1. Saving and Investing

2. Investing and Free Enterprise
Investing money is a way to increase your money by either not using it today (savings), or by using it to create more money (stocks, bonds, business ownership, property, etc…)
This invested money is used to build new business, and encourage economic growth.

3. Financial Intermediaries
There are many kinds of businesses that link savers and borrowers
Risk can be reduced by diversifying (having more than one type) investments
Banks, Savings and Loans, Credit Unions
Finance Companies
Mutual Funds
Life Insurance Companies
Pension Funds

4. Risk in Investing
Typically, the higher the payout, the riskier the investment. These risks can be described in different ways
Credit risk (The borrower can fail or bankrupt)
Liquidity risk (Cash tied up in non-cash investments)
Inflation rate risk (Interest rates change, lowering return)
Time risk (Your money might be unavailable for a while)

5. Financial Assets
Bonds: (I.O.U.) Many kinds of bonds, including Federal, corporate, municipal, and others.
Certificates of Deposit (CDs)
Money Market Mutual Funds (Trading financial assets like bonds, with a group of investors)
401Ks, IRAs, T-Bills, Stocks

6. Stocks
Stocks are investments that show partial ownership in a company

7. Stocks come in two main varieties:
Common Stock can vote, lower priority
Preferred Stock cannot vote, higher priority
Profit can be made by collecting dividends or by selling the stock (capital gains)
As stocks increase in value, they may split
Stock prices are determined by supply and demand, and therefore are not necessarily representative of the value of the company – this can cause “bubbles” like the technology bubble at the end of the 1990s

8. Stocks are traded at stock exchanges around the world, or online
American - Nasdaq
New York - Hong Kong
Tokyo - London
Many stocks are included in Indexes. These Indexes are used to determine the health of the market
Dow Jones Industrial Average (DJIA)
Standards and Poor’s 500 (S&P 500)
Russell’s 3000
Nikkei Index

9. DJIA 1928 to present

10. Bull and Bear Markets
Bull and Bear markets describe general conditions in the market
A Bull Market is going up
A Bear Market is going down