BizWiz Lesson 2

Investing  Why do people choose to invest rather than keeping their money in a piggy bank?  How can you make your money work for you?

Terms to Know  Financial goal- the amount of money an investor hopes to make on an investment  Investment strategy- a plan of action taken to achieve a financial goal  Investment portfolio- a collection of investments owned by an individual or a group

Risk Tolerance  Risk- the perceived chance of injury, damage, or loss  Most people make decisions involving risk every day, but the degree of risk they are willing to take depends on their perspective of what they have to lose or gain.

High-risk vs. low-risk  At your tables, list 3 types of activities a person with a high risk tolerance might be interested in trying.  List 3 types of activities a person with a low risk tolerance might be interested in trying.

Risk Tolerance  3 types  Risk Averse  Risk Neutral  Risk Tolerant

Risk Averse  Low risk tolerance  Prefer lower but safer returns  Cannot afford to lose money  Do not have a lot of extra money in savings  Losing money would create financial stress (cannot pay bills, etc.)

Risk Neutral  Seek a balance of high- and low-risk investments  Can afford to lose some money, but not a lot  Have some money in savings  Losing money would not create great financial stress (still able to pay bills), but losing a lot could be troublesome

Risk-Tolerant  High risk-tolerance  Seek higher-risk investments that may yield higher returns  Financially comfortable position, can afford to lose money  Have a lot of money in savings  Losing a lot of money would not create a financially stressful situation

Shopping Spree!!!  Each table will select a card with a monthly income  You will have a chance to go on a shopping spree, but you must have enough money in your bank account to cover your expenses for the next month  Rent and bills-$250  Food-$50  Transportaion-$50  The remaining money will be disposable income, money available for spending and saving

Shopping Spree Item  Video games  Amusement park tickets  Football game tickets  Concert tickets  Clothing store certificates  Helicopter rides  Hot air balloon rides Price $20 each $30 each $40 each $75 each $100 each $200 each $250 each

Risk Tolerance  What kind of investor is represented by Group A? Group B? Group C?