Mind map

ALTERNATIVE INVESTMENTS

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CAPITAL MARKETS SECURITIES
- FIXED INCOME
  - Scheduled fixed income
  - Corporate Bonds
    - Definition: To raise money
    - Issued by corportations
    - Time: Varied length, can be as long as 30 years
    - PRO: Higher growth potential than government bonds
    - CON: Can Lose value due to the economy
    - Example: Microsoft Bonds
  - Equities
    - Value of shares
    - Preferred Stock
      - Definition: claim to dividends
      - Example: Preferred stock of Wells Fargo & Co.
      - Issued by company
      - Time: Usually long, more than 30 years
      - PRO: Pay a little more than common stocks
      - CON: Limited upside potential (ratio of return of investment)
    - Common Stock
      - Definition:Corporate equity Ownership
      - Issued by company
      - Time: Until Company removes them or gets bankrupt or taken over
      - PRO: Highest rate of return in the long run
      - CON: Last to get paid if the company is liquidated
      - Example: Apple common stocks
  - Government Bonds
    - CON: Relatively low return
    - PRO: Lack of risk, safer than other bonds
    - Time: Up to 30 years
    - Issued by Government
    - Definition: Government debt security
    - Example: Treasury Bond
- Long-term financial Instruments
INVESTMENT FUNDS
- Definition: Supply Of capital
- Mutual Funds
  - Definition: Diverse stock pool
  - Time: Last until you choose to stop
  - Issued by a broker or bank that you are applying for the mutal fund at
  - PRO: Advanced portfolio management, lower risks, and fair pricing
  - CON: High fees, tax inefficiency, and poor trade execution
  - Example: RBC Mutual Fund
- Exchange-Traded Funds
  - Definition: Stock investment fund
  - Issued by brokers, brokerage accounts, or online brokerages (ex. Fidelity)
  - Time: Holds however long you wish to.
  - PRO: Can help lower operating costs
  - CON: Subject to market fluctuation and risks
  - Example: Global Health Care Fund on Fidelity
DERIVATIVES MARKET
- financial security market
- Options
  - Definition: Certain price trade
  - Rights to do this is issued by the company
  - Time: Until the company revokes the right or the company becomes bankrupt
  - PRO: Offers more strategic apporache
  - CON: Lower level of liquidity
  - Example: Stock is priced at $10 and sell option set for $12
  - Call Option
    - Definition: Set price sell
  - Put Option
    - Definition: Set time + price
- Futures
  - Definition: Specific future buy
  - Issued by the Commodity Futures Trading Commission (CFTC)
  - Time: Time is varied but is a later time in the future
  - PRO: Futures are be used to help gain profit based on speculation
  - CON: Investors may lose more money than the inital margin amounts
  - Example: An investor invests $50000 into crude oil but only needs to pay a fraction of the amount upfront when the end date occurs, the investor may sell the future for profit or net loss
VALUE INVESTING
- Definition: Investment algorithm
- Factors of Methodology For Value Investing
  - Company Performance
  - Profit Margins
  - Company Debt
  - Cheaper price?
  - Company Relibility
  - Is the company public?
- Example: On May 10, 2016, Fitbit lost about 19% of the value, even though the price of their stock had dropped the value of the the actual company did not diminish, investing Fitbit at this time would yield high profits in the coming future.
- PRO: Less risk and volatility.
- CON: Requires patience and analysis