Download presentation
Presentation is loading. Please wait.
Published byLester McKenzie Modified over 8 years ago
1
Practical Economics: Saving and Investing
2
Pay Yourself First Make investing a habit ▫$5,000 at 2% interest 20 year, $7,456 Long & Short Term Goals ▫At age 45, 3x salary
3
Goal Setting What do you want in life? ▫Career ▫Net worth ▫Accessories ▫Retirement
4
Risky Business Chance taken that all or part of the money put into an investment can be lost Bigger the risk, the bigger the POTENTIAL payoff
5
October 22 nd Please grab the two handouts available on the podium
6
Time is Money Time Value of Money ▫The more time spent on saving and investing, the more money one will accumulate Simple Interest ▫Earnings based on principle $1000 @ 4% Year 1: $1040 Year 2: $1080 Year 3: $1120 Compounded Interest ▫Earnings based on original principal and accumulated interest $1000 @ 4% Year1: $1040 Year 2: $1081.60 Year 3: $1124.86
7
Rule of 72 In order to calculate amount of time for investment to double, divide interest rate into 72 ▫Interest rate of 6 12 years for money to double
8
Savings Short-term needs or emergencies Very low risk, especially in FDIC insured institutions Accumulated interest
9
Savings Account No minimum deposit Very low interest ▫APY (Average Percentage Yield) 0.01% Immediate withdrawal of funds
10
Money Market Deposit Account (MMDA) $1000-$2500 minimum deposit High interest ▫Wells Fargo Bank, 0.03% APY Limited-check ability
11
Certificate of Deposit (CD) Time restriction ▫Maturity One month to five years $1000 minimum High interest rate ▫Fixed across term ▫Well Fargo 1 year, 0.05% Penalty for early withdrawal Taxable gains
12
Stocks and Bonds Stock ▫Security ▫Funds accumulated by a corporation To use in expanding business ▫5-7 years, 7% Stockholder ▫Investor ▫Entitled to certain part of future profits and assets Part owner
13
Stocks and Bonds Dividends ▫Return received on the amount that he or she invested in the company Dependent on profits Speculation ▫Sell for more than purchased
14
Stocks and Bonds Dividends ▫Procter & Gamble
15
Stocks and Bonds Capital Gain ▫Increase in value of an asset from the time it was bought to the time it was sold Capital Loss ▫Decrease in the value of an asset from the time it was bought to the time it was sold
16
Stocks and Bonds Bond ▫Certificate issued by company or government in exchange for borrowed money Bond’s maturity ▫Full amount plus interest paid at pre- described term Fixed interest 3-5% ▫Paid monthly
17
Stocks and Bonds Tax-exempt bonds ▫Issued by local and state governments ▫Interest is not taxed Savings bonds ▫Federal distributed $50-$10,000 ▫Interest is tax at end of term ▫Purchased at half-face value $50, purchased for $25 now
18
Stocks and Bonds Treasury bill ▫Certificate exchanged for a minimum $1000 ▫Matures in a few days to 26 weeks Treasury notes ▫Matures in two to ten years Treasury bonds ▫Matures in 30 years Exempt from state and local taxes, not federal
19
Stock and Bond Markets Stockbrokers ▫Person who acts as a go-between for buyers and sellers of stocks and bonds NYSE ▫New York Stock Exchange Chicago Exchange Tokyo London
20
Stock and Bond Markets Over-the-counter Market ▫Electronic purchase and sale of stocks and bonds Small companies, outside organized exchanges NASDAQ ▫National Association of Securities Dealers Automated Quotations 100 shares http://www.nasdaq.com/ http://www.nasdaq.com/
21
Stock Markets Stock Market Indexes ▫Measures of what is happening to a given set of stock prices Dow Jones Industrial Average The Dow ▫30 major companies ▫Increase/decrease in prices Standard & Poor’s 500 S&P 500 ▫500 major companies
22
Mutual Funds ▫Investment company that pools the funds of many individuals to buy stocks, bonds, and other investments Diversification ▫Could have as many as 100 (1000) Stock fund ▫Could have as many as 100 different bonds ▫Advantage $250 minimum (American Funds) IBM (all your eggs in one basket) Limits risks
23
Mutual Funds ▫Investor chooses type of stocks Large companies, growth industries Apple, Google, Facebook Outside the United States China Combination of stocks & bonds ▫Choose your flavor, but not the ingredients
24
Money Market Mutual fund used to make short-term loan to business and banks Large pool of short-term securities ▫Pool of CDs, 30 day paper Limited-checks ▫>$500 Interest (0.05%) earned on amount left in account Is not federally insured AAA Rate Debt Security ▫Very low risk
25
Investing for Retirement Pension Plan ▫Company provided retirement plan 401(K) Portion of paycheck is withheld with company matched amount ▫Tax incurred once funds are withdrawn
26
Investing for Retirement SEP Plans ▫Self-employed individuals can save a maximum of 15% of their income up to a specified amount each year ▫Can deduct amount from yearly taxable income
27
Investing for Retirement IRA ▫Individual Retirement Account Private retirement account that allows individuals (married couples) to save a certain amount of untaxed earnings per year with the interest being tax-deferred Deposits are tax deducted (credit) $5,500, if qualified Federal & State tax experienced when funds are withdrawn ▫59 ½ Roth IRA ▫Income is taxed before saved ▫Tax-free interest
28
Investing for Retirement IRA ▫Individual Retirement Account Bucket Chose to invest ▫Edward Jones Roth IRA ▫Income is taxed before saved No credits ▫Tax-free interest 59 ½ ▫Flexibility
29
Futures Bonds, Stocks, Mutual Funds, Real Estate Government Securities, Insured Savings Accounts, MMF, CD, Cash
Similar presentations
© 2025 SlidePlayer.com. Inc.
All rights reserved.