Creating your Investment Profile

Here are some examples of Diversified and Risk tolerance of portfolios containing stocks

Ø  Based on a $100,000.00 student portfolio

Ø  Buying on Margin NOT allowed

Risk Tolerance

Very Conservative / Conservative / Moderate / Speculative / Very Speculative
Stocks 20%
M.F/Bonds 50%
Cash 30% / Stocks 45%
M.F/Bonds 40%
Cash 15% / Stocks 65%
M.F/Bonds 30%
Cash 5% / Stocks 80%
M.F/Bonds 15%
Cash 5% / Stocks 90%
M.F/Bonds 5%
Cash 5%

You have to also consider variations in Cap Size.

·  Large Cap companies offer less risk and some have dividend value

·  Mid Cap companies moderate risk

·  Small Cap companies are your higher risk investment

Very Conservative / Conservative / Moderate / Speculative / Very Speculative
*15 – 20 stocks
*Each purchased with $5,000.00 or less.
*5 to 10 Industries/Sectors
* All Lg. Cap Companies / *12 – 15 stocks
*Each purchased between $5,000 & $7,500
*5 – 10 Industries/Sectors
* All Lg. Cap Companies / *10 – 12 stocks
*Each purchased between $7,500 & $10,000
*5 to 7 Industries/Sectors
*Company size
5 Lg. Cap
4 Mid Cap
3 Sm. cap / *7 – 10 Stocks
*Each purchased between $10,000 - $20,000
*3 – 4 Industries/Sectors
*Small Cap Companies / *4 – 5 Stocks
*Each purchased around $20,000
* 1 -2 Industries/Sectors
*All Small Cap Companies

v  For CHC remember to add at least 1 of: a mutual fund(s) and a bond(s)

Key Vocabulary

Risk Tolerance: the degree of variability in investment returns that an individual is willing to withstand. (Conservative, Moderate, and Speculative Risk Levels)
I have an example at www/smgman-mi.org or direct link: http://www.investopedia.com/terms/r/risktolerance.asp
Diversification: Spreading your money among a slew of different securities.
Stock: Investing in a company as a shareholder.
Mutual Fund: an investment with many stocks, or bonds – provides diversification and is considered a conservative investment
Bond: the investor is loaning money to a corporation, city, state, institute or the government. Is usually considered a conservative investment. Bonds are rated with a letter (A, B, C D)
Market Cap: the total dollar market value of all of a company’s outstanding shares
(# of shares • stock price = market cap).
*Large cap: 10 billion +
*Mid cap: 2 billion to 10 billion
*Small cap: less than 2 billion
Dividend: a distribution of a portion of a company’s earnings
Beta: measure of the volatility of a security (stock) or a portfolio in comparison to the market as a whole. Break down – a beta of 1 indicates than the security’s price will move with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta greater than 1 indicates that the security’s price will be more volatile than the market. For example, if a stock’s beta is 1.2, it’s theoretically 20% more volatile than the market.
P/E: the ratio for valuing a company that measures its current share price relative to its per-share earnings. Break down – the P/E ratio indicates the dollar amount an investor can expect to invest in a company in order to receive $1.00 of that company’s earnings. If a company were currently trading at a P/e of 20 the interpretation is that an investor is willing to pay $20 for $1 of current earnings.
*In general, a high P/E: investor is expecting higher earnings growth in the future compared to companies with a lower P/E. A low P/E can indicate either that a company may currently be undervalued or that the company is doing exceptionally well relative to its past trends.
Growth Stock: a company whose earnings are expected to grow at an above average rate relative to the market. Most tech stocks are growth stocks.
Events/Reasons for stock prices to go or
Possible reasons for stock prices to / Possible reasons for stock prices to
New Products
Government Spending
Profit (Earnings report) shows growth
Co. takeover bids or spinoffs / Accidents or Health Problems
Government Instability
Increase in Margin Rates
Investigation by the SEC
Based on what we discussed, summarize what your investment strategy will be.
What percent of stocks, mutual funds, and bonds will you buy? Include the type of companies you are interested (growth, dividend, market cap, industry, etc)
My Strategy

Lessons I would include from the Teacher Support Center

·  What is Risk

·  What is Diversification

·  What is a Bond

·  What is a Mutual Fund

·  Stock Talk: Jack and the Beans Talk (Beta)

·  Stock Talk: Funds with Style, Fund Time, Emily & ETF (Mutual Funds)

·  Stock Talk: Cap Size (Small, Mid and Large Cap Companies)