Savings and Investment Strategies Chapter 19 CHAPTER 19 Savings and Investment Strategies 19-1 Saving and investment planning 19-2 Stock investments 19-3 Bonds and mutual funds 19-4 Real estate investments 19-5 Other investments

Saving and Investment Planning CHAPTER 19 10/27/2017 Chapter 19 19-1 Saving and Investment Planning Goals Explain the basics of saving and investing. Identify types of savings and investments. Discuss factors to consider when evaluating savings and investment alternatives.

Chapter 19 Key Terms saving investing yield liquidity

SAVING AND INVESTMENT BASICS Chapter 19 SAVING AND INVESTMENT BASICS Savings and investment activities Determine investment goals The growth of savings Interest Compound interest

Quarterly Compound Interest Chapter 19 Quarterly Compound Interest

Checkpoint >> How does saving influence economic activity? Chapter 19 Checkpoint >> How does saving influence economic activity? Answer Saving benefits the economy by making more money available for borrowing by individuals, businesses, and governments. When this money is spent, demand for goods and services increases, resulting in more jobs and more spending by workers.

SAVING AND INVESTMENT CHOICES Chapter 19 SAVING AND INVESTMENT CHOICES Savings plans Savings account Certificate of deposit Money market account Securities Stock investments Bond investments Mutual funds

SAVING AND INVESTMENT CHOICES Chapter 19 SAVING AND INVESTMENT CHOICES (continued) Alternative investments Real estate Commodities Collectibles

Chapter 19 Checkpoint >> What are the nine main categories of saving and investment alternatives? Answer Savings accounts Certificates of deposit Money market accounts Stock investments Bond investments Mutual funds Real estate Commodities Collectibles

EVALUATING SAVINGS AND INVESTMENTS Chapter 19 EVALUATING SAVINGS AND INVESTMENTS Safety and risk Potential return Liquidity Taxes

$100 Invested for 20 Years at Different Yields with Annual Compounding Chapter 19 $100 Invested for 20 Years at Different Yields with Annual Compounding

Chapter 19 Investment Pyramid

Chapter 19 Checkpoint >> What are four factors to consider when selecting an investment? Answer Safety Return Liquidity Taxes

19-2 Stock Investments Goals Compare the two major types of stock. Chapter 19 19-2 Stock Investments Goals Compare the two major types of stock. Describe the activities involved with buying or selling stock. Identify factors that affect the value of a stock.

Key Terms preferred stock common stock stockbroker stock exchange Chapter 19 Key Terms preferred stock common stock stockbroker stock exchange market value

Chapter 19 TYPES OF STOCK Preferred stock Common stock

Checkpoint >> How does preferred stock differ from common stock? Chapter 19 Checkpoint >> How does preferred stock differ from common stock? Answer Preferred stock has priority over common stock in the payment of dividends. Investing in preferred stock is less risky than common stock, but preferred stockholders generally have no voting rights within the corporation. Common stock represents general ownership in a corporation and a right to share in its profits. Common stockholders are entitled to one vote per share. Although preferred stockholders are paid first, their dividends usually are limited to a set rate.

STOCK TRANSACTIONS Using a stockbroker Online investing Chapter 19 STOCK TRANSACTIONS Using a stockbroker Online investing Stock exchanges Changing stock values

Example of Stock Market Quotations Chapter 19 Example of Stock Market Quotations

Checkpoint >> What is the purpose of a stock exchange? Answer Chapter 19 Checkpoint >> What is the purpose of a stock exchange? Answer The purpose of a stock exchange is to accommodate the buying and selling of securities.

STOCK SELECTION Stock information sources Economic factors Chapter 19 STOCK SELECTION Stock information sources Economic factors Inflation Interest rates Consumer spending Employment Company factors

PROCESS FOR DECIDING STOCK PURCHASES Chapter 19 PROCESS FOR DECIDING STOCK PURCHASES 1. Observe and analyze economic and social trends. 2. Determine industries that will be affected. 3. Identify companies in those industries. 4. Decide whether to buy, sell, or hold the stock of those companies.

Chapter 19 Checkpoint >> How do various economic factors affect stock prices? Answer Inflation affects stock prices by causing lower spending by consumers, reducing company profits out of which dividends are paid. Falling or rising interest rates can also increase or decrease company profits as the cost of money changes. The employment rate also affects stock prices; when more people are employed, they spend more money on a company’s products and stock prices rise.

19-3 Bonds and Mutual Funds Goals List types of government bonds. Chapter 19 19-3 Bonds and Mutual Funds Goals List types of government bonds. Describe features of corporate bonds. Describe various types of mutual funds.

Chapter 19 Key Terms municipal bond corporate bond mutual fund

GOVERNMENT BONDS Municipal bonds U.S. savings bonds Chapter 19 GOVERNMENT BONDS Municipal bonds U.S. savings bonds Other federal securities Federal notes (T-notes) Treasury bills (T-bills) Treasury bonds (T-bonds)

Chapter 19 Checkpoint >> List the types of bonds issued by the federal government of the United States. Answer The types of U.S. savings bonds issued by the federal government are Series EE bonds, Series HH bonds, and I bonds. The federal government also issues Treasury bills and Treasury notes.

Chapter 19 CORPORATE BONDS Bond components Bond values

Checkpoint >> What affects the value of a bond? Answer Chapter 19 Checkpoint >> What affects the value of a bond? Answer The value of a bond is affected by changing interest rates. If the bond’s stated rate is lower than interest rates on similar bonds, investors will want to buy the bond for less than its face value. If the bond’s stated interest rate is higher than interest rates on similar bonds, the seller of the bond will want to receive more than its face value.

Chapter 19 MUTUAL FUNDS A mutual fund is an investment fund set up and managed by companies that receive money from many investors.

TYPES OF MUTUAL FUNDS Aggressive-growth stock funds Income funds Chapter 19 TYPES OF MUTUAL FUNDS Aggressive-growth stock funds Income funds International funds Sector funds Bond funds Balanced funds

MUTUAL FUND VALUES Shares of the mutual fund Value of each share Chapter 19 MUTUAL FUND VALUES Shares of the mutual fund Value of each share Net asset value (NAV) Operating expenses Earnings

Checkpoint >> What are the main types of mutual funds? Answer Chapter 19 Checkpoint >> What are the main types of mutual funds? Answer The main types of mutual funds are aggressive-growth stock funds, income funds, international funds, sector funds, bond funds, and balanced funds.

Real Estate Investments Chapter 19 19-4 Real Estate Investments Goals Describe home buying activities. Explain the benefits of home ownership. Discuss the costs of home ownership.

Chapter 19 Key Terms real estate mortgage equity assessed value

SELECTING HOUSING Renting your residence Owning a mobile home Chapter 19 SELECTING HOUSING Renting your residence Owning a mobile home Buying a home Services of real estate agents Other real estate professionals Buying a condominium

Checkpoint >> What are four available housing alternatives? Chapter 19 Checkpoint >> What are four available housing alternatives? Answer Renting Owning a mobile home Buying a traditional home Buying a condominium

BENEFITS OF HOME OWNERSHIP Chapter 19 BENEFITS OF HOME OWNERSHIP Tax benefits Increased equity Pride of ownership

Checkpoint >> What are the main benefits of home ownership? Chapter 19 Checkpoint >> What are the main benefits of home ownership? Answer Tax benefits Increased equity Pride of ownership

COSTS OF HOME OWNERSHIP Chapter 19 COSTS OF HOME OWNERSHIP Property taxes Interest payments Property insurance Maintenance

Checkpoint >> What are common costs of home ownership? Answer Chapter 19 Checkpoint >> What are common costs of home ownership? Answer Common costs of home ownership are property taxes, interest payments, property insurance, and maintenance.

19-5 Other Investments Goals Discuss types of commodity investments. Chapter 19 19-5 Other Investments Goals Discuss types of commodity investments. Explain the use of collectibles as an investment.

Chapter 19 Key Terms commodities futures contract collectibles

COMMODITIES AND FUTURES Chapter 19 COMMODITIES AND FUTURES Commodity exchanges Agricultural commodities Gold, silver, and precious metals Currency and financial instruments

Chapter 19 Checkpoint >> What types of commodities are commonly used with futures contracts? Answer Types of commodities commonly used with futures contracts are agricultural commodities, such as grain and livestock, and precious metals.

Chapter 19 COLLECTIBLES Types of collectibles Collectible values

Checkpoint >> What are common types of collectibles? Answer Chapter 19 Checkpoint >> What are common types of collectibles? Answer Common types of collectibles are stamps, coins, sport trading cards, and antiques, as well as unusual items purchased as investments.