1. UNIT 4: SAVING AND INVESTING 1. Discuss how saving contributes to financial well- being 2. Explain how investing builds wealth and helps meet financial goals. 3. Evaluate investment alternatives. 4. Describe how to buy and sell investments. 5. Explain how taxes affect the rate of return on investments.

2. PREPARING FOR AN INVESTMENT PROGRAM  Establishing Your Investment Goals  Goals should correspond with your values  Middle of the road = wisest  Questions:  What will I use money for?  How much money do I need to satisfy my goal?  How will I get the money?  How long will it take me to get the money?  How much risk am I willing to take when I invest?

3. PERFORMING A FINANCIAL CHECKUP  TIPS:  1. Balance your budget!!!  Spend less money than you make, stay out of debt, and limit your credit card use.  2. When you’re on your own, you should have enough insurance to cover financial losses from events, such as a car accident, a medical emergency, or a theft.

4. OBTAINING THE MONEY YOU NEED TO GET STARTED  1. Pay Yourself First  2. Take Advantage of Employer-Sponsored Retirement Plans  3. Participate in an Elective Savings Program  4. Make a Special Savings Effort One or Two Months Each Year  5. Take Advantage of Gifts, Inheritances, and Windfalls

5. THE VALUE OF LONG-TERM INVESTMENT PROGRAMS

6. FACTORS THAT AFFECT YOUR CHOICE OF INVESTMENTS  SAFETY & RISK  Safety – the chance of losing your money in an investment is fairly small  Risk – you cannot be certain about the outcome of your investment  5 COMPONENTS OF THE RISK FACTOR  INFLATIOIN RISK  Inflation rate – interest rate = loss of buying power (5%- 3% = 2% loss)  INTEREST RATE RISK  BUSINESS FAILURE RISK  FINANCIAL MARKET RISK  GLOBAL INVESTMEST RISK

7.  INVESTMENT INCOME  Savings accounts, certificate of deposits, bonds, etc.  INVESTMENT GROWTH  “growth’ = investment increase in value  Retained earnings = profits that are reinvested  INVESTMENT LIQUIDITY  Ability to buy or sell an investment quickly without substantially affecting its value

8. AN OVERVIEW OF INVESTMENT ALTERNATIVES  Types of Investments:  1. Stock or Equity Financing  Money that a business gets from its owners in order to operate  2. Corporate and Government Bonds  Written pledge to repay a specified amount of money along with interest  3. Mutual funds  Investors pool their money to buy stocks, bonds, and other securities based on the selections of professional managers who work for an investment company.  4. Real Estate

9. EVALUATING INVESTMENT ALTERNATIVES  Diversification:  The process of spreading your assets among several different types of investments to lessen risk.

10. DEVELOPING A PERSONAL INVESTMENT PLAN  Steps:  Establish goals  How much money to achieve goal by particular date  Amount of money to invest  List of investments to evaluate  Evaluate risk and return on each  Reduce list to reasonable number  Choose 2 investments to give some diversity  Recheck investment program periodically