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Organizing Financial Assets Guide
1. Organizing Financial Assets
Direct Investing
Investors buy and sell securities
themselves, typically through brokerage
accounts.
Indirect Investing
The buying and selling of the shares of
investment companies, which in turn hold
portfolios of securities.
2. Direct Investing
Non marketable Financial Assets
Savings deposits
Certificates of deposits
Money market deposit account
Money Market
Treasury bills
Commercial Papers
Euro Dollars
Banker’s acceptances
3. Direct Investing
Capital Market
Fixed income
Equities
Derivatives market
Options
Futures contracts
4. Indirect Investing
Investment companies
Unit Investment trust (NIT)
Mutual Funds
Open end mutual funds
Closed end mutual funds
5. Money Market Securities
Treasury Bill
Discount Yield =
Face value – pur price * 360
Face value maturity of bill in days
Investment yield =
Face value – pur price * 365
Pur. Price maturity of bill in days
6. Fixed Income Securites
Capital Market
Fixed income securities
Bonds
Call provision
Zero coupon bond
7. Fixed Income Securites
Types of Bonds
Treasury Bonds
Municipal Bonds
Corporates
Senior Securities
Debenture
Convertible Bonds
Junk Bonds
8. Equity Securities
Preferred Stock
Common Stock
Characteristics of Common Stocks
Book Value
Dividends
Dividend Yield
Payout Ratio
Stock Dividend
Stock Split
9. Equity Securities
P/E Ratio
Also called Earning Multiplier
Can be 10 or 15 times
Shows the investor confidence on a
particular stock
10. Derivative Securities
Securities that derive their value in
whole or in part by having a claim on
some underlying security.
Warrant
A corporate created option to purchase a
stated number of common shares at a
specified price within a specified time.