Investing for Your Future by hcj


									   Investing for Your Future

      Personal Finance Chapter 11
  Lesson 11.1 – Investing Fundamentals
Lesson 11.2 – Exploring Investment Options
        Stages of Investing
Goals for investing vary person to person
As excess income grows, you can
 progress through different stages of
Five stages of investing:
  Put-and Take Account
  Beginning Investing
  Systematic Investing
  Strategic Investing
  Speculative Investing
                Stage 1
• Put-and-Take Account
• First savings account is a temporary
• Purpose is to pay for short-term needs
  with enough left over to cover unexpected
• Many financial advisers recommend that
  you have three to six months net pay set
  aside for this type of fund
                 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
                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
                  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
                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
       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
           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
• Types of Risk
  – Interest-rate Risk
  – Political Risk
  – Market Risk
  – Company or Industry Risk
       Investment Strategies
• Criteria for Choosing an Investment
1. Safety
2. High liquidity
3. High dividends or interest
4. Growth in value that exceeds the inflation
5. Reasonable purchase price
6. Tax benefits
     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
• Chapter 11 Worksheet – Due Wednesday
• If you want some extra credit points, you can
  do the questions for Chapter 11 on page 327.
  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.
    Sources of Financial Information
•   Newspapers
•   Investor Services and Newsletters
•   Financial Magazines
•   Brokers
•   Financial Advisers
•   Annual Reports and Financial Statements
•   Online Investor Education
         Investment Options
• Investments can be put into different
  groups according to their degree of risk
  and expected return:
1. Low Risk/Low-to Medium Return
2. Medium Risk/Medium Return
3. High Risk/High Return
 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
• Treasury Securities
  – T-bills
  – Treasury Notes
  – Treasury Bonds
  Medium Risk/Medium Return
• Mutual Funds
  – Large, professionally managed group of
  – Fastest growing segment of financial services
• Annuities
  – Sold by insurance companies
• Self-Managed Retirement Accounts
  – 401(k), 403(b), IRA, Keogh Plan
• Real Estate
        High Risk/High Return
•   Stocks
•   Futures
•   Options
•   Penny Stocks
•   Collectibles

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