Chapter 01 Gitman

Topics: Investment, Rate of return, Mutual fund Pages: 20 (6256 words) Published: December 2, 2012
Part One
Preparing to Invest
Part One Includes
Chapter 1Investment Environment
Chapter 2Markets and Transactions
Chapter 3Online Information and Investing

Chapter 1
Investment Environment
 Outline
Learning Goals
I.Investments and the Investment Process
A)Types of Investments
1.Securities or Property
2.Direct or Indirect
3.Debt, Equity, or Derivative Securities
4.Low or High Risk
5.Short or Long Term
6.Domestic or Foreign
B)The Structure of the Investment Process
1.Participants in the Investment Process
5. Types of Investors
Concepts in Review
II.Investment Vehicles
A)Short Term Vehicles
B)Common Stock
C)Fixed Income Securities
2. Preferred Stock
3.Convertible Securities
D)Mutual Funds
E)Derivative Securities
F)Other Popular Investment Vehicles
Concepts in Review

III.Making Investment Plans
A)Steps in Investing
1.Meeting Investment Prerequisites
2.Establishing Investment Goals
3.Adopting an Investment Plan
4.Evaluating Investment Vehicles
5.Selecting Suitable Investments
6.Constructing a Diversified Portfolio
7.Managing the Portfolio
B)Considering Personal Taxes
1.Basic Sources of Taxation
2.Types of Income
a.Ordinary Income
b.Capital Gains and Losses
3.Investments and Taxes
4.Tax-advantaged Retirement Vehicles
C)Investing Over the Life Cycle
D)Investing in Different Economic Environments
1.Stocks and the Business Cycle
2.Bonds and Interest Rates
Concepts in Review
IV.Meeting Liquidity Needs: Investing in Short-Term Securities A)Role of Short Term Securities
1.Interest on Short Term Securities
2.Risk Characteristics
3.Advantages and Disadvantages of Short Term Investments
B)Popular Short Term Investment Vehicles
1.Deposit Accounts
2.Federal Government Issues
3.Nongovernment Issues
C)Investment Suitability
Concepts in Review
Putting Your Investment Know-How to the Test
Discussion Questions
Case Problems
1.1Investments or Golf?
1.2Preparing Carolyn Bowen’s Investment Plan
Excel with Spreadsheets
OTIS—Online Trading and Investment Simulator
 Key Concepts
1.The meaning of the term investment and the implications it has for individual investors. 2.Review the factors used to differentiate between different types of investments. 3.The importance of and basic steps involved in the investment process. 4.Popular types of investment vehicles, including short term vehicles, common stock, and fixed income securities such as bonds, preferred stock, and convertibles. 5.Derivative securities such as options and futures, and mutual funds. 6.Other popular investment vehicles such as real estate, tangibles and tax advantaged investments. 7.Investment goals including income, major expenditures, retirement, and sheltering income from taxes. The latter includes analysis of tax-advantaged retirement vehicles. 8.Building a diversified portfolio consistent with investment goals. 9.Sources of taxation, types of taxable income, and the effect of taxes on the investor. 10.Developing an investment program that considers differing economic environments and life cycle stages. 11.The use of short term securities in meeting liquidity needs. 12.The merits and suitability of various popular short term investment vehicles including deposit accounts and money market securities.  Overview

This chapter provides an overview of the scope and content of the text. 1.The term investment is defined, and the alternative investment opportunities available to investors are classified by types. 2.An examination of the structure of the investment process is presented. This section explains how suppliers and demanders of investment funds are brought together in the marketplace. 3.The key participants in the investment process—government, business, and individuals—are described, as are institutional and individual investors. 4....
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