How do you determine your investment risk? Investing for Your Future Section 3 Chapter 11 Financial Investment -Money set aside to increase wealth over time and accumulate funds for long-term financial goals such as retirement.

Stages of Investing Stage 1. Put-and-take account Checking/savings account for expected and unexpected expenses Stage 2. Beginning investing Invest excess savings in conservative low risk investments. Stage 3. Systematic investing Investing on a regular and planned basis Diversification-spreading the risk among many types of investments. Stage 4. Strategic investing Careful management of investment alternatives to maximize growth of your portfolio(collection of investments) Stage 5. Speculative investing Additional money to be used in high risk investments.

Reasons for Investing Advantages: Investing helps beat inflation. Inflation-A rise in the general level of prices. Investing increases wealth. In general-Investments earn higher profits than savings increasing your assets which increase your net worth. Investing is fun and challenging. By choosing investments, buying and selling at specific times can create more financial security. Diversification - to spread the risk of investment Minimizes loss of potential risky investments.

Risks of Investing Risk is the chance that an investment's return will be different than expected. Return is the gain or loss of an investment in a particular period Short-term investments are generally more risky than long-term investments. Interest –Rate Risk 2% APY on CD 3% increase in inflation Market Risk Dow Jones declines to 6500 points from 14036 Company or Industry Risk Big Three Auto Manufacturers request Bail-out Money Non-Market Risk 9-11, Katrina

Costs of Investment Capital loss-the decrease in the value of an investment below the price initially paid for it. Fees financial institutions may charge: Commission-fees to a third party for assisting in a business transaction, such as buying or selling an asset. Expense ratio- rate take from entire fund to cover overhead expenses Transaction fee-flat fee that you pay each time you buy or sell stock Front load-is a percentage that is charged for each stock you buy Back load-is a percentage that is charged for each stock that you sell.

Criteria for Choosing an Investment Degree of safety (risk of loss) Degree of liquidity(ability to get your money quickly) Expected dividends or interest Expected growth in value that exceeds the inflation rate (Rate of return-inflation rate=Growth in value) Reasonable purchase price and fees Tax benefits saving or postponing tax liability tax deferral

Wise Investment Practices Define your financial goals. Go slowly. Follow through. Keep good records. Seek good investment advice. Keep investment knowledge current. Know your limits.

Sources of Financial Information Newspapers(Wall Street Journal) Investor services and newsletters (Moody’s Investors Service and Standard and Poor’s Reports) Financial magazines (Money and Kiplinger) Stockbrokers-an employee of a brokerage firm, who buys and sells securities for investors. Financial advisers-trained professional planners who give overall investment advice based on your goals, age, lifestyle, and other factors. Annual reports – a summary of a corporation’s financial results for the year and prospects for the future. Online investor education-educational information for new investors(Motley Fool, MSN Money, Yahoo Money)