Investment basics Financial Literacy

Usually, the higher the risk, the higher the potential return The chance that an investment will not be profitable The potential profit from an investment Usually, the higher the risk, the higher the potential return

Interest & Inflation When you invest by loaning funds, you gain profit through interest More risky investments often involve higher rates Inflation causes money to lose value over time Value of interest made on investments is worth less in the future

Nominal Interest Rates Real Interest Rates Do NOT account for inflation What the bank tells you Account for inflation More accurately predict future value

Factors affecting your profit State of the economy Government economic policy Taxes owed on returns Fees charged by brokers

“Miracle Returns” Watch the video below to answer this question: What is the difference between simple and compound interest, and which is preferable? Https://www.Youtube.Com/watch?V=wf91regw88q

Liquidity How easily an investment can be exchanged for cash More liquid investments can be sold quickly with fewer penalties

Things to keep in mind Avoid focus on “sunk costs” (money lost) Seek new opportunities Diversification Know your personality and balance it Be aware of tax laws, interest rates, and risks Be in the know of your employment benefits