1. Road to Retirement

2. Investments

3. Why People Invest V1

4. Why People Invest V1 Inflation Quiz If you are earning 1% in a savings account and inflation is at 3%, will you be able to purchase more or less next year? What if you were earning 7% on a stock market investment with 3% inflation? Would you be able to purchase more or less next year? What if your bank offered you a CD at 4% but you had to keep your money in the CD for 5 years? What are the risks? In year 1 if the inflation rate was 3% would that give you more or less purchasing power? What if inflation jumped to 8% in the second year? Would that investment still make sense for you?

5. Why People Invest V1 Future Impact Activity

6. Important terms that relate directly to your financial freedom: CASH FLOW is the difference between the money you have available at the beginning and end of an accounting period. o Positive cash flow: Cash coming in is greater than cash going out. o Negative cash flow: Cash going out is greater than cash coming in. o Breakeven cash flow: Cash coming in and cash going out are the same. NET WORTH equals Assets minus Liabilities. ASSET is any item of economic value owned by a person or corporation Tangible assets include gold, real estate, stocks. Intangible assets include copyrights, trademarks, brand recognition. Introduction to Investing V2

7. Important terms that relate directly to your financial freedom (cont): LIABILITY is a loan and/or other obligation you have to pay. Preparing to Invest V3 RETURN ON INVESTMENT (ROI). This performance measure helps investors compare the return offered by one investment to returns on other investments. ROI is calculated by dividing an investment’s financial yield by its cost. The result is expressed as a percentage or ratio.

8. Compound Interest V4 Rule of 72 How long will it take for your money to double?

9. Compound Interest V4 Answer:

10. Understanding Risk Inflation Risk – The value of an asset or income decreases due to the reduced value of the currency. Liquidity Risk – The inability to convert an asset to cash. Interest Rate Risk – When interest rates rise, the value of a fixed-rate investment will decline in value. Business Risk – The potential for a company in which you have invested (in a stock or bond) to go out of business, become bankrupt, or be unable to pay back their bond obligations. Risk & Potential V5

11. Understanding Risk (cont) Opportunity risk – When you’re presented with a better investment option than the one to which you’ve committed your money. Credit Risk – Credit risk is a specific risk for bondholders where the bond issuer cannot make interest or principal payments. Market Risk – The uncertainty and movement of financial markets is termed market risk. Reinvestment Risk – This risk mainly applies to those bondholders whose bonds are coming due who are seeking a bond investment with equal or greater interest and the same amount of risk. Political Risk – Government action that might change the value of the investment is a risk that must be considered. Risk & Potential V5

12. Tips to Reduce Risk Risk capital is money that you can afford to lose without encountering dangerous financial circumstances. Only invest risk capital. Invest with the guidance of trusted advisors. Create an overall investment plan. Be diligent in your research on specific investments. Determine risk and reward for each investment. Make sure that you have a plan in place in case the investment does not go as planned. Risk & Potential V5

13. Building a Team of Trusted Advisors V6 Your financial team may include: Financial Advisor College Planner Tax planner / CPA Attorney Insurance Agent Financial Mentor Investment Advisor Real Estate Professional

14. Types of Investments V7 Savings Account Certificate of Deposit Annuities Individual Stocks Mutual Funds Commodities Exchange Traded Fund Bonds Real Estate Currency

15. The Stock Market V8 Stock Market Basics When you own a stock you own part of the company. The stock market is one piece of the overall U.S. financial market. The stock market trades the stock of companies and other financial securities. The stocks of companies are listed and traded on stock exchanges. The stock of companies in the United States is listed on several different exchanges; for example, the New York Stock Exchange (NYSE) and the NASDAQ. Stocks are bought and sold by bidding. The worth of the stock you own can change, depending on demand for the company’s stock.

16. The Stock Market V8 Basic Principles: Supply and Demand Risk and Return Ownership Types of Investors: Day Traders Short Term Investors Long Term Investors

17. Investment Diversification V10 Bonds Money Market Instruments Mutual Funds Stocks Real Estate Business

18. Investment Checklist V11  You have a basic understanding of investing and why people invest.  You know some of the risks of investing, and also the opportunity cost.  You have a plan to build a team of trusted advisors to help you with your investments.  You have knowledge of the basic principles of the stock market and how the market works.  You understand how to diversify investments and how diversification lowers risk.