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Recap Saving and Investing

Recap Saving and Investing. Review Questions. Which of these saving/investing options has the highest risk? a. stocks b. savings accounts c. U.S. government bonds d. money market accounts

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Recap Saving and Investing

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  1. Recap Saving and Investing

  2. Review Questions Which of these saving/investing options has the highest risk? a. stocks b. savings accounts c. U.S. government bonds d. money market accounts If you bought an investment for $1,000 and it grew to $1,050 1 year later, what is your ROI? a. 50% b. 0.5% c. 5% d. 5.5% Slide 2

  3. Just a Couple More When investing, the higher the risk you are willing to take a. the less return you can expect b. the greater your possible return may be c. the lower your possible return may be d. the less return you can expect and the lower your possible return may be A long-term, planned approach to making investments is called a. systematic investing b. contingency fund planning c. political risk d. hedging Slide 3

  4. Answers Are Which of these saving/investing options has the highest risk? • Stocks If you bought an investment for $1,000 and it grew to $1,050 1 year later, what is your ROI? c. 5% When investing, the higher the risk you are willing to take b. the greater your possible return may be A long-term, planned approach to making investments is called a. systematic investing Slide 4

  5. Saving and Investing • Saving is accumulating money for future needs • Savings accounts and CDs • Money market accounts • Investing is attempting to make your money grow • Stocks and bonds • Real estate 10-1 Reasons for Saving and Investing Slide 5

  6. Savings can be used to help pay for emergency expenses. Short-Term Needs • Contingency planning • Liquidity • Emergency fund • Vacations • Short-term goals 10-1 Reasons for Saving and Investing Slide 6

  7. Many people make investments to provide for future needs of their families. Long-Term Needs • Education • Buying a house • Providing for a family • Financial security • Retirement planning 10-1 Reasons for Saving and Investing Slide 7

  8. Sample Financial Plan 10-1 Reasons for Saving and Investing Slide 8

  9. Growth of Principal • Principal grows through • Additional deposits to the account • Interest earned • Simple interest • Compound interest • Capital Appreciation • Return on Investment (ROI) 10-2 Saving and Investing Principles Slide 9

  10. Growth of Principal 10-2 Saving and Investing Principles Slide 10

  11. Return on Investment • Is the amount that money saved or invested grows • ROI formula Selling Price – Purchase Price = Gain Gain / Purchase Price = ROI 10-2 Saving and Investing Principles Slide 11

  12. Achieving financial goals requires discipline, just as preparing for a marathon does. Systematic Saving and Investing • Is a strategy for regularly setting aside cash that can be used to achieve goals • Has a long-term focus • Dollar-cost averaging is onestrategy for systematicinvesting 10-3 Saving and Investing Strategies Slide 12

  13. Tax Advantages • Tax-deferred investments have no taxes on gains until the money is taken from the account • Tax-free investments have no taxes on gains 10-2 Saving and Investing Principles Slide 13

  14. Natural disasters, such as a hurricane, can damage investment properties. Risk and Return • Investment risk • Inflation risk • Industry risk • Stock risk • Political risk 10-2 Saving and Investing Principles Slide 14

  15. Diversification • Means holding a variety of investments to reduce risk • Aninvestment portfolio is a collection of assets • Certificates of deposit • Stocks • Bonds • Real estate • Other holdings 10-3 Saving and Investing Strategies Slide 15

  16. Understanding the Market • Bull market • Prices are steadily increasing • Profit-taking may cause a temporary drop in some stock prices • Bear market • Prices are steadily decreasing • May be a good time to buy stocks that are sound investments because prices are lower • Economic conditions 10-3 Saving and Investing Strategies Slide 16

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