1. Chapter 2 Investments

2. Savings vs Investing Savings< than 5 years
Investing > than 5 years

3. Risk, Return, and Reward
Investors must weigh the risk involved with an investment against the possible return expected.
Higher the risk > the possible return will be.
Lower the risk< the possible return will be.

4. Rules of Investing KISS Keep it Simple Stupid
Must understand the investment thoroughly!!
Never borrow money to invest
Never invest to save money on taxes

5. Diversification Spread around Do not put all your eggs in one basket
Lowers Risk

6. Personal Risk Tolerance
Conservative- ( Low)
Moderate( Growth Stock)
Speculative ( High )

7. Returns …………..
Risk-free investments (those guaranteed by the government) come with a relatively low return.
Return on investment (ROI) – is a measurement of return expressed as a percentage. It tells how much you will receive either in cash or increased value.

8. Return on Investment (ROI)

9. Risk return and Liquidity
Potential
Return
Liquidity= Availability
Liquidity

10. Investing
Do Now: Investment $ Return: $27.00 Compute the ROI

11. Money Facts Throughout the stock market history
97% of five –year periods made money
100% of 10 year have made money

12. Low Risk: Types of Investments
Certificate of Deposit: ( bank)
savings account typically in a bank
Charge you for taking your own money out
Money market (Bank)
check writing privileges
great for emergency funds
Bonds (Broker)
Debt instrument which the company owes you money .
Return is the fluctuation of the interest rate
Few do well individually
Explain that CD and money markets are savings and opened through banks not brokers

13. Types of Mutual Funds Small Cap: Aggressive growth funds
Mid –Cap Fund: Medium Size companies
Large Cap: Growth and Income Funds
International : International companies

14. Types of High Risk Investments
Single Stocks
No more than 10% of your investment
Only 7% average return to low
Buying small piece of ownership

15. Bad/Horrible Investments
Annuities
Savings account with an Insurance company
Fixed annuities are at a low interest rate
Variable annuities are mutual funds sheltered and allowed to grow tax -deferred

16. Horrible Investments Gold, Commodities and Futures Day Trading
Viaticals

17. Financial Markets
Financial Market – any place where investments are bought and sold.
Bull Market – exists in the stock market when prices are steadily increasing.( confident)
Bear Market – exists in the stock market when prices are steadily decreasing.
Securities Exchanges & Markets
The New York Stock Exchange (NYSE)
The American Stock Exchange (AMEX)
NASDAQ (over-the-counter market)
The term comes from the way these animals attack their opponents.
Bull horns go up
Bear swipes its paws down

18. Name that Investment
Viaticals: buying the beneficiary position on a life insurance policy of someone who is dying. ( Full of fraud/top 10 scams)
Real Estate : The least liquid of all consumer investments. Never pay retail price , need lots of cash
Oil and Gold: commodities/futures
Annuities: A savings account with an insurance company

19. Name that Investment
Certificate of Deposit: (CD) charged a penalty if withdrawing money early from this type of bank account.
Single Stock: represents a piece of ownership in a company ex:100 shares of Walmart
Bonds: a debt instrument where the return comes on the interest rate paid on the loan
Mutual Funds: Portfolio mangers who do lots of research manage this pool.

20. Name that Investment Bonds: As interest rates rise these prices fail.
CD: 6 or one year savings account that pays a little more interest than a regular savings account.
Commodities / Futures: ex: if oil hits a certain amount of money in 90 days your money will increase tenfold.
Mutual Fund: Could consist of companies.