1. The Basics of Savings and Investing
Mrs. Sandy Prestage
Marketing II

2. Unit 1 Key Terms (refer to handout for definitions)
Benefits
Choices
Compound Interest
Decision Making
Diversification
Financial Plan/ Investment Plan
Goals
Interest Rate
Investing
Limited Resources
Market returns
Needs vs. Wants
Opportunity Costs
Rainy Day Fund
Risk
Savings
Time Value of Money
Trade-offs
Values

3. Why People Save and Invest
Preparing for a career, often by going to college
Saving for major purchases (college education, a family, a first home)
Building up a “rainy day” fund for emergencies (job layoff, etc)
Developing a personal financial/investment plan
Starting a savings and investment program

4. How to think about making financial decisions..
Decision Making Model
Define the issue or problem
Gather info
Consider alternatives and consequences (the trade-offs/opportunity costs)
Make a decision and take action
Modify plans as needed

5. Key Concepts of Saving and Investing
Pay yourself first (Make investing a habit) Start early (refer to the Time Value of Money handout)
Set goals that will inspire success (instead of saying you want financial security at retirement, say $500,000 net worth by age 60)

6. Types of Goals
Short term goals will happen within a few months (ex. Senior trip). Low-risk vehicles such as CD’s are better than investments like stock.
Medium term goals – a few years to accomplish (ex. – first car, college) consider mutual funds that pay dividends that don’t fluctuate too much in price.
Long-term goals – several years away (ex. Retirement) Higher risk investments such as stocks, bonds, long term CDs, Individual Retirement Accounts (IRA),

7. 3. Don’t take unnecessary risks
Risk and investing goes hand-in-hand. With greater risk comes the potential for a greater reward. Remember, there are NO Guarantees! Control risk by having 3-6 months living expenses in a savings account.
4. Put time to work for you. (see handout) Compounded interest can create impressive sums when even small amounts are invested regularly.

8. Mary, Mary quite contrary,
5. DIVERSIFY…
Mary, Mary quite contrary,
How does your financial garden grow?
With STOCKS, BONDS, and MUTUAL FUNDS…
A DIVERSIFIED Portfolio!
Never put all your “eggs in one basket”
The greater the diversification, the lower the exposure to risk!

9. Video Links (if these do not work, go to www. investorprotection
Video Links (if these do not work, go to and look under the correct Unit.

10. Unit 2: Key Terms Introduction to Financial Markets
Economic indicators
Economy
Exchange
Financial Industry Regulatory Authority (FINRA)
Financial Markets
Free Enterprise System
Futures
Gross domestic product
Load vs No-load
Market Economy
Markets
Mutual funds
12(b)-1 fees
Blue Chip Companies
Bond Market
Caveat Emptor
Commodity Futures Trading Commission (CFTC)
Common vs Preferred Stock
Consumer
Coupon Rate
Dividend
Dollar Cost Averaging
Dow Jones Industrial Average (DJIA)
Economic growth

11. Unit 2: Key Terms, cont. NASDAQ Stock Market Net Asset Value (NAV)
New York Stock Exchange (NYSE)
Private vs public companies
Prospectus
Risk tolerance
Securities and Exchange Commission (SEC)
State securities regulators
Stock
Stock market
Supply vs demand

12. Reasons to study financial markets…
Young people today are the investors of tomorrow.
A person doesn’t have to be rich to start investing.
The financial markets will play a major role in the lives of most Americans.

13. 6 major types of investment risks…
What is your risk tolerance? It varies from person to person depending on the stages of life.
6 major types of investment risks…
Interest rate risk
Business failure risk
Market price risk
Inflation risk
Political risk
Fraud risk

14. Benefits of Mutual Funds
Diversification
Professional Management
Often low-cost shares
Liquidity
Before investing in a mutual fund
Learn the objective of the fund
What securities the fund owns
The level of risk
Its earning record as compared to similar funds.

15. Five main factors that affect a stock or bonds value
Investor actions
Business conditions
Government actions
Economic indicators
International events and conditions

16. Responsibilities of Self-Regulatory Organizations
Establish rules governing trading and other activities
Set qualifications for industry professionals
Oversee the conduct of their members
Impose discipline in instances of unethical or illegal behavior
Administer the licensing process, including background investigations and licensing exams