Personal Finance 101 Personal Finance 101 CHOICE by xiaoyounan

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									Personal Finance 101
 CHOICE

 SCARCITY

 INCENTIVES

 BENEFIT - COST

 OPPORTUNITY COST
II. BASIC CONCEPTS


  A. When you borrow money
  you PAY interest


   B. When you invest money
   you EARN interest
C. Rule of 72 –
   interest rate divided by 72 = number of
    years it will take to double your money

D. Liquidity -
    how fast the investment can be turned
   into cash
 III. YOUR INVESTMENT PORTFOLIO
Your $ working for you   Benefit           Cost
Checking                 -everyday use     Low interest
account                  -easy to access $ < 1%
                         w/ atm card
Savings Account/         Should equal 2    Low interest
                         months salary     2-3%
Emergency fund
                         Easy to access

IRA (Individual          Not taxed         Cannot
                                           access until
Retirement                                 65 w/out big
Account 401k,                              penalty
403b)
                      Benefit          Cost
CD (Certificate of    Fixed interest   Cannot access
Deposit)              Fixed time of    until matures
                      maturity         w/out big penalty
                      No risk          !!will rollover


Real Estate           - Ownership     Difficult to turn
                      - Historical    into cash
                      upward trend in Down Payment
                      Chicago         10-20 %
Bonds – I.O.U.’s to   Fixed interest  Cannot access
Government or         Fixed time of   until matures
Business              maturity        w/out big penalty
                       BENEFIT               COST

stock – share of   Ownership           Minimum # of
ownership in a     Dividend            shares to get in
company            Historical upward   All eggs in one
                   trend               basket


Mutual Fund –                          Minimum # of
fund manager       Diversification     shares to get in
spreads your       Fund manager
money out in the   expertise
stock market
                   Historical upward
                   trend
                   7-8% interest
IV. Personal Finance 101

         1. Save early and often

       2. Save as much as possible
            (10% of income minimum)

              3. Have a plan

   4. Save and Invest for the long term

   5. Gather information before deciding
              (benefit –cost analysis)
                  CHICAGO
               BULL MARKET –
                  BOARD OF
                      ARE ON
               STOCKS (CBOT)
                TRADE
BEAR MARKET    THE RISE, GOOD
– STOCKS ARE   TIME TO BUY
DOWN, GOOD
TIME TO SELL
STOCK MARKET VOCABULARY
 STOCK – SHARE OF OWNERSHIP

 DIVIDEND – PROFITS PAID TO A
              SHAREHOLDER

 BLUE CHIPS – STOCKS THAT HAVE
          CONSISTANTLY DONE WELL
Market Cap =
         Total value of a company

Securities and Exchange Commission (SEC)
– government agency that regulates
   the stock market
   MARKETS
NYSE
   (New York Stock Exchange) 1792 - +3000 companies
    hybrid of electronic and open outcry
AMEX (American Stock Exchange)

NASDAQ
  ( National Association of Securities Dealers Automated
  Quotations) electronic, screen – based +3200 companies

CBOT
( Chicago Board of Trade ) 1848   Futures and Options

CME ( Chicago Mercantile Exchange)
INDICES ( INDEX)
DOW JONES
               - Top 30 companies


S+P 500
               - Standard and Poor top 500

NASDAQ
               – measures all 3200 stocks trades on
                     NASDAQ
Russell 2000
Where                        Stock
traded
NYSE =                       Symbol
New York                     for coca-
Stock                        cola
Exchange


Parent                       1 year
Company                      high and
                             low stock
Current                      price
price for 1   Market price of the entire
share         company, total value

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