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Chapter 3 Investment Information and Securities Transactions (The market…

- - - - Screening: Screening stocks, bonds, mutual funds based on certain characteristics by using screening tools. e.g. Stock Screener, Google.
      - Planning: Develop Financial plans, set investment goals, by using planning tools, such as, online calculator and worksheet
      - Charting:plots the performance of securities over a specified time period. used for compare. e.g. Yahoo!, Stock chart and BigChart
      - Stock Quotes and Portfolio Tracking: Keep track of your investments by obtaining current stock quotes as well as your overall portfolio value
    - - Advantages
        
        easy to make transection
        
        easier for individuals to do research and act on that research
      - Disadvantages
        
        be skeptical of Free advice
        
        Frequently trading cause higher transaction cost and higher taxes on short-term gains
        
        No broker act as a safety net and remind you
        
        Online transaction bug, may cause investors buy or sell twice
  - - - Price Information: including various type of securities and focus their quotations, which include current price data and recent price behaviour
      - Other online investment information sources: some website of stock, bonds, and mutual funds.
      - Industry and Company Information
        
        Source
        
        Comparative data source: broken down by industry and firm size, are good tool for analyzing the financial condition of companies
        
        Subscription Services: Emphasise industry and company information
        
        Brokerage Report: brokerage firms provide research report to their clients. e.g. Back-office research reports, focus the prospectuses for new security issues
        
        Stockholders' Reports: it is also called annual report, published yearly by public corporations
        
        Fair Disclosure Rules: requiring senior executives to disclose material information such as earnings forecast and news of merge
        
        Investment Letter
        
        Definition: of special interest to investors is information on particular industries and companies
      - Economic and current event information
        
        Source
        
        Institutional News: Monthly economic information provided by the leading bank or some famous website. e.g. NAB. commonwealth, Dow Jones, Bloomberg.
        
        Business Periodicals: Business periodicals vary in scope, some present general business and economic articles, others cover securities markets and relate topics and others focus on specific industries. they provide both Descriptive and analytical information
        
        General Newspapers: e.g. New York Times, Washington Post, Los Angeles Times, and Chicago Tribunes
        
        Government Publications: economic data and reports provided by several goverment agencies
        
        Financial Journals: e.g. Wall Street Journal and Barron's, Investor's Business Daily.
        
        Special Subscription Services: the special services subscribed by the investors who want additional business insights and economic condition
        
        Definition: includes the background and forecast data related to economic, political, consumption, and business event trend both domestic and golbal
      - Avoiding Scams: 1. Pump-and-Dump scam. 2. Get-rich-quick scams
    - - Analytical information: presents projections and recommendations about possible investments based on current data
      - Descriptive information: presents factual data on the past behaviour of the economy, the market, the industry, the company or a given investment
- - - - Definition: Indexes measure the current price behaviour of a representative group of stocks in relation to a base value set at an earlier point in time
      - Examples
        
        S&P 400 medium-sized companies
        
        S&P 600 small-sized companies
        
        S&P 100 large companies, with options
        
        Standard & Poor's Indexes
        
        Definition: it is the 500-stock composite index, which is calculated each business day by substituting the closing market vale of each stock
        
        Equations: (Current closing market value of stock 1 + Current closing market value of stock 2 +...+Current closing market value of stock n)/divisor
        
        Functions of Divisor provide a scaling factor, 2. adjust the index to account for the change
        
        Chara: 1. S&P is more broad-based and representative measure the general market conditions than Dow Jones
      - other indexes
        
        Frank Russe Indexes
        
        Value Line Indexes
        
        NYSE, NYSE Amex, and Nasdaq index
    - - Examples
        
        The Dow Jones Averages:
        
        Equation: DJIA=(closing share price of stock 1 + Closing share price of stock 2.....+ Closing price of 30)/DJIA divisor
        
        Definition: This average is made up of 30 stocks, most of which are issued by large, well-respected companies with long operating histories. The sectors are include technology, transportation, banking, energy, hearth care, consumer products
        
        Chara:
        
        2. DJIA divisor is used to adjust for the merge, bankruptcy and raise of new stock.
        
        1.DJIA is a price-weighted, which means that the stock have higher price gets more weight than the sock has lower price
        
        The Dow Jones Transportation Average: is based on the 20 stocks, including railroads, airlines, freights, and mixed transportation companies
        
        The Dow Jones Utilities Average is computed using 15 public-utility stocks
        
        The Dow Jones Composite Average is made up of the 30 industrials, the 20 transpositions ,and 15 utilities
      - Definition: reflect the arithmetic average price behaviour of a representative group of stock at given point in time
- - - - Type
        
        A day order: cancelled within one day
        
        A good-til-canceled order: cancelled within 6 month
        
        A Fill-or-kill order: cancelled immediately if not exceuted
      - Definition: it is an order to buy at or below a specified price, or to sell at or above a specified price
  - - - Premium discount broker: Focus primarily on making transactions for customers, charging low commissions and proved limited free research information and investment advice
      - Basic Discount broker: also called online brokers, or electronic brokers, are typically deep-discount brokers through whom investors can execute trades electronically online via a commercial service, on the internet, or by phone.
      - Full-services broker: providing investment advice and information, holding securities in street name, offering online brokerage services, and extending margin loans
    - - Offer information services
      - 1.The primary activities of stockbrokers is to route clients' buy and sell orders to the markets, and executed at the best possible price