Chapter 12 Section 2

 This is an economics class and NOT an investment seminar. Mr. Ross is NOT an investment expert. The material contained in this power point is solely for educational purposes and in NO way should be construed as financial advise. Please consult an investment consultant before investing any money in any way.

 You have to consider the following  Your goals for retirement  Risk-Return Relationship  Simplicity  Consistency

 Retire without having to work  Have any additional source of income now  College Funds for kids

 General Guidelines  If an investment seems too complicated – leave it alone  If an investment seem too goo to be true then it probably is

 “People always say ‘Buy low, sell high’ and they’re right. But time in the market is more important than timing the market” ~Doug Roberts Investment Consultant

 Named for the section of the tax code that it is found  Tax-Deferred  Lowers the amount that you are taxed on currently  You pay the taxes on it when you start with drawing  Figure 12.4 – Page 321

 Long term financial assets  Three components:  Coupon – Stated interest on the debt  Maturity – length of the bond  Par Value – the amount borrowed  Example: Air Fraga’s decides to issue bonds (borrow money). We sell $1,000 bonds (the par value) that have a 6% coupon (interest rate) that will be paid annually and will mature in 10 years. If you purchase one of these bonds, you will receive $60 once a year for 10 years, and then at the end of the term (when the bond has fully matured, you will get your $1000 back as well. So how much money did you make?

 CDs  Corporate Bonds  Government (Savings) Bonds  Municipal Bonds  Treasury Bonds  IRAs  Roth IRAs

 Issued by state and local governments  Generally considered one of the safest investments  What does that mean for your return?  Used to build parks, stadiums, schools, etc.

 401(k) is done through employer IRAs done independently (or with an adviser)  Other than that IRAs are basically the same as 401(k)s  Roth IRA – taxes are taken out now, and the money is tax free later

 Capital Markets – Money loaned for more than a year  Money Markets – Money is loaned for less than a year  Can sometimes overlap – CDs can be 6 months or 5 years

 Page 326  #s 1, 3, 4 and 6 – In notebook