Investments
MBA 825 Investments Chapter-3MBA
Study825 - Chapter 3
Guide
Study this set o nline at: https://www.cram.co m/flashcards/investments-mba-825-
chapter-3-1697371
- E xerci se same cauti ons as regul ar i nvesti ng - Remember: there i s no l i ve broker to
act as a “saf ety net” - Be skepti cal of “f ree” advi ce onl i ne - Know what you are
Pros and Cons of Usi ng t he I nternet as an I nvestment T ool
buyi ng and f rom whom - Watch out f or f requent tradi ng *H i gh transacti on costs
*H i gher taxes on short-term gai ns - Beware of the ri sks of margi n tradi ng
- D escri pti ve I nf ormati on – f actual data on past behavi or of economy, market,
i ndustry company or gi ven i nvestment - Anal yti cal I nf ormati on – avai l abl e current
data i n conj uncti on wi th proj ecti ons and recommendati ons about potenti al
T ypes of I nvestment I nf ormati on
i nvestments - E conomi c and current events - I ndustry and company i nf ormati on -
I nf ormati on on al ternati ve i nvestments - Pri ce i nf ormati on - I nf ormati on on personal
i nvestment strategi es
- I s the i nvestment regi stered? - I s the person l i censed and l aw-abi di ng? - D oes
Protect Yoursel f by Aski ng T hree Key Questi ons:
the i nvestment sound too good to be true?
- Reasons to use market averages and i ndexes *Gauge general market condi ti ons
*Compare your portf ol i o perf ormance to l arge, di versi f i ed portf ol i o *Study market
cycl es, trends and behavi ors to f orecast f uture market behavi or Stock market
averages and i ndexes measure the general behavi or of stock pri ces over ti me
*Averages ref l ect the ari thmeti c average pri ce behavi or at a gi ven poi nt i n ti me
*I ndexes measure the current pri ce behavi or rel ati ve to a base val ue set at an
earl i er poi nt i n ti me D ow Jones I ndustri al Average * Most popul ar average *
Compri sed of 30 hi gh qual i ty, di versi f i ed stocks * T racks overal l market acti vi ty
Understandi ng Market Averages and I ndexes
* Stock makeup can change to better ref l ect the broader stock market - D ow Jones
T ransportati on Average - D ow Jones Uti l i ti es Average Compri sed of 15 publ i c
uti l i ty stocks - Standard & Poor’s 500 Composi te I ndex Compri sed of 500 stocks
f rom maj or i ndustry sectors More broad-based and representati ve of overal l market
than D JI A T rue i ndex cal cul ated f rom 1941–1943 base peri od cl osi ng market
val ues Standard & Poor’s provi de seven other i ndexes f or tracki ng speci f i c i ndustry
sectors - NYSE Composi te I ndex I ncl udes al l stocks l i sted i n NYSE - AME X
Composi te I ndex I ncl udes al l stocks l i sted on the NYSE Amex - Nasdaq
Composi te I ndex *I ncl udes al l stocks traded on the Nasdaq stock market *Of ten
used to track technol ogy compani es’ behavi or due to l arge technol ogy compani es
MBA 825 Investments Chapter-3MBA
Study825 - Chapter 3
Guide
Study this set o nline at: https://www.cram.co m/flashcards/investments-mba-825-
chapter-3-1697371
- E xerci se same cauti ons as regul ar i nvesti ng - Remember: there i s no l i ve broker to
act as a “saf ety net” - Be skepti cal of “f ree” advi ce onl i ne - Know what you are
Pros and Cons of Usi ng t he I nternet as an I nvestment T ool
buyi ng and f rom whom - Watch out f or f requent tradi ng *H i gh transacti on costs
*H i gher taxes on short-term gai ns - Beware of the ri sks of margi n tradi ng
- D escri pti ve I nf ormati on – f actual data on past behavi or of economy, market,
i ndustry company or gi ven i nvestment - Anal yti cal I nf ormati on – avai l abl e current
data i n conj uncti on wi th proj ecti ons and recommendati ons about potenti al
T ypes of I nvestment I nf ormati on
i nvestments - E conomi c and current events - I ndustry and company i nf ormati on -
I nf ormati on on al ternati ve i nvestments - Pri ce i nf ormati on - I nf ormati on on personal
i nvestment strategi es
- I s the i nvestment regi stered? - I s the person l i censed and l aw-abi di ng? - D oes
Protect Yoursel f by Aski ng T hree Key Questi ons:
the i nvestment sound too good to be true?
- Reasons to use market averages and i ndexes *Gauge general market condi ti ons
*Compare your portf ol i o perf ormance to l arge, di versi f i ed portf ol i o *Study market
cycl es, trends and behavi ors to f orecast f uture market behavi or Stock market
averages and i ndexes measure the general behavi or of stock pri ces over ti me
*Averages ref l ect the ari thmeti c average pri ce behavi or at a gi ven poi nt i n ti me
*I ndexes measure the current pri ce behavi or rel ati ve to a base val ue set at an
earl i er poi nt i n ti me D ow Jones I ndustri al Average * Most popul ar average *
Compri sed of 30 hi gh qual i ty, di versi f i ed stocks * T racks overal l market acti vi ty
Understandi ng Market Averages and I ndexes
* Stock makeup can change to better ref l ect the broader stock market - D ow Jones
T ransportati on Average - D ow Jones Uti l i ti es Average Compri sed of 15 publ i c
uti l i ty stocks - Standard & Poor’s 500 Composi te I ndex Compri sed of 500 stocks
f rom maj or i ndustry sectors More broad-based and representati ve of overal l market
than D JI A T rue i ndex cal cul ated f rom 1941–1943 base peri od cl osi ng market
val ues Standard & Poor’s provi de seven other i ndexes f or tracki ng speci f i c i ndustry
sectors - NYSE Composi te I ndex I ncl udes al l stocks l i sted i n NYSE - AME X
Composi te I ndex I ncl udes al l stocks l i sted on the NYSE Amex - Nasdaq
Composi te I ndex *I ncl udes al l stocks traded on the Nasdaq stock market *Of ten
used to track technol ogy compani es’ behavi or due to l arge technol ogy compani es
