1. INVESTMENTS The greater the risk – the greater the return
Stocks
Bonds
Savings Accounts
Collectibles
Mutual Funds
Futures
Real Estate

2. PYF? PLAN YOUR FUTURE (pay yourself first) What are our goals?
Short and long term
WHERE DO YOU SEE YOURSELF 5 YEARS FROM TODAY?
WHERE DO YOU SEE YOURSELF 10 YEARS FROM TODAY?
Needs vs. Wants?
Investigate your options – risk vs. reward
Time is on your side … start today!
Prepare a budget
Stick with the plan and you will succeed!

3. Typical Expenses Pay Yourself First 10% 5% 10% Charity 5% 5% 5%
Housing 20%
12%
Food 15%
Clothing 7%
20%
12%
Transportation 9%
JA Finance Park Saving, Investing, and Risk Management
Utilities 12% 9%
Medical 12%
15% 7%
Entertainment 5%
Extras 5%

4. OPPORTUNITY COST Having a savings goal means making choices.
Saving involves an opportunity cost. If you choose to spend $20 on a movie and popcorn, you won’t be able to put $20 in your college fund. On the other hand, if you save $20, you give up a night with your friends.
JA Finance Park Saving, Investing, and Risk Management
Having a savings goal means making choices.

5. A Great Saving Formula
The larger the money pile + the higher the interest rate + the more time you have to save = more in savings!
JA Finance Park Saving, Investing, and Risk Management
Increase the amount, interest, or time and you may earn even more. 5

6. Every investment has risks and rewards, which a smart investor must evaluate and weigh.
JA Finance Park Saving, Investing, and Risk Management

7. SAVINGS AND INVESTMENTS Security vs. Risk
3 VARIABLES TO CONSIDER
Amount
save the most possible each month
Interest Rate
higher rate = higher growth
Time
longer your money is invested = faster it will grow
start with first paycheck

8. BANK ACCOUNTS Bank or Credit Union
SAVINGS ACCOUNT
(pro: use money anytime con: low interest rate)
Save money in an account
Lowest interest rate offered (lucky to get 1% per year)
Less risk – will not lose insured by FDIC (Federal Deposit Insurance Corporation) up to $250, per account
Withdraw funds at anytime
CERTIFICATE OF DEPOSIT
(pro: greater return con: cannot touch money)
Savings account requires minimum balance and commitment to not use money for a period of time (months, years,
Fixed interest rate and time frame (lucky to get 3% for 5 years)
Cannot use money when need/want, without penalty

9. SAVINGS CHART Save Each Week Interest (annual) Savings in 10 Years $ 7
$ 7 5%
$4,731
$14
$9,463
Interest
Savings in 10 Years
Savings in 20 Years
$19.20 5%
$12,977
$34,337 6%
$13,705
$38,632 7%
$14,484
$43,599 8%
$15,320
$49,353 9%
$16,218
$56,029
JA Finance Park Saving, Investing, and Risk Management
Note: Savings calculation totals are approximate.

10. COMPOUND INTEREST Earning interest on the interest Simple interest
$100 x 6% interest = $6.00 = $106.00
Compound Interest
$106 x 6% interest = $6.36 = $112.36

11. The shorter the window of time,
the smaller the return
Short-Term Options
Savings account
Certificates of deposit
Money market account
Long-Term Options
Bonds
Stocks
Mutual funds
401(k) retirement account
JA Finance Park Saving, Investing, and Risk Management

12. HOW LONG WILL IT TAKE TO GROW MY MONEY?
RULE OF 72
Use this calculation to figure out the rate or the number of years needed to double your money
Divide Interest Rate by 72
72/6 = 12 years to double your money at that rate
Divide Number of Years by 72
72/12 = 6 percent to double your money at that rate

13. Risk of loss of principal
Type
Maturity
Risk of loss of principal
Yield
Minimum
Savings Account
None
Low: insured
Low
$0/–$25 (varies)
Certificates of Deposit (CDs)
90 days up to 5 years
$50–$500
Money Market
Account
$50–$2,500 +
Bonds
1–5 years +
Medium
Moderate
$1,000–$5,000
Stocks
Long term
Medium–high
Moderate–high
Varies
Mutual Funds
Low–high
$1,000 or higher
JA Finance Park Saving, Investing, and Risk Management

14. Stock/Shares of Stock
Represent ownership in company/corporation = shareholder
Publicly traded on NYSE or NASDAQ
Price changes several times daily (value)
Long term investment (20 years)
High risk, not insured – could lose investment
Buy low, sell high …
Must sell ownership to see profit (profit = income= taxes)
Sometimes Dividends are paid based on profit of company (Earnings to shareholder – pay tax)
Paid on a per share basis (example $1.00 per share)
An Annual Report is published each year
The SEC (Securities and Exchange Commission) oversees/regulates the sale of stock
If you see the stock price fall …. What would you do? (sell or buy)

15. DOW JONES INDUSTRIAL AVERAGE
Index of 30 major US companies
Represent variety of industries in the US
Used to measure how all stocks are performing
See next slide for actual companies chosen for the Down Jones Industrial Average for last year

16. DOW JONES INDUSTRIAL AVERAGE – Sept. 2013

17. BONDS Represent an IOU from company or government
For your purchase today, a promise is made of a greater amount to be paid to you in the future (future date varies – 5, 10, 20 years)
Does not represent ownership
Not insured but less likely to lose your investment than with stocks

18. STOCK: COMMON & PREFERRED
Common Stock
Ownership share in a corporation. Each share of common stock permits 1 vote to elect members of the Board of Directors of the corporation. Fluctuating dividend paid after Preferred stockholders are paid. Last in line to collect on assets if the corporation goes bankrupt.
Preferred Stock
An ownership share in a corporation with a fixed dividend that is paid before any dividends are paid to common stockholders. No voting rights.

19. Blue Chip vs. Penny Stocks
Blue Chip Stocks (a/k/a Glamour Stocks)
High quality, high priced stock
Large, strong, financially-stable
Industry-leader with dominant product/service
Long record of steady earnings
IBM, CAT, MMM, JNJ, DIS, GM
Penny Stocks
Less than $5 a share
Highly volatile, very risky
New companies
High possible gains, very short time

20. Buying on Margin & Selling Short
Buying on Margin (borrowing money)
Buying stock by paying only a percentage of the purchase price (typically 50%) and borrowing the balance from a broker.
Selling Short (borrowing stock)
A stock transaction that allows an investor to make money on a stock expected to fall in value. This transaction involves immediate sale of shares not owned by the seller, who expects to buy them back later at a lower price.

21. Bull vs. Bear Market Bull Market (optimistic) Economy is great
People are working and spending money
Stock prices are going up (can cause overvaluation)
Bear Market (pessimistic)
Economy is bad
Recession is looming (people are not working and not spending money)
Stock prices are falling
Good time for short selling

22. MUTUAL FUND (most popular)
Professionally managed by a Fund Manager
People invest in the fund based on it’s purpose – growth or income
The fund consists of a variety of stocks, bonds, real estate, precious metals, etc.
A prospectus – published report explaining fund goal and types of securities purchased to make up the fund.
Represents partial ownership in fund’s collective holdings. Dividends paid can be re-directed into the company or cashed for personal projects.
Everyone in the fund shares the wealth or lose together (more shares = more profit/loss)

23. COLLECTIBLES
Baseball cards, antiques, stamps, coins, jewelry, figurines, toys
“One man’s garbage is another man’s treasure”
Anything that appreciates in value over time
Must be a buyer in order to sell

24. REAL ESTATE Flipping (short term)
Buying a house, fixing it up, and selling for more than you paid
Some real estate properties will always appreciate in value – LOCATION, LOCATION, LOCATION
Some real estate properties are a real gamble – no guarantee you can sell at a profit
Must pay property taxes to town and monthly mortgage (type of loan) to bank/credit union issuing the mortgage

25. FUTURES Commodities Exchange (similar to NYSE)
Obligation to buy/sell a specific commodity on specific date and amount
Corn
Wheat
oil
gold
bonds

26. PORTFOLIO a/k/a your collection of investments
Include a mixture of types of investments
DIVERSITY – balance risks with rewards
Purchase stocks and mutual funds with bonds and savings accounts (Jim Cramer video clip: Diversify)
REMEMBER the greater the risk the better the return (or percentage earned)
Why?