Investing & Housing Let your money make money.
Risk v. Return All investments have risk & return Undiversifiable Risk – Uncontrollable Diversifiable Risk – Specific to each company More risk = more return Portfolio diversification reduces risk
Investing in Stocks Investment with most risk Reduce risk by buying mutual fund Stocks traded through stockbrokers – online or person Your goals affect your risk & return Patience is the key
Investing in Bonds Loans to corporations Less risky than stocks Bought & sold through broker Used to raise capital Holders receive interest payments & repayment of loan
Governments sell municipal bonds Federal government sells treasury instruments Each has different interest rates & maturity dates T.I.s have lower risk & return Investing in Bonds
Individual Retirement Accounts Considered investments & savings Financial advisor selects stocks & bonds to invest in Offered by employers & banks Traditional – Yearly contributions, taxed on withdrawal Roth – Taxes taken out on deposit
Renting a Home How much should you pay? What are the other expenses? Location & Amenities What to save for Read lease carefully Choose roommates Rights & Responsibilities
Good & Bad of Renting Benefits Money saved can be invested You don’t have to do maintenance Negatives Renting is only borrowing Rent can be raised when lease is renewed
Buying a Home Good investment, but big commitment Monthly mortgage should be 30% of monthly income
Good & Bad of Buying Benefits Good investment – value increases Builds equity, can be used to borrow money Tax deductions You get to choose what changes to make Negatives Huge financial responsibility Lots of upkeep Home Owners’ Association