1. Chapter 6
Saving and Investing

2. Why Save? Economy as a whole benefits Businesses expand
Increased income
Increased standard of living
Security for retirement
You earn
interest on your savings
Many options for where to save
Passbook
Statement
Money market
Certificate of
Deposit (CD)
Be one of these…
Not one of these…

3. Investing: Stocks Can be a more RISKY investment!
Stocks (also called securities) are buying up “pieces” of a company’s profits
Company obtains funds for use to expand with hope of making larger profits
YOU get a “share” or “stock” in those profits (capital gain) OR losses (capital loss)
Example: buy at $20, sell at $30, capital gain = $10
Stockholder (person who owns stock) make money by:
Dividends (return of interest earned at company discretion)
Speculation (sale of stock at time when earnings are at their highest)
Can be a more RISKY investment!

4. Investing: Bonds USUALLY a SAFER investment!
A bond is a certificate issued by a company or government in exchange for borrowed money
Does NOT result in partial “ownership” of the company
Broker: the go-between for buyers and sellers
Tax-Exempt Bonds
Issued by government and interest is not taxed
Savings Bonds
Safe investment issued by government, you collect face value at end of term
T-Bills (3mos-1 yr), T-Notes (2-10 yrs), T-Bonds (10 + yrs)
Issued by U.S. Treasury with varying maturation terms
Interest exempt from tax
USUALLY a SAFER investment!

5. Where do I invest? Stock Exchange Over-the-Counter Markets Bond Market
NYSE (a place)
Over-the-Counter Markets
NASDAQ (digital)
Typically for quantities of shares
Bond Market
NY Exchange Bond Market (counter or digital)
Money Market Fund
Investors’ money used to buy short-term debt of companies and banks

6. Where do I invest? Mutual Funds
Investment company “pools” money of many individuals to buy a variety of investments (stocks/bonds)
Dow Jones Industrial Index (DJIA)
Standard & Poor’s (S&P)
Tracks stock prices over long period of time
Used by most middle class American’s as choice investment tool

7. Government Regulations
Securities and Exchange Commission
(SEC)
Securities and Exchange Act of 1934
Purpose: avoid another crash like 10/29/29
Administers regulatory laws
Authority over all investment sales
Investigates anything that affects value of stocks
Requires all info be made available to investors (prospectus)

8. How do I plan? How big should your nest egg be?
PATH #1
Pension Plans
401k (for-profit)
403b (non-profit)
Money is invested from each paycheck into selected investment options
Company matches what you invest
PATH #3
Real Estate
Buying land or buildings
Buy low, wait, sell high
Primary home purchase is a typical example
PATH #2
Individual Retirement Account
IRA
Non-work related
$2000/yr invested
Tax benefit yearly based on HOW MUCH you contribute in a yr.
Non-taxed until withdrawn
ROTH IRA
$2000/yr
No yearly tax benefit for investment
NEVER taxed

9. How MUCH do I save? How much risk? Diversification Values
Years until retirement?
Soon = less risk (lower interest return)
Later = more risk (higher interest return)
Diversification
Spread out investments over several
types
Lessons risk
Greater overall gains
Values
Where do you want/not want
to put your money?
Help community?
Avoid morally questionable
investments?
Foreign vs. Domestic