1

InvestingInvestingMaking money with money

Investing = Saving

It involves risk—you can lose your $$

2

Remember our 3 tools to Remember our 3 tools to save?save?

Savings Account

Money Market Account

Certificate of Deposit (CD)

3

What are some ways to What are some ways to invest?invest?

Stocks

Bonds

Mutual Funds

Currency

Real Estate

4

Unique Investments…Unique Investments…

Collectables

5

Rule of 72’sRule of 72’s

The time or the interest rate you need to double your money

72/t=int

72/int=t

6

Simple Interest Simple Interest Vs. Vs.

Compound InterestCompound InterestSimple – Interest paid only on

principle amount

Compound- Interest paid on principle and also on previously earned interest

*See Interest Worksheet

7

Retirement Plans Retirement Plans Pension Plans

A retirement plan set up by your employer

IRA’sMust wait until 59 ½ to access money

Special tax benefits

Used if employer does not offer a pension plan

8

Retirement Plans Retirement Plans

401K

403B

SEP PlansPlan if you worked for a small business

9

Mutual FundsMutual Funds

A collection of investments

Diversification

Minimize risk

Professional manager

Many investors

10

LiquidityLiquidity$Ability to convert your

assets to cash quickly

Cash

Stocks

Houses/Cars/Jewelry

11

Dollar Cost Averaging

Letting your money work for you over time

Diversification

Spreading your money out over different investments

Ie: stocks, bonds, mutual funds, etc.

Investing Choices

12

Now What?Now What?

How does diversification help limit risk?

How does age and financial situation affect how you make investment decisions?

13

The Stock MarketThe Stock Market

14

StockStock

Represents ownership in a

corporation

15

Market ValueMarket Value

$The amount of money you can sell your investment at in the market place.

16

Stock Stock ExchangesExchanges IndexesIndexesNYSE

AMEX

Nasdaq

London, Japan, etc

S&P 500

Dow

Nasdaq Composite

NIKKEI in Japan

17

Dow JonesDow Jones

18

DividendsDividends

$Share of the profits from a corporation

$Receive dividends for each share

19

How are earnings made on How are earnings made on stocks?stocks?

$Dividends.

$Dividend are usually paid quarterly

$Buy Low & Sell High

20

Advantages of Stock Advantages of Stock InvestmentsInvestments

$If the market value goes up, the gain can be considerable

$Liquid

$Money is easily accessible

21

DisadvantagesDisadvantages

$If the market value goes down, the loss can be considerable

$Time

22

StocksStocks

$A block of stock is one hundred (100) shares.

$Preferred

$Common

$Blue Chip

$Growth

Stock LineStock Line

Yahoo Finance - Apple Inc.

24

Who protects the interest Who protects the interest of investors by regulating of investors by regulating companies that sell stock?companies that sell stock?

25

BondsBondsCarry less risk than a stock

is an IOU, certifying that you loaned money to a

government or corporation and outlining the terms of

repayment

26

How Bonds WorkHow Bonds WorkBuyer purchases bond

Fixed interest rate

Fixed period of time

When matured it is redeemed for full face value

27

Bond TypesBond Types

Federal GovernmentMunicipalCorporate

28

Federal BondsFederal Bonds

The federal government issues bonds to pay for services; military, roads, infrastructure.

Virtually NO RISK!!

Savings bonds, Series EE & HH

29

Municipal BondsMunicipal Bonds

State or local governments issue bonds for the construction of buildings, roads, schools, etc.

Moderate, if any, risk

30

Corporate BondsCorporate Bonds

Issued by a Business to raise money for a capital venture.

Higher risk

Better rates of interest

31

Risk?Risk?

US savings bond least risk

Corporate bond

Preferred stock

Common stock most risk