Jenny Olivos
Professor Ling-Locke
Investment and Securities
11/20/15

Types of Investments
Securities or Property * Securities: stocks, bonds, derivatives * Real Property: land, buildings * Tangible Personal Property: gold, artwork, antiques * Debt, Equity or Derivative Securities * Debt: investor lends funds in exchange for interest income and repayment of loan in future (bonds) * Equity: represents ongoing ownership in a business or property (common stocks) * Derivative Securities: neither debt nor equity; derive value from an underlying asset (futures, options, swaps, indices)
Risks
* Low Risk or High Risk * Risk: chance that actual investment returns will differ from those expected
Time
* Short-Term or Long-Term * Short-Term: mature within one year * Long-Term: maturities of longer than a year * Domestic or Foreign * Domestic: home country based companies of the investor * Foreign: foreign-based companies

* Institutional Investors * Paid to manage other people’s money * Trade large volumes of securities * Include: banks, life insurance companies, mutual funds and pension funds

Different stages of an Economic/Market style

Markets and Efficiency * A perfect market, where prices are such that there are no excess profits, requires: * Large number of buyers and sellers * No barriers to entry or exit * No transaction costs * Free and instantaneous flow of information * And enforceable contracts via legal system * An efficient market is close enough to these criteria for excess profits to be trivial

Efficient capital market- one in which security prices adjust rapidly to the arrival of new information, and therefore, the current prices of securities reflect all information about the security.