1 investing making money with money investing = saving it involves risk—you can lose your $$

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InvestingInvestingMaking money with money

Investing = Saving

It involves risk—you can lose your $$

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

Savings Account

Money Market Account

Certificate of Deposit (CD)

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

Stocks

Bonds

Mutual Funds

Currency

Real Estate

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Unique Investments…Unique Investments…

Collectables

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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

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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

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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

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Retirement Plans Retirement Plans

401K

403B

SEP PlansPlan if you worked for a small business

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Mutual FundsMutual Funds

A collection of investments

Diversification

Minimize risk

Professional manager

Many investors

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LiquidityLiquidity$Ability to convert your

assets to cash quickly

Cash

Stocks

Houses/Cars/Jewelry

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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

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Now What?Now What?

How does diversification help limit risk?

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

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The Stock MarketThe Stock Market

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StockStock

Represents ownership in a

corporation

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Market ValueMarket Value

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

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Stock Stock ExchangesExchanges IndexesIndexesNYSE

AMEX

Nasdaq

London, Japan, etc

S&P 500

Dow

Nasdaq Composite

NIKKEI in Japan

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Dow JonesDow Jones

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DividendsDividends

$Share of the profits from a corporation

$Receive dividends for each share

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

$Dividends.

$Dividend are usually paid quarterly

$Buy Low & Sell High

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Advantages of Stock Advantages of Stock InvestmentsInvestments

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

$Liquid

$Money is easily accessible

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DisadvantagesDisadvantages

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

$Time

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StocksStocks

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

$Preferred

$Common

$Blue Chip

$Growth

Stock LineStock Line

Yahoo Finance - Apple Inc.

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

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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

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How Bonds WorkHow Bonds WorkBuyer purchases bond

Fixed interest rate

Fixed period of time

When matured it is redeemed for full face value

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Bond TypesBond Types

Federal GovernmentMunicipalCorporate

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Federal BondsFederal Bonds

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

Virtually NO RISK!!

Savings bonds, Series EE & HH

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Municipal BondsMunicipal Bonds

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

Moderate, if any, risk

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Corporate BondsCorporate Bonds

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

Higher risk

Better rates of interest

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Risk?Risk?

US savings bond least risk

Corporate bond

Preferred stock

Common stock most risk