1. Investing for Your Future
Personal Finance Chapter 11
Lesson 11.1 – Investing Fundamentals
Lesson 11.2 – Exploring Investment Options

2. Stages of Investing Goals for investing vary person to person
As excess income grows, you can progress through different stages of investing
Five stages of investing:
Put-and Take Account
Beginning Investing
Systematic Investing
Strategic Investing
Speculative Investing

3. Stage 1 Put-and-Take Account
First savings account is a temporary account
Purpose is to pay for short-term needs with enough left over to cover unexpected expenses
Many financial advisers recommend that you have three to six months net pay set aside for this type of fund

4. Stage 2 Beginning investing
Investing is the use of savings to earn a financial return
Investing begins when your savings are permanent rather than temporary
Initial investment should be conservative and low-risk
Don’t have a lot of money to invest

5. Stage 3 Systematic Investing
After you become comfortable with your beginning investments, you can start investing on a regular and planned basis
Regularly set aside a certain amount each month for investing
Goals are long-range – investing for a financially secure retirement

6. Stage 4 Strategic Investing
The careful management of investment alternatives to maximize growth of your portfolio over the next 5-10 years
You invest in different types of securities to try to maximize your returns

7. Stage 5 Speculative Investing
Occurs when you are investing regularly but still have money available to take bigger risks
Can make – or lose – a large amount of money in a short period of time
Many investors never choose to speculate

8. Reasons for Investing Investing Helps Beat Inflation
When prices are rising rapidly, you may not be able to earn a return that beats inflation
Investing Increases Wealth
Over the long run, investments earn higher profits than savings do
Investing is Fun and Challenging

9. Risk and Return All types of investing involve some degree of risk
Diversification is one way to reduce risk
Spread the risk among many types of investments
Types of Risk
Interest-rate Risk
Political Risk
Market Risk
Company or Industry Risk

10. Investment Strategies
Criteria for Choosing an Investment
Safety
High liquidity
High dividends or interest
Growth in value that exceeds the inflation rate
Reasonable purchase price
Tax benefits

11. 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

12. Assignment Chapter 11 Worksheet – Due Wednesday
If you want some extra credit points, you can do the questions for Chapter 11 on page They must be placed in my drop box at the beginning of class on Wednesday.
Start thinking about companies you might be interested in investing in.

13. Sources of Financial Information
Newspapers
Investor Services and Newsletters
Financial Magazines
Brokers
Financial Advisers
Annual Reports and Financial Statements
Online Investor Education

14. Investment Options
Investments can be put into different groups according to their degree of risk and expected return:
Low Risk/Low-to Medium Return
Medium Risk/Medium Return
High Risk/High Return

15. Low Risk/Low-to-Medium Return
Corporate and Municipal Bonds
Interest usually paid every six months
Principal repaid at maturity
Interest on gov’t bonds usually tax-free
U.S. Government Savings Bonds
Series EE Savings Bond (discount bond)
Series HH Savings Bond (exchange for EE Bonds)
Treasury Securities
T-bills
Treasury Notes
Treasury Bonds

16. Medium Risk/Medium Return
Mutual Funds
Large, professionally managed group of investments
Fastest growing segment of financial services industry
Annuities
Sold by insurance companies
Self-Managed Retirement Accounts
401(k), 403(b), IRA, Keogh Plan
Real Estate

17. High Risk/High Return
Stocks
Futures
Options
Penny Stocks
Collectibles