1. How do you determine your investment risk?
Investing for Your Future
Section 3
Chapter 11
Financial Investment -Money set aside to increase wealth over time and accumulate funds for long-term financial goals such as retirement.

2. Stages of Investing Stage 1. Put-and-take account
Checking/savings account for expected and unexpected expenses
Stage 2. Beginning investing
Invest excess savings in conservative low risk investments.
Stage 3. Systematic investing
Investing on a regular and planned basis
Diversification-spreading the risk among many types of investments.
Stage 4. Strategic investing
Careful management of investment alternatives to maximize growth of your portfolio(collection of investments)
Stage 5. Speculative investing
Additional money to be used in high risk investments.

3. Reasons for Investing Advantages: Investing helps beat inflation.
Inflation-A rise in the general level of prices.
Investing increases wealth.
In general-Investments earn higher profits than savings increasing your assets which increase your net worth.
Investing is fun and challenging.
By choosing investments, buying and selling at specific times can create more financial security.
Diversification - to spread the risk of investment
Minimizes loss of potential risky investments.

4. Risks of Investing
Risk is the chance that an investment's return will be different than expected.
Return is the gain or loss of an investment in a particular period
Short-term investments are generally more risky than long-term investments.
Interest –Rate Risk
2% APY on CD 3% increase in inflation
Market Risk
Dow Jones declines to 6500 points from 14036
Company or Industry Risk
Big Three Auto Manufacturers request Bail-out Money
Non-Market Risk
9-11, Katrina

5. Costs of Investment
Capital loss-the decrease in the value of an investment below the price initially paid for it.
Fees financial institutions may charge:
Commission-fees to a third party for assisting in a business transaction, such as buying or selling an asset.
Expense ratio- rate take from entire fund to cover overhead expenses
Transaction fee-flat fee that you pay each time you buy or sell stock
Front load-is a percentage that is charged for each stock you buy
Back load-is a percentage that is charged for each stock that you sell.

6. Criteria for Choosing an Investment
Degree of safety (risk of loss)
Degree of liquidity(ability to get your money quickly)
Expected dividends or interest
Expected growth in value that exceeds the inflation rate (Rate of return-inflation rate=Growth in value)
Reasonable purchase price and fees
Tax benefits
saving or postponing tax liability
tax deferral

7. Wise Investment Practices
Define your financial goals.
Go slowly.
Follow through.
Keep good records.
Seek good investment advice.
Keep investment knowledge current.
Know your limits.

8. Sources of Financial Information
Newspapers(Wall Street Journal)
Investor services and newsletters (Moody’s Investors Service and Standard and Poor’s Reports)
Financial magazines (Money and Kiplinger)
Stockbrokers-an employee of a brokerage firm, who buys and sells securities for investors.
Financial advisers-trained professional planners who give overall investment advice based on your goals, age, lifestyle, and other factors.
Annual reports – a summary of a corporation’s financial results for the year and prospects for the future.
Online investor education-educational information for new investors(Motley Fool, MSN Money, Yahoo Money)