Buy Low
            3. No time limit
            4. Must eventually return borrowed securities
            5. Short Interest
            6. Short Interest Ratio
            7. Days-to-Cover
            8. Short Squeeze
            9. Short Against the Box
  13. DERIVATIVE SECURITIES
    1. Options & Futures
    2. Standardized Contracts
    3. Exchanges
      1. Chicago Board Options Exchange (CBOE)
      2. Chicago Futures Exchange
      3. Option Clearing Corporation (OCC)
    4. Options on Stocks
      1. Calls
      2. Puts
        1. Premium
        2. Intrinsic Value
        3. Time Component, Speculative Premium
        4. In-the-Money
        5. At-the-Money
        6. Out-of-the-Money
        7. Insurance
        8. Speculation
        9. Selling (Writing) Options
        10. Covered
        11. Naked
    5. Micro-HedgeMacro-Hedge
    6. Index Options
    7. Arbitrage
    8. Black-Scholes Option Valuation Model
Last Updated:  May, 2016