Tag: The Great Course

Understanding Investments (3/24) 2

This is later part of 3. Starting with stocks.

There are 2 types of intermediaries in the financial market.

One type is broker who is simply helps buyers locate sellers and vice verse and arrange the sales. Broker may also help buyers and sellers agree on a price. The buyer or sellers pay a fee, or commission, to the broker for these services. If you want to invest in individual stocks, you will need to set up an account with a broker. There are human brokers, and there are online brokers that let you do almost everything yourself, at your convenience, or you can have some kind of mixture.

The other type of intermediary is a dealer, who also connects buyers and sellers but does so indirectly. Dealer announce to the market that they will a specified security to anyone who is willing to pay the dealer’s asking price, or the ask-price for short. At same time, dealers also announce that they will buy a certain security from anyone who is willing to sell at the dealer’s offering price, or the bid-price. When the dealers buys a share of stock from someone and then sells it to you, he or she earns the difference between the ask price and the bid price, which is called the bid-ask price.

We tend to buy things in standard quantities, called lots, and most financial investment have standardized lot sizes. For stocks, the size of round lot is 100 shares.

There are several different types of orders you can submit to the market.

A market order is an order to buy or sell at whatever the current market price is.

A limit order places an upper limit on the price you are willing to pay or a lower limit on the price you are willing to receive.

A stop-loss order is on order to sell shares that is triggered once the price of the shares falls below a certain level.

Understanding Investments (3/24) 1

3. Starting with Stocks.

I am going to divide this chapter the first half and the latter half.

Stocks can be pretty risky investments, but they serve as a great model for learning about individual investments and how to use them because the basic ideas behind stock investment are clear and easy to understand. In addition, the stock contract itself is very simple . Furthermore, the detail of stock investing are very similar to the detail of other types of investing.

When a firm issues stock, it divides the ownership of the company into thousands of equal part, which are individual share. Each share has an equal claim on the firm’s profit and an equal say in the management of the firm. The more shares you buy, the bigger the slice of company’s profits you receive, and the more influence you have on company decisions.

IPO (Initial public offering) : When a company sells its shares to the public for the first time, in a special sale called the initial public offering (IPO), it usually uses investor’s money to expand its business and start new projects.

Additionally, when one company buys another company, it often pays for this purchase by issuing new shares. Otherwise, firms are reluctant to sell shares; there are usually cheaper ways for firms to borrow form investors than selling share of stock. Therefore, most investors buy their stock from other investors not directly from firms.

The term Primary market describes the market buy directly their borrowers who issue them.  The term Secondary market describes the market for used.

Dividends are the profits that companies pay out to their shareholders. While it is true that stockholders are entitled to a share of the company’s profits, the company is not under any obligation to actually pay them out. Many corporations do not pay any dividends. When a firms earns profit, it has a choice.

1. It could pay the profit out to the shareholders.

2. It could hold onto the profits and reinvest them into new project.

Understanding Investments (1/24)

1. ‘How to stop worrying and start Investing’ from the Great course lecture.

I started the investment when I became 27 years old. The younger is the better for investing. If you are younger, you have little money but you may lost little. And time is an important factor for investments. If you have start younger, you have more time to spend for investing.

This title is fanny, must be parody of the book ‘How to stop worrying and start living’ written by Dale Carnegie. Let’s get started!!

What is investment?

Investing is spending your money, time, or other resources to create or acquires assets. An assets is anything that holds onto its value over time. Financial assets are documents that entitle their owner to receive something of value, generally a set of cash payment.

What makes you worry? There are top 4 threats,

1. Market Downturns.

Market downturns are extremely difficult to predict. During a market downtown, you may worry about your loss. But remember, the price would be back to normal. We have to be patient, and we have to have the time to spare. We need to see the investment in the long term.

2. Bankruptcy

Another risk of investment is the risk of bankruptcy. a firm, the government, or a person can go bankrupt. It almost always means that your asset will lose value. By being alert and proactive, investors can take effective steps to limit bankruptcy risk. For example, if we learn how to read the financial statements of the company, we can know the financial state of the company.

3. Inflation

Inflation is a general increase in prices.There are many ways to measure inflation, but most people are familiar with the consumer price index (CPI), which measure the price of a set of goods and services that a typical household consume. To combat inflation, find investments that keep up the inflation. The stocks seem to be one of them, however the assets that tend to do better at keeping up with inflation also tend to be the riskier ones.

4. Human nature

The biggest threat to investing is human nature. In many ways, our own psychology and emotions do far more damage to our investing success than the market crashes do. Know yourself

These are top 4 threats. The first step to making sure that we don’t inadvertently sabotage our own investments is to become more familiar with investing ‘basic idea’ ‘tools of investing’ ‘know yourself’. And then, make a investment plan.