Intro to Investing © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.

Daily Objectives Explain diversification. Compare the relationship between risk & return. Determine how long it will take your money to double using the rule of 72. © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.

Saving to Investing Once you have built up an emergency fund, switch your goals from saving to investing. An emergency fund is usually 3-6 months of expenses. © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.

What is Investing? Purchase of assets with the goal of increasing future income Focuses on wealth accumulation Appropriate for long-term goals © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.

The Risk of Inflation The safest investments are ones that seek to preserve your money, like CDs or money market funds. While they may be important in your overall financial plan, you need to be aware of inflation risk. Inflation is like an invisible tax that erodes the purchasing power of any investment. To maintain an investment’s purchasing power, its total return must keep pace with the inflation rate. © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.

Savings vs. Investing Savings Investing Objective Short-term needs Long-term growth Products Savings account, money- market account, CD Stocks, bonds, mutual funds Risks None if FDIC insured; inflation risk Varies Source of Return Interest paid on money deposited Interest, dividends, capital gains and losses Key Benefit Safe and accessible Returns outpace inflation over the long term Key Drawbacks Returns historically have not out-paced inflation over the long term Risk of losing money if securities decline in value © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.

What You Need to Know There are many ways to invest your money. Before you invest, think about these factors: Safety – How risky is it? Liquidity – Can you easily get your money out of the investment? Return on the investment – What's your earning potential?  © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.

Keep It Simple Silly/Stupid K.I.S.S. Keep It Simple Silly/Stupid Most systems work better if they are less complex. How does this apply to investing? You should never invest in anything that you do not understand. © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.

Risk vs. Return Risk: the potential that an investment may fail to pay the expected return As risk goes down, potential return goes down As risk goes up, potential return goes up © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.

Investment Philosophy Investment Philosophy- an individual’s general approach to investment risk Varies based on age, values, amount of money, goals, etc. © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.

Investment Categories Conservative Taking on less risk Used when an individual has a short time frame until retirement. Moderate Taking on some risk Used when an individual has a moderate time frame until retirement. Aggressive Taking on high risk Used when an individual has a long time frame until retirement. © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.

What level of risk? Bob is saving for a down payment on a house. He expects to have the full down payment in six months. What level of risk would you recommend for Bob? Why? Bob should seek low risk savings tools because there is not enough time to invest. (Shorter time frames carry more risk.) © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.

What level of risk? Alicia just graduated from college and began her first job. She would like to buy a condo and believes that she could save enough for the down payment in about five years. What level of risk would you recommend for Alicia? Why? Moderate risk because of the moderate time frame. © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.

What level of risk? Maria is 16 and has earned some extra money at her summer job. She does not need the money in the near future. She wants to put the money into a brokerage account and let it grow over time. What level of risk would you recommend for Alicia? Why? High risk (Aggressive) because of the long time frame. © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.

Portfolio A grouping of financial assets such as stocks, bonds, mutual funds, index funds, and cash equivalents. An investment notebook © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.

Diversification Spreading out your money in multiple investments Choose different high risk vs. low risk investments Invest some of your money in stocks, buy some bonds, mutual funds, or CDs © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.

Career Spotlight: Financial Planner A financial planner is an advisor who helps people make investment decisions to meet stated goals. Work for brokerage firms and at financial institutions Investors provide the financial planners with data about assets owned, debts owed, income earned and their financial goals, the planner considers the info and suggests options that will help meet the investor’s goals © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.

Rule of 72 This is a quick way to calculate how long it will take to double your money if it is invested at a particular interest rate. It is all about the power of time. 72/ Interest Rate= Number of Years to Double 72/ Number of Years to Double= Interest Rate Ex. If you expect a return of 6%, 72/ 6 = 12, it will take 12 years to double your money. © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.

Rule of 72 Investment Rate of Return Years to Double CD 3.0% Bond 27 Stock 10% Money Market 42.4 1) 24 2) 2.66% 3) 7.2 4) 1.7% © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.

Rule of 72 A: If you invest $11,000 at 3% interest, how long with it take to double? 24 years B: If you invest $1,000 at .2% interest, how long will it take to double? 360 years C: If you invest $4,000 at 10% interest, how long will it take to double? 7.2 years What is an example of an investment of A, B, and C? A– bond, B—savings account, C—stock or mutual fund © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.

Discussion When should you switch your goals from savings to investing? What benefit can you gain from investing? How is risk related to return? What does it mean to diversify? How might an individual’s investment philosophy change throughout their lifespan? What does the rule of 72 tell us? © 2018 Business Girl. Image Credit to Unsplash. All Rights Reserved.