Stock Market Analysis and Personal Finance

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Presentation transcript:

Stock Market Analysis and Personal Finance Mr. Bernstein Opportunity Costs and Strategies, pp 19-25 February 19, 2013

Stock Market Analysis & Personal Finance Mr. Bernstein Opportunity Costs The cost of not taking an action You cannot both save and spend the same dollar If you spend, you will not earn interest on savings If you save, you will not gain satisfaction of consuming

Stock Market Analysis & Personal Finance Mr. Bernstein Future Value The amount $1 today will be worth at some point in the future Interest earned compounds FV = $$ x (1+interest rate)number of years Example: $1 in ten years at 5% interest rate $1 X 1.0510 = $1.629

Stock Market Analysis & Personal Finance Mr. Bernstein Present Value The amount needed today to be worth $1 at some point in the future $1 is discounted at a given interest rate PV = $$ / (1+interest rate)number of years Example: $1 in ten years at 5% discount rate $1 / 1.0510 = 61.4 cents

Stock Market Analysis & Personal Finance Mr. Bernstein Basic Financial Planning Strategies Obtain (Income) Plan (s/t, intermediate and l/t budget) Spend (Realistically) Save (Regularly) Borrow Wisely Invest (Growth Wealth) Manage Risk Plan for Retirement