1. Chapter 17.1 Preparing for an Investment Plan
Finance Mrs. A
Chapter 17.1
Preparing for an Investment Plan

2. What’s the difference between Saving and Investing?
Savings???
Investing???

3. To start an Investment Plan STAY ON THE POSITIVE NOT THE NEGATIVE!
Financial Check-Up
To start an Investment Plan
Balance your budget
Spend less money than you make
Stay out of debt
Limit your credit card use
STAY ON THE POSITIVE NOT THE NEGATIVE!

4. Financial Check Up 2. Insurance to cover financial losses
Car accident
Medical emergency
Theft
3. Have an emergency fund (liquidity)
Disabled, laid off
Save enough to cover living expenses
Three to nine months

5. Financial Checkup Have access to other sources of cash
Line of credit with a bank or credit union
Cash advance capability from a credit card company
Use only for serious emergencies

6. Obtaining the Money You Need to Start an Investment Plan
Stable job(s)
Pay yourself first – 1%, 2%, ……12%
Take advantage of employer-sponsored retirement plans (401K) - Deferred Taxes!!!
Set up a “special” savings account – “Cut back to basics”
Gifts, inheritance, and windfalls

7. The Value of an Investment Plans
Start investing right away
Small amounts add up quickly
TVM – Time Value of Money
Continue to add money and watch your money grow!!!!

8. The relationship between risk and reward is
Risks vs. Rewards
The relationship between risk and reward is
POSITIVE
High Risk (hopefully) yields High Rewards
Speculative!!!!!
Low Risk yields Low Rewards
Very Secure!!!

9. Five Components of Risk
Inflation Risk – general rise of price
Investing helps to stay ahead of inflation
Interest Rate Inflation
Business Failure Risk – stocks and bonds
Financial Market Risk – social & political conditions
Global Investment Risk – Not the same rules!

10. Preparing for an Investment Plan
Risks Involved in Typical Investments
**Look at page 551 in the book**

11. Preparing for an Investment Plan
Think Critically
How might you advise a friend about what to do with a $500 bonus she just received for accepting a job at a software design firm?

12. General Investments
Income Investments – provides a dependable source of income $$$
Growth Investments – investment will increase in value
Retained Earnings – profits reinvested into the company – NO dividends, no $$$

13. Types of Investments Common Stock – ownership in a company
Preferred Stock – ownership in a company
Corporate Bond – IOU from a company
Government Bond – IOU from the government
Municipal Bond – IOU from the city or county
Mutual Funds – mixture of different investments
Real Estate – land and buildings