You gotta know the basics before yon make a killing.
By Brendan Picha
OK, you were embarrassed when the gang
in psych class was talking about the Hang
Seng, and you thought they meant the
new Chinese restaurant in town. Well,
here’s your chance for a quick intro to
basic money matters: Steamturmels guide
to investment basics.
Basics: Investors fund a com
pany’s operations by buy
ing a company’s stock.
The purchaser becomes
part owner of the compa
ny, and the investor’s stock is
linked to how well the company per
forms. A good year will award dividends—
cash from company profit to the investor.
Not everyone profits, however—investors
lose money if the company takes a dive.
Stock: If the company makes a profit,
there are several things it might do with
the money: it could hold onto the cash
and build up its infrastructure, called a
growth stock. If it decides to pay out
most of its profits in the form of dividends,
it’s called an income stock.
An investor that wants to buy a certain
stock may go through a brokerage firm like
Paine Webber, Charles Schwab or Merrill
Lynch. In this situation, the firm charges
the investor a fee and gives a percentage
of that fee to the broker.
CDs: A certificate of deposit is a safe alter
native to investing in the stock market. You
lend the bank money for a set period of
time, from three months to five years. At the
end of the term, you get your money back
seven percent, based on the CD duration.
Bonds: When you buy bonds, you lend
money to the government or a corporation.
A bond provides a fixed interest rate, called
a Coupon Payment, and a return of the
original investment at the date of maturity.
The coupon is paid every six months. The
original bond price and final interest pay
ment are paid at the date of maturity. Bonds
plus the earned
interest, at a rate
set at the time
of purchase. This
investment
option is low-risk
but also low
return—typically
between five and
are low risk and a
good way to diversi
fy your portfolio.
Mutual Funds: Mutual funds
are a grouping of stocks or bonds that
are managed by professional investors.
An investment company buys
quantities of securities and sells
portions to the public. Funds
vary depending on how many
stocks are involved. Benefits:
Your investment is spread out
over numerous stocks, so if one
tumbles, the fund won’t suffer.
Annuities: Insurance companies sell annu
ities as insurance policy/retirement
account combos. You place money into an
annuity and it’s allowed to grow, tax
deferred, until you're 59. After you reach
59, you are allowed to remove money by
either receiving steady payments over a
period of time, or at once in a lump sum.
There’s no limit to the amount of money
you can put in, unlike an IRA or 401 K.
However, taxes and broker charges are sig
nificantly higher than other investments.
Financial Self-Evaluation: Before invest
ing, set aside enough money to live for at
least six months. Also, pay off debt on
credit cards and loans. However, some
graduates have debt with such a low inter
est rate that it’s actually more financially
sound to pay back the loan over more
years and invest the money. Many invest
ments have a high enough return to cover
the interest on your student loans and still
make money.
Decide how you feel about risk and
return. As a rule, lower-risk investments like
CDs won’t earn as much, but you’re sure
not to lose money. Investing in the stock
market has the potential to make a lot of
money—but you could also lose it all. Most
people deal with this by diversifying their
investment portfolios.
Now is definitely the time: beginning to
invest at a young age is the key to com
pounding interest and making your money
work for you. •
For more about investing and tips from the
Motley Fool, go to Steamtunnels.net and
search for keyword “invest.”
Average Professors
Salaries by Discipline
Business
Chemistry
Economics
Education
Engineering
English
Fine Arts
History
Law
Math
Philosophy
Physics
Political Science
Psychology
Sociology
Theater Arts
Source: chronicle.com
Private Public
65,054 66,464
55,556 58,977
67,255 66,682
49,137 54,369
76,060 78,024
50,931 51,960
48,619 51,249
54,363 54,937
102,513 95,829
54,087 57,871
54,856 55,105
63,516 63,537
57,645 56,027
53,188 58,157
53,242 54,471
48,134 49,219
Gadgets Guide
High-Tech Toys: Better Living
through Technology
Olympus DS-150 Digital Voice
Recorder: $299
Recording lectures
may seem like just a use
less hassle, but not with
the Olympus DS-150
Digital Voice Recorder
(olympusamerica.com).
The Digital Voice
Recorder uses speech
to-text technology and
holds up to 160 minutes
of recording time. You
may never have to take
notes again (but we
doubt it).
Compressor Music Jukebox
MP3 Player: $749
Most MP3 players can hold about two
dozen songs max, but the Compressor
Music Jukebox (musiccompressor.com)
isn’t your ordinary portable MP3 player.
The jukebox stores up to 100 CDs worth
of music with its 6.4GB notebook hard
disk drive. -Kathryn Yu
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PERSONAL JUKEBOX