Compare risk and return between the various types of investments

Why Should We Invest??? 1. We can reach our financial goals 2. Cover Emergencies 3. Make Major Purchases 4. Provide for Retirement Tid-Bit: 87% of retirees are retiring with income of $10,000 or less

The lower the risk, the lower the return Keep This in mind! The lower the risk, the lower the return The higher the risk, the higher the return

Bonds Def: loan to a business or company for a certain amount of time. You earn interest during that time Risk: Essentially risk-free, but keep in mind the reliability of the company or government you are loaning to. Return: Because the risk is lower, the return is also not as high as other forms of investment

Stocks Def: owning a part of a company where you receive part of the profits the company makes Risk: very volatile and high risk – they fluctuate in value on a daily basis and there is no guarantee that you will make money Return: relatively high returns compared to bonds. We call the money you earn on a stock, dividends

Mutual Funds Def: A collection of stocks and bonds. You pool your money with other investors and have your Broker buy many different stocks and bonds then split the profits between all investors Risk: Because you are not putting all your money in one stock or bond, there is less risk. Return: Having a broker guide your investments helps you achieve higher returns, because of their knowledge of the market

Savings Def: a bank account where you deposit money that you do not use on a daily basis. You can also earn interest! Risk: very low-risk, as you can access your money at anytime and the bank keeps it safe Return: lower return (due to low interest rates) than other investments, but also more stable

Certificate of Deposit (CD) Def: an account where you deposit money and earn interest, but cannot readily access it for a certain amount of time Risk: low risk as they are insured by the FDIC (Federal Deposit Insurance Corp.) Return: Much higher return than a savings account because interest rates are much higher.