Investing your money This class is going to give you money to invest. How would you invest it??

Things to consider Safety: how risky is it? Liquidity: can you easily get your money out of the investment? Return on the investment: what is your earning potential?

Certificates of Deposits CDs are bought at the Bank. o Bank gives a certificate saying amount deposited, interest rate being paid and how long the money must remain in the account o CDs pay slightly higher interest rates than savings accounts The pay different rates and require different lengths of time you keep money in them

Investing in CDs Safety: Bank CDs are FDIC-insured. $ is protected Liquidity: CDs are investments for a certain amount of time. 3 months, 6 months, 1 year, 5 years. If you withdraw early, you must pay a penalty. Return: longer the deposit time, the higher the interest rate (or return) Interest rates are fixed and can not change. Typically CD rewards you with compound interest (interest on the interest you already earned). Required amount: invest a certain amount.

Money Market Account A savings account offered by a bank or brokerage company. Safety: FDIC insured (under $100,000) Liquidity: unlike a CD, you may withdraw at any time. Return: no fixed interest rate. Interest goes up and down but earns more than saving account Requirements: deposit certain amount, keep a certain amount

US Bonds When you buy a bond you are lending money to the federal government. Safety: money you invest in bonds is back by the full faith and credit of the federal government. Liquidity: Long-range investing. Money is tied up for years Return: interest rate is low since there is a lower risk of bonds

Mutual Funds Combine the money of many investors to by many kinds of investments. (stocks, bonds, real estate, etc.) Safety: RISK because no one insures your investment Liquidity: can withdraw at any time, price paid is on the worth of share that day Return: no guarantees

Stocks Safety: there’s no FDIC to protect you against losses. No compound interest. Liquidity: sell at any time.

Collectibles Items you buy, hold onto and hope they’ll be worth more someday because they‘re rare Baseball card, action figure dolls, coins stamps comics, etc. Safety: no guarantees that the item will grown in value or that anyone will want to buy it. Liquidity: the only way to get your money back is to find a buyer willing to pay the price

What would you invest in??? Do you want the guarantee? Do you have the patience for a long term investment? Want to invest with the government? Willing to risk it to make money? Do you know what would be collectable in the future and could you keep it safe for years?

How long will it take to become a Millionaire? With $10,000 invested 3%- 46 years 4.94%- 36 years 4.94%- 37 US 7.86%- 27 years Mutual 8.34%- 26 years Stock 11.99%- 21 years

Lets try the stock market

What is the Stock Market A place where stocks and bonds are bought and sold (traded). The goal is to buy the stock, hold it for a time and then sell for more than you paid for it. Investors who hold on to stock for 15 years or longer are usually more successful. BUT there is no Guarantee o Stocks is units of ownership in a company

Companies sell stock to…. Get money. o They use money for… Research better ways to make things Create new products Improve the products they have Hire more employees Expand or modernize their buildings

How it works Once you buy stock you become a stockholder (own a “part” of the company) If the company’s profits go up, you “share” in those profits If the company’s profits fall, so does the price of your stock o If you sold your stock on a day that the price was lower that what you paid for it then you would lose money.

In the stock market, prices rise and fall every day. The hope is that over the years, the stock will become much more valuable than the price you paid for it.

Try your hand at the stock market Log onto o Create a profile Give teacher your user name She will add you to a group, you must accept o You are given $10,000 Weseed cash to invest in stocks. At the end of the semester you will review your stock choices. o You may choose any stock you want as much as you want. You may NOT add money beyond the $10,000. o Trade as often as you like (as long as it does not interfere with class assignments) or leave to see what will happen.