Lesson 8B: Evaluating Investment Options Unit 8: Investing Lesson 8B: Evaluating Investment Options ©2017, Minnesota Council on Economic Education. Developed in partnership with the Federal Reserve Bank of St. Louis.

How do people choose among investment options? Compelling Question How do people choose among investment options? Lesson 8B

Visual 8B.1: Risk and Return Investment alternatives Slide 1 of 4 Investment alternatives CRITERIA Rate of return Risk Liquidity Costs Cash Checking accounts Savings accounts Money market deposit accounts Lesson 8B

Visual 8B.1: Risk and Return Slide 2 of 4 Investment alternatives CRITERIA Rate of return Risk Liquidity Costs Certificates of deposit U.S. savings bonds Money market mutual funds U.S. Treasury bonds Lesson 8B

Visual 8B.1: Risk and Return Investment alternatives Slide 3 of 4 Investment alternatives CRITERIA Rate of return Risk Liquidity Costs Corporate bonds Income stocks Growth stocks Real estate Lesson 8B

Visual 8B.1: Risk and Return Investment alternatives Slide 4 of 4 Investment alternatives CRITERIA Rate of return Risk Liquidity Costs Commodities Collectibles Mutual funds Lesson 8B

Visual 8B.1: Risk and ReturnAnswer Key Slide 1 of 4 Investment alternatives CRITERIA* Rate of return Risk Liquidity Costs Cash  1 0% 2 Theft, inflation 5 1 None Checking accounts 0-0.25% Insured, inflation Fees Savings accounts  2 0.25-1% 4 Maintenance fees Money market deposit accounts 2.5-3.5% Min. balance required NOTE: Rates of return are based on historical data. *1 = Very low, 2 = Low, 3 = Medium, 4 = High, 5 = Very high. Min., minimum. Lesson 8B

Visual 8B.1: Risk and ReturnAnswer Key Slide 2 of 4 Investment alternatives CRITERIA* Rate of return Risk Liquidity Costs Certificates of deposit  3 4-5% 1 Insured 3 2 Transaction, access fees U.S. savings bonds 2-4% Govt. guaranteed** Money market mutual funds 4.5-5% Not insured other fees U.S. Treasury bonds 3.5-5.5% NOTE: Rates of return are based on historical data. *1 = Very Low, 2 = Low, 3 = Medium, 4 = High, 5 = Very High. ** Backed by the full faith and credit of the U.S. Government. Lesson 8B

Visual 8B.1: Risk and ReturnAnswer Key Investment alternatives Slide 3 of 4 Investment alternatives CRITERIA* Rate of return Risk Liquidity Costs Corporate bonds  3-4 6-10% 2-4 Company rating 3 Broker, trans. fees Income stocks  4 9-11% 3-4 Company rating/market Growth stocks  4-5 12-15% 4-5 Real estate Varies Market 2 4 Agent, trans. fees NOTE: Rates of return are based on historical data. *1 = Very Low, 2 = Low, 3 = Medium, 4 = High, 5 = Very High. Trans.; transaction. Lesson 8B

Visual 8B.1: Risk and ReturnAnswer Key Investment alternatives Slide 4 of 4 Investment alternatives CRITERIA* Rate of return Risk Liquidity Costs Commodities  4 Varies 4-5 Market 3 Broker, trans. fees Collectibles  1-5 1 4 Trans. fees Mutual Funds  2-4 2-4 Mix dependent 3-5 Management fees NOTE: Rates of return are based on historical data. *1 = Very low, 2 = Low, 3 = Medium, 4 = High, 5 = Very high. Trans.; transaction. Lesson 8B