8.01 A: Summarize the various types of short-term and long-term investment

Investing Strategies Putting your money to use in order to make money on it Invest to meet your goals Invest within your risk tolerance –how much risk you are willing to take? Invest according to your family life cycle –New family –Growing family –Mid years family –Launching family –Pre-retirement –Aging family

Investing Plans How do you make investment decisions? –Are you a risk taker? –How much $ do you have to invest? –Who is dependent on your financial decisions Conservative vs. Speculative – very risky Savings plans change as one proceeds through out the life cycle. Plans are based on short term and long term needs.

Life Cycle of Savings/Investment Type of Invest StrategyConsiderations Begin Saving Begin at Early Age Safety Short term liquid Meet unexpected needs SecurityFuture Begin Investing Full time worker Age 18+ Conservative, low risk Speculative, higher return Diversify portfolio Tax Advantages Tax Planning Systematic Planning & Investing Age 25+ Especially parents Long range, major goals, retirement, estate planning More conservative as age Growth Future security & spending Less time to make up for lost money Speculating Any age-*If risk taker Taking chances Risk based on profit potential Income Short-term profits

Investing Simple Interest vs. Compound Interest –Simple – interest that is computed only on the amount saved. –Compound – interest that is computed on the amount saved plus interest previously earned. Securities –bonds & stocks sold by corporations and governments to raise large sums of money

Why save and invest? To reach your personal financial goals –Major purchases-car, furniture, home –Emergency situations-car repair, medical –Retirement planning –Education for children –Vacations –Other major planned goals - vacation home

Savings is money put aside for future use. Most common reasons to save are: H5 –Major purchases –Emergencies Save money for a “rainy day” –Retirement

Investing Through Banks H6 Savings Account-demand deposit/withdrawal Simplest form of saving Offered by all institutions (banks, credit unions, etc.) +Generally, a low minimum deposit is required –Interest is low and varies from institution to institution +SAFE because insured through FDIC at banks Certificate of Deposit- time deposit/withdrawal –Requires a minimum deposit for a minimum amount of time –Withdrawn on maturity date –Interest rates are higher than a savings account

Investing Through Banks Money Market Fund –Kind of mutual fund, or pool of money, put into a variety of short-term debt by business and government. –Moderately safe- depends on investment strategies of fund administrators