Introduction
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The world has changed. No longer does achieving a high education
and staying at a career for 20 years guarantee any kind of retirement to
rely on. The entire population of the United States, regardless of
age, needs to have investments of some kind in order to do more financially
than merely "get by." Here are a few choices for investments:
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Property investments
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Buy and sell businesses
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Buy and own a business, which often becomes another "job" if you personally
run it.
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Investing in other companies, products, services.
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One way to invest in other companies is to gain an understanding of the
Stock Market. And learn to use the Stock Market to improve financial
futures.
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Many types of investments can be started and managed online.
The Stock Market Game
The Stock Market -- those who fear it rarely understand it. Before
effective investing in the Stock Market can take place, an understanding
of the Stock Market needs to be had. DECA is a strong supporter of
SMG, The Stock Market Game. Financial literacy is essential for a
successful future, and a current high school graduation requirement.
One way to get this education is through the Stock Market Game. Schools
are encouraged to get involved. In Utah, contact Julie Felshaw
at jfelshaw@usoe.k12.ut.us
or (801) 538-7859. To find out more about the Stock Market Game,
visit the following web addresses (a new window will open for each link):
The Internet as an Investing Tool
In years past, those wishing to invest relied 100% on their stock broker.
Stock brokers are still valuable resources. But the Internet has
opened avenues for more personal control over investments. Several
books have been written on the subject of online investing, including:
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It's Your Money. The E*TRADE Step-by-Step Guide to Online Investing.
by Christos M. Cotsakos. Christos M. Cotsakos is the Chairman of
the Board and CEO of E*TRADE
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The Wall Street Journal Guide to Understanding Money & Investing.
by Kenneth M. Morris and Alan M. Siegel
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Escaping the Coming Retirement Crisis. by R. Theodore Benna
and William Proctor. R. Theodore Benna is the inventor of the 401(k)
savings plan.
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Financial Freedom by Richard P. Halverson
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HyperW@rs, Strategies for Survival and Profit in the Era of Online Business
by Bruce Judson.
Steps to Investing Online - The "How To" (Getting Started)
The following steps were taken from "It's Your Money. The E*TRADE
Step-by-Step Guide to Online Investing." The steps are not given
in-depth within this lesson and some content is paraphrased. No ownership
of the following content is claimed by the author of this course or the
Utah State Office of Education:
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Choose a Good Online Financial Service Provider. A good online financial
service provider should give you access to a broad range of investment
alternatives and an ample amount of online resources and research information
to manage your money. Here are a few examples of online financial
service providers:
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Open Your Account. You will have to choose the type of account you
want to open. Here is a brief overview:
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Individual, Joint, Custodial (accounts for minors), Business (Corporate,
Sole Proprietorship, or Partnership), Investment Club (mutual investing),
Trust and Estate (accounts for children).
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There are also online retirement accounts: Traditional IRAs, Rollover
IRAs, Simplified Employee Pension Plans (SEP-IRAs), Savings Incentive Match
Plan for Employees (SIMPLE IRAs), and Roth IRAs.
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Know Your Personal Financial Goals - Where You are Going. The
following guidelines are given:
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Outline yoru personal financial goals
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Know your strengths
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Know where you stand financially
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Reduce debt
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Invest small, steady amounts regularly
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Don't buy one stock and hope it makes all of your dreams come true.
Diversify your investments
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Continue to learn and plan
Complete the following worksheet:
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I currently have $ ____________ . available for
investment.
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In order to enjoy my retirement and live the way I'm living now, I need
an annual income of
$. (About 80% of your current gross income or the gross income
you'd like to have)
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In order to generate that amount of money in interest income on a yearly
basis, at 6% interest, I would need the following capital investment:
$
. (To determine this number: Take the number you entered
in Item 2 and divide by 6, then mulitply by 100)
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I want to be ready to retire in
years.
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Steps to Investing Online - The "How To" (Types of Investments)
Stocks
When you buy stocks, you are buying a "share" of a company. When
you buy a "share" of a company, you are investing in that company.
You share in the profits and share in the losses. The first time
a company offers shares of their company is called an Initial Public Offering
(IPO).
Bonds
While stocks are the form of ownership, Bonds are the equivalent of a loan
-- from the bondholder to the bond issuer. The bondholder is the
person or group of people issuing the loan to the company (buying the bond)
and the bond issuer is the company receiving the investment (accepting
the loan). Buying a bond from the federal government is pretty secure,
but if you buy a corporate bond, you need to know how stable the company
is, and all you can about it.
Mutual Funds
In a mutual fund, money is pooled from a number of investors and a fund
manager invests it in a diversified mix of stocks, bonds, or other investment
vehicles, depending on the objective of the fund. In other words,
when you buy into a mutual fund, you're actually purchasing shares, or
pieces, of a portfolio (mix of securities) that could contain any number
of different stocks and/or other securities depending upon what type of
mutual fund it is. (E*Trade, Step-by-Step,
Pgs 91-92)
Summary of Online Investing
We've just covered the very basics of online investing.
Buying stocks and bonds and mutual funds can all be done over the Internet.
Online Banking
Now we'll switch gears to online banking.
According to Christos M. Cotsakos, CEO of E*TRADE, approximately 3 percent
of all banking transactions in 1989 were done outside of downtown banks.
By the end of 1999, an estimated 65 percent of all banking was done over
the Internet, by phone, or ATM.
Because of the increased competition for consumer
dollars between online and offline financial institutions, banking fees
are coming down. The next time you watch a television commercial
advertising "free checking," you can thank the Internet - the power of
competition.
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Complete Assignment, Part 1 (see above)
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Know the material in this lesson for the Unit and State tests.
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