Unit 3, Lesson 7 Investment Concepts AOF Financial Services Copyright © 2007–2012 National Academy Foundation. All rights reserved.

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Presentation transcript:

Unit 3, Lesson 7 Investment Concepts AOF Financial Services Copyright © 2007–2012 National Academy Foundation. All rights reserved.

People invest to get their savings to grow Compounding is a powerful tool for increasing wealth. Because of inflation, money that is not invested actually loses value over time. Saving and investing are important for meeting financial goals. In the past, people often hid their money at home. Can you list some reasons why this is a bad idea? Inflation Value of savings

Some degree of volatility and risk is common to all types of investments Volatility is a measure of range of value of an investment product. Risk is a measure of the likelihood that a investment product will lose value. Usually, the higher the risk and volatility, the greater the chance for higher returns. Why do you think investment products with high potential for returns usually have the greatest risk and volatility?

Liquidity and low volatility are important to some investors Liquidity is a measure of how easy it is to convert your investment product into cash at any time. When an investment has low volatility, it means the value of the investment for the most part remains within an expected range. Why do retired people often prefer investment products with low risk and volatility?

There are two main types of investment products Stocks Some Bonds Some Mutual Funds Growth Investments Income Investments Passbook Savings Certificates of Deposit Money Market Funds

Income from most investments is taxed Income from growth investments is usually taxed. Losses from investments are also deducted from taxes. There are some special types of investment tools, such as IRAs, where the taxes are deferred. Also, some government bonds are tax free.

Investments are an important part of a financial plan Age: 20s 30s 40s 50s 60s 70s 80s Growth Investments Income Investments Buy House Income Investments Retire- ment