For our last day, we had a guest speaker come in.

• Small/mid/large cap stocks are determined by market capitalization (which is shares outstanding * price)

  • Small: 300M-2B

  • Mid: 2B-10B

  • Large: 10B+

• Active managers can often outperform the market in specific sectors, but it is most difficult to outperform the S&P 500

• Trump administration:

  • Very active administration can lead to volatility in the market (but often headlines are more extreme than reality, so its good to buy when the price drops)

  • Inflationary impacts (ex: tariffs, restricting immigration)

  • Economic growth in U.S. (possibly in specific sectors like technology because of AI)

  • Geopolitical effects (Germany possible ending stagnation in Europe)

  • Dollar will depreciate

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On Day 7, we talked about creating a balanced portfolio and then spent the rest of class working on our final projects.

• Allocate 70-80% of investments towards ETFs

• 5-10% should be in bonds (which have an inverse relationship with interest rates)

• 10% should be held in savings

  • Amex high yield savings returns 3.6% per year and pays this monthly (like a dividend payment in an MMF)

  • Holding money in a checking account equates to losing 3.6% yearly

  • CDs are usually not worth it because they're illiquid (unless rates are very low)

• Market capitalization= shares outstanding * price

  • This determines the percent it makes up of the S&P 500

• 10% of investment can be used for risk (but it still needs to be diversified in at least 3 equities)

Rule of thumb (for final project):

• Housing shouldn't exceed 30% of net income

• Emergency fund should contain 6 months of savings

1. Need a broker (ex: Robinhood)

   • Fundamental analysis: looking at financial statements

   • Technical analysis: looking at charts (usually used more for day trading), you can make money on small growth in high volume

   • Swing trading: mix of both (trading on both news and numbers)

   • Stocks generally regress to their mean price after news blows over, so its good to buy when the price drops

   • Paper trading simulates the current market with fake money. It doesn't fully replicate how you'd actually do because it takes out the emotion of having your real money at risk.

2. Type of account

   • Traditional/individual brokerage account

     • Pay taxes on capital gain; 15% for long term (1+ years) and 30% for short term

   • Traditional IRA

     • Maximum amount deducted from taxable income is $7,000 a year (everything after that is taxable)

     • Can't be accessed until you are 59.5

     • Roth IRA: money isn't deducted from taxable income, but compounds tax-free

   • SEP IRA for business owners

   • 401k

     • Employer matches your contribution (usually up to around 3%)

3. Building a portfolio

   • You can set up a TDF (target date fund) to have a broker manage your investments according to an approaching date, or you can have complete autonomy over your investments

   • DCA: dollar cost averaging

     • Buy the same amount of a certain stock every month as the price changes

     • % growth is calculated using the weighted average price that you bought the stocks for

   • If you can't afford a full ETF share, you can buy a fraction, or find a different stock that tracks the same ETF at a lower price

   • Sectors:

     • ex: tech, real estate, logistics, finance, defense, healthcare

     • Energy and commodities can be used as a hedge because they usually go up as the market goes down (this is because they are considered a safe investment)

     • Alternative investment mutual fund

   • Hedge Funds: usually have a minimum of 250k and perform well

   • Want P/E ratio to be lower than you believe the company is worth (also often you don't even need to look at the numbers because there are expert analytics advice online)

   • MMF: money market fund (holds cash and pays dividend); an alternative to high yield savings account

   • Dividends:

     • Tech companies generally reinvest their money into more research and development, which is profitable for its investors because the stock price goes up

     • S

On Day 5 we talked about artificial intelligence and had a guest speaker.

• Universal income: government giving money to individuals whose jobs are no longer necessary

• How to add value even when AI takes over jobs:

  • Soft skills (emotional intelligence)

    • Ex: sales, social worker, therapist, education

    • Jobs that can be replaced by AI: uber drivers, designers, lawyers, developers, admin, telemarketers, customer service

  • Ability to use AI

    • Majority of businesses are owned by baby boomer generation who probably need assistance using AI

    • Ex: buy a company (with 1M revenue) for 3M, scale it to 1.5M revenue by replacing jobs with AI, sell it for 4.5M

  • Owning assets

    • Stocks, bonds, real estate

    • Ownership of companies will be more valuable as AI is implemented

• Guest Speaker: works at a company that tests and improves AI models for other companies

  • How to assess AI

    • Helpfulness: relevant and accurate information

    • Honesty: fact-checking if claims are valid

    • Harmlessness: dangerous or inappropriate responses

    • Language: correct language without grammatical error

    • Instruction following

  • Using AI to scale businesses

    • Don't waste time on something AI can do faster

    • Taking the time to train AI to do something will be more efficient than continuing to do it manually

On day 4, we learned how to start our own business.

Phase 1: legal documents

• LLC (limited liability company) is a legal structure needed through your state to start a company

  • Costs $200-300

  • If company is sued, the money comes from company funds and not the business owners savings

• EIN (employee identification number) is a number that is unique to your LLC and you get it through the IRS

• Bank Account under LLC

  • Checking account that revenue is deposited into

  • Credit card to pay expenses (better than a debit card because it protects you against fraud)

• Operating Agreement defines ownership, rules, and responsibilities

Phase 2: digital landscape and brand identity

• POS (point of sale) payment system

  • transaction fee is usually 3% for credit cards (AMEX is 4%)

• Create a website

• SEO (search engine out)

  • DMs, blogs, social media

• Reviews and referrals bring in more customers

• PPC (pays per click) in google ads or facebook ads

Phase 3: operating model and tech stack

• Income statement (profit and loss statement)

• Taxes are filed on 3/15 for businesses

• Venture capital companies invest in smaller companies (provide capital in exchange for equity)

• EBITDA (earnings before interest, taxes, depreciation, and amortization)

  • Lower EBITDA is better to avoid taxes, so many companies spend this money as business expenses (ex: improvements, transportation, food, phone bills)

• Net income is the final amount of money the company gets to keep and it is distributed between the owners (K1 distribution is around 15%)

• If business owners contribute labor, they can pay themselves as an employee through a W2

• Cash flow statement

  • AR (accounts receivable)

  • AP (account payable)

• Using a company credit card allows you buffer time between receiving the payment and paying for the product

  • Company credit card debt doesn't affect your personal credit score

• Balance sheet (assets and liabilities) statement

• 1099 contractor does not included taxes for employer

On Day 3, we talked about trading currencies, taking out a mortgage, and managing a business.

FX Exchange:

• 1 euro = 1.17 USD

• This is bad for European companies because their goods are more expensive for Americans (which means less sales)

• US inflation makes the dollar less valuable (you need more dollars for 1 euro)

• If US dollar gets stronger (deflation), foreign companies benefit

• USD is the risk free rate

• Riskier countries with less stable economies have higher interest

  • ex: Argentina defaulted on their debts and can no longer borrow money from the US (their economy crashed and their currency lost value)

Buying a House:

• You are required to put 3.5% down on your primary home

• Both conventional and FHA loans are backed by the government

  • FHA has less credit history requirements

• Any downpayment less than 20% requires you to pay PMI

  • For conventional loan, PMI goes away after you have 20% equity of the property

• Appraisal determines the value of a house

• Seller pays commission to realtor

• Around 6% is paid in closing costs

  • 1.5% goes to bank for the origination fee

  • Pre-approval letter can be brought to any bank and they'll bid to get you the best deal

  • Around $700 goes towards the appraisal

  • Title company

  • Transfer taxes

• DOM: days on market

  • Listing price will get lower as DOM increases

• EMD: earns money deposit

• Home owner's insurance is required by the bank if you have a mortgage (because they own most of the property and don't want to deal with possible damage)

• Real estate taxes are usually 1% of property value each year

• Escrow: account where the bank holds money for taxes (they collect monthly payments from the homeowner and hold it until they pay taxes every year)

• PITI: principal, interest, taxes, insurance

Business Management:

• Procurement: negotiating in bulk

• Gross margin = revenue - expenses (good for gross/revenue to be around 70%)

• COGS: cost of goods sold

• G+A: general and administrative costs

  • Marketing, tech, research/development

On Day 2 we focused on mainly real estate and the 2008 housing crisis.

• You can apple for a mortgage when you have a job with a W2 tax form and it takes around 60 days to get it

• Real estate is not a liquid asset and 5% of your sale is lost to commission

• It generally takes around 10 years for real estate to gain value

• High interest means less demand in the housing market, and vice versa

• ROI = [(price sold - price bought) / price bought ] * 100

  • Divide this number by years to get the yearly rate

  • If calculating ROI for real estate, use only the downpayment as the bought price to show the advantage of using a loan as leverage

• Capital appreciation: the value of assets increasing (required to pay taxes on this)

  • Money earned = capital gain - downpayment

• HELOC: home equity line of credit

• Debt to income ratio shouldn't exceed 30% if you want a good rate on your mortgage

• Monthly payments = principal + interest + insurance + taxes

2008 Housing Crisis:

• NINJ loans: no income no job

• Many people couldn't pay off their mortgages, so they took out HELOCs as their home value continued to increase

• Investment banks bought these loans from the bank because they didn't think consumers would default (they ended up losing a lot of money)

• Housing prices finally dropped and consumers couldn't use their property's appreciation to pay off mortgages anymore and started defaulting on their loans

• The banks owned the majority of properties, but stopped receiving liquid mortgage payments

• The banks were "too big to fail"

• The federal government had to buy stocks from these banks to bail them out

• TARP: toxic acid relief program (funded through tax payers)

• CDO: collateralized debt obligation

• CDS: credit default swap

  • Banks sold these to people who wanted to short the housing bonds

• AIG: insurance company for bonds that failed and couldn't pay the banks when everybody defaulted on their loans

• Short sale: the consumer sells the property and pays the remainder of the mortgage

• Now the FDIC insures up to 250k in banks

Shorting:

• Bear market: believing stock prices will go down

• You borrow the stock from a shareholder, sell it, and buy it back at a hopefully lower price

• It's important to have a margin to limit how much money you can lose

• Derivatives/options:

  • The right to buy shares of a stock at a certain price on a strike date

  • Put: betting stock will go down

  • Call: betting stock will go up

I want to use Paragraph to publish my notes because...

• It may inspire somebody else to study finance

• It'll help me review what I learned

• I may want to revisit the notes online in the years to come

Notes from Day 1

On Day 1 we talked about a wide variety of finance topics without a set agenda.

• 3 financial statements:

  1. balance sheet

  2. cash flow

  3. income statement

• FIRE: financial independence retirement early

• S&P 500 has historically grown at an average of 8.33% per year over a 10 year period

• Syndication: a company's IPO (initial public offering) to a few select shareholders who then sell and distribute it on the secondary market

  • If there are not enough initial sales, it goes to the open market

• Stock exchanges are facilitated by brokerage companies (ex: Robinhood, Fidelity, etc.)

• Private equity: group find used to buy ownership of a company and run it

• 2 ways to bring money into a private company

  1. equity: money from investors

  2. debt: money from the bank (ex: SBA is a small business loan handed out by the government to get companies started)

• Bonds are more secure than stocks because they get paid first when a company goes bankrupt

  • U.S. treasury has never defaulted on their bonds, so they are considered the risk free rate

  • All bonds from private companies are going to have a higher yield than the U.S. treasury because there is higher risk

• WACC: weighted average cost of capital

• Debt ceiling: government continues to issue more bonds at a higher yield to pay off their current debts (causes national debt to exponentially grow until an external factor decreases it)

  • The head of the federal reserve (currently Jerome Powell) determines the T-bill rates

• The federal reserve controls the economy by printing money and issuing bonds

  • Current events: Trump wants to cut interest rates (to incentivize more people to take on debt), but Jerome doesn't want this because it could cause inflation

Currency hack: make money in the U.S. and spend it abroad

Sales Skills:

1. Lead

   • Start by cold calling companies

   • Always be the first to answer the phone call

   • Use emotional connections to win over your client (asking about family life)

   • Get business through referrals ("network is your networth")

2. Show value/need

   • Know your clients WTP (willingness to pay)

   • Compare prices with competitors

   • Let the client talk (makes them feel heard)

     • "may I" or "would you allow"

     • put them in the driver's seat

   • Ask open ended questions

     • Asking yes/no questions allows them to decline service

     • ex: "What are your future goals?"

   • Be friendly and likable

3. Close

   • Continue to follow up (usually takes 7 calls to close a deal)

   • Have them sign a contract

   • Make them feel confident in their purchase (prevent buyer's remorse)

   • If they show hesitation or mention competitors...

     • show high demand for your product/service

     • put a limit on how much they can currently purchase to create urgency and make then feel like they need to finish the deal

   • Move on if you are rejected and don't be discouraged

     • more contact = more sales