FINANCIAL MARKETS

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by

• FINANCIAL MARKETS
• INVESTING

• Paul B. Bryan
• Marketing Manager
• Edward Gayle Company Limited

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Financial Markets

• The place where entities with surplus funds and
  those requiring funds transact business. The
  financial market comprises
• Money Market
• Bond Market
• Stock Market

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Money Market

• The market place where debt instruments that
  matures within one year are purchased and sold.

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Money Market Instruments

• Certificate of Deposits
• Money Market Funds
• Repurchase Agreements (Repos)
• Commercial Paper
• Treasury Bills

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GOJ Treasury Bill
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BOJ Repurchase Agreement
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Bond Market

• It is the market-place for the purchase and sale
  of debt instruments that expires in over one
  year.

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Bond Market Instruments

• A bond is a medium to long term loan that pays
  interest during a fixed term. Types of bonds are
• Government Bonds
• Corporate Bonds

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GOJ VR LRS
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GOJ FR LRS
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GOJ Investment Debenture
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Stock Exchange or Stock Market

• An organized marketplace where buyers and sellers
  are brought together to buy and sell stocks and
  must follow certain rules, regulations and
  guidelines.

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Stocks/Shares

• Certificates representing ownership in a
  corporation and the appropriate claim on the
  corporation's earnings and assets. There are
  two types of stocks
• Preferred Stocks/Shares
• Common Stocks/Shares

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Investing

• A process of wealth accumulation involving the
  purchase and sale of assets and management of the
  risk/ return dynamics.

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Fundamental Concepts in Investing
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Risk and Volatility

• Inflationary risk
• Investment or credit risk
• Interest rate risk

When considering your own risk tolerance, you
should understand that investments associated
with higher risk typically offer higher reward
potential over time. A key factor to successful
investing is to identify which types of risk you
are willing to assume and which you want to
mitigate.
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Total Return
In selecting investments based upon their
expected total return, you should understand
which portion is generated from income and which
from growth. Usually, the greater the reliance on
income, the lower the market risk but the greater
the long-term purchasing power (or inflationary)
risk.
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Liquidity
A "liquid" investment is one that can be readily
turned into cash if you need the funds on short
notice. Investments can vary greatly in their
degrees of liquidity. Money Market Funds and
savings accounts are very liquid so are
investments with short maturity dates such as
Certificates of Deposits (CDs).
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Time Horizon
Different investors have different time frames in
which to achieve their investment objectives.
Generally, young investors with long time
horizons should be able to assume greater risks
because they have more time to offset any losses
with the higher return potential of investments
with greater risk. Older investors, however,
often choose to reduce risk because they have
less time to recoup losses.
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Diversification
Building a diversified portfolio, with securities
spread across different investment classes, can
help you avoid the risk of having all your eggs
in one basket. By mixing industries and types of
assets, you spread your risk. A particular market
condition will have less impact if your portfolio
consists of a wide assortment of securities than
if you purchase only one type of security.
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Tax Consequences
Building a diversified portfolio, with securities
spread across different investment classes, can
help you avoid the risk of having all your eggs
in one basket. By mixing industries and types of
assets, you spread your risk. A particular market
condition will have less impact if your portfolio
consists of a wide assortment of securities than
if you purchase only one type of security.
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Dollar Cost Averaging
Dollar cost averaging, the practice of committing
a fixed amount of money to an investment program
on a regular basis, is a popular practice with
many long-term investors. By investing a set
amount regularly (usually monthly or quarterly),
investors are able to avoid the pitfalls of
trying to time market peaks and valleys. Also,
because the dollar amount of the investments is
set, investors who practice dollar cost averaging
are able to buy more shares of a stock or mutual
fund when they are less costly and fewer shares
when they are more expensive.
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Value of Time
The design of your portfolio should take
advantage of time and conform to your personal
objectives and risk tolerance.
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THE RISK PYRAMID
High - Yield Junk Bonds Common Stocks Preferred
Stocks
Mortgaged-Backed Securities Corporate
Bonds Municipal Bonds
Government Securities
Certificates of Deposits Treasury Bills Money
Market Funds Passbook Accounts
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Investor Profile

• Speaks to the risk/return preferences of
  investors. The basic profiles are
• Conservative
• Moderate
• Aggressive

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Asset Allocation

• the proportion of certain types of basic
  investments in your portfolio -- is an important
  component in a total portfolio approach to
  investing
• Developing an asset allocation strategy can help
  you capitalize on the unique risk and return
  features of different basic investment types, or
  asset classes, and reduce the volatility of your
  portfolio.

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ASSET ALLOCATION - YOUNG INVESTOR
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ASSET ALLOCATION - MIDLIFE INVESTOR
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ASSET ALLOCATION - PRE-RETIRED INVESTOR
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ASSET ALLOCATION -RETIRED INVESTOR
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ASSET ALLOCATION - CONSERVATIVE INVESTOR
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ASSET ALLOCATION -MODERATE INVESTOR
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ASSET ALLOCATION -AGGRESSIVE INVESTOR
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THE INVESTMENT PROCESS

• Establish your goals.
• Line up the Money
• Assess your risk appetite.
• Allocate the money according to the goals.
• Decide on your asset allocation.
• Find a financial advisor/mentor.
• Improve your financial intelligence.

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Sources of Investment Information

• Friends Family
• The Street
• Financial Newspapers
• Edward Gayle Company

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• Thank
• You