Investments First rule: Pay yourself first through saving. What is compound vs. simple interest? Second rule: As you acquire wealth and income learn to diversify. You want investments in all categories of risk. Low risk, medium risk, and high risk. Liquidity: ease one can access money. Stocks have hard liquidity, a checking or savings account has easy liquidity.

Warm Up: What is liquidity? Which of the following is a more liquid asset/investment? Savings account Money market account Stocks

Municipal Bonds: Low risk, Low return( earns low interest) A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, states and U.S. and foreign governments to finance a variety of projects and activities.

Money Market Account and CD’s Money Market Accounts: accounts held in banks and other financial institutions that earn higher interest than CDS and savings accounts. Usually have to have a large amount to open an account. Easy liquidity CD’s: Certificates of Deposit. Time limit account, Short- or medium-term, interest- bearing, FDIC-insured debt instrument offered by banks and savings and loans. Low interest, low risk- but not liquid until it matures.

I. Types of Investments-Stocks Buying stock Stock is issued in portions known as shares- portions of the company. High risk but can bring in a high return. Corporations sell stock to raise money to start, run, or expand their business Dividends- portion of profits shared with investors (size depends on company profits) Capital Gains- When a person sells stocks, land, or any asset and makes a profit ( you sell it for more than you originally paid for it- you make a capital gain. People who make a capital gains Will pay a capital gains tax.

Bull Market vs Bear Market A bull market is when the stock market is high and doing well. The economy is in an expansion period of growth. A bear market usually indicates a weak economy and slow economic growth in a recession.

Types of corporations and stock Closely held corporations- stock only offered to a few people (ex: family) Publicly held corporations- many shareholders buy or sell stock on the open market

Common stock- voting owners of company, one vote per stock Preferred stock- nonvoting members but receive dividends first Mutual funds- collection of various stocks, usually less yield but less risk Bonds- gov’t loans, less flexible and less yield but no risk

IRA’s and 401K’s Both are used as retirement accounts. 401K- offered through employer. Employee can contribute a certain amount of their paycheck into the acct. Tax deferred-pay taxes when you take it out Some companies may match the contribution

IRA’S: Individual Retirement Acct. Roth IRA: Pay taxes up front After-tax contributions, so withdrawals are tax-free in retirement. Traditional IRA: Pay taxes later (tax deferred) Contributions may be tax-deductible, and you'll pay taxes when you make withdrawals in retirement.