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Investment basics Financial Literacy.

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Presentation on theme: "Investment basics Financial Literacy."— Presentation transcript:

1 Investment basics Financial Literacy

2 Usually, the higher the risk, the higher the potential return
The chance that an investment will not be profitable The potential profit from an investment Usually, the higher the risk, the higher the potential return

3 Interest & Inflation When you invest by loaning funds, you gain profit through interest More risky investments often involve higher rates Inflation causes money to lose value over time Value of interest made on investments is worth less in the future

4 Nominal Interest Rates
Real Interest Rates Do NOT account for inflation Account for inflation More accurately predict future value

5 Factors affecting your profit
State of the economy Government monetary and fiscal policy Taxes owed on returns Fees charged by brokers

6 “Miracle Returns” Watch the video below to answer this question:
What is the difference between simple and compound interest, and which is preferable?

7 Liquidity How easily an investment can be exchanged for cash
More liquid investments can be sold quickly with fewer penalties

8 Things to keep in mind Avoid focus on “sunk costs”
Seek new opportunities Diversification Know your personality and balance it Be aware of tax laws, interest rates, and risks Be in the know of your employment benefits

9 Classwork There are four short group assignments to complete. Your group should take one handout at a time to work on. Consumer Decisions Insurance Types of Investments Financial Trouble

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