Chapters 17-20 Saving & Investing

Performing a Financial Checkup Saving and Investing Chapter 17 Section 1 Preparing for a Savings or Investment Program Performing a Financial Checkup Preparing for a Financial Crisis Establish a larger emergency fund. Know what you owe. Reduce spending. Pay off credit cards. Apply for a line of credit at your financial institution. Notify creditors if you are unable to make a payment. Monitor your investments and retirement accounts.

Getting the Money Needed to Start an Investment Program Saving and Investing Chapter 17 Section 1 Preparing for a Savings or Investment Program Getting the Money Needed to Start an Investment Program Sources of Money to Invest Pay Yourself First Employer-Sponsored Retirement Plans Elective Savings Programs Special Savings Effort Gifts, Inheritances, and Windfalls

Long-Term Investment Programs Saving and Investing Chapter 17 Section 1 Preparing for a Savings or Investment Program Long-Term Investment Programs

Making Investment Decisions Saving and Investing Chapter 17 Section 1 Preparing for a Savings or Investment Program Making Investment Decisions Inflation Risk Interest Rate Risk Five Components of Risk Business Failure Risk Financial Market Risk Global Investment Risk

Making Investment Decisions Saving and Investing Chapter 17 Section 1 Preparing for a Savings or Investment Program Making Investment Decisions Sources of Investment Income Savings accounts Certificates of deposit (CDs) U.S. Savings Bonds U.S. Treasury bills Corporate bonds Preferred stocks Mutual funds Real estate Commodities Precious metals Gems Collectibles

Questions to Ask Before Investing in a Piece of Real Estate Saving and Investing Chapter 17 Section 2 Savings and Investment Options Types of Investments Questions to Ask Before Investing in a Piece of Real Estate Why are the present owners selling? Is the property in good condition? What is the condition of other properties in the area? Is there a chance the property will decrease in value? Will you be able to find an interested buyer? Can an interested buyer get the financing to buy the property?

Developing a Personal Investment Plan Saving and Investing Chapter 17 Section 2 Savings and Investment Options Developing a Personal Investment Plan

Financial Planners 17 Saving and Investing Section 3 Chapter 17 Section 3 Reducing Risk and Sources of Information Financial Planners Types of Financial Planners Fee-Only Planners Fee-Offset Planners Fee-and-Commission Planners Commission-Only Planners

Basic Services of a Good Financial Planner Saving and Investing Chapter 17 Section 3 Reducing Risk and Sources of Information Financial Planners Basic Services of a Good Financial Planner Assess your current financial position Offer a clearly written plan with recommendations Discuss the plan with you and answer questions Help you keep track of your progress Guide you to other financial experts as needed

Financial Planners 17 Saving and Investing Section 3 Chapter 17 Section 3 Reducing Risk and Sources of Information Financial Planners

Managing Your Investments Saving and Investing Chapter 17 Section 3 Reducing Risk and Sources of Information Managing Your Investments What Should You Do to Manage Your Investments? Think About Tax Considerations Evaluate Investments Monitor Investments

Managing Your Investments Saving and Investing Chapter 17 Section 3 Reducing Risk and Sources of Information Managing Your Investments Taxable Income Includes Interest Income Rental Income Dividends

Common Stock Why Investors Purchase Common Stock 18 Stocks Section 1 Chapter 18 Section 1 Common and Preferred Stocks Common Stock Income from Dividends Why Investors Purchase Common Stock Appreciation of Stock Value Increased Value from Stock Splits Voting Rights and Control of the Company

Preferred Stock Why Do Investors Purchase Preferred Stock? 18 Stocks Chapter 18 Section 1 Common and Preferred Stocks Preferred Stock Why Do Investors Purchase Preferred Stock? Considered a Safer Investment than Common Stock Considered a Predictable Source of Income

Sources of Evaluating Stocks Chapter 18 Section 2 Evaluating Stocks Sources of Evaluating Stocks Finding Information for Evaluating Stocks Newspapers The Internet Stock Advisory Services – Standard & Poor’s Stock and Bond Guide – Value Line Investment Survey – Mergent’s Handbook of Common Stock Corporate News Publications – Annual Reports

Factors That Influence the Price of Stock Stocks Chapter 18 Section 2 Evaluating Stocks Factors That Influence the Price of Stock Current Yield Total Return Numerical Measures for a Corporation Earnings Per Share Price-Earnings (PE) Ratio Projected Earning

The Fundamental Theory The Efficient Market Theory Stocks Chapter 18 Section 2 Evaluating Stocks Investment Theories The Fundamental Theory Assumes that a stock’s real value is determined by looking at the company’s future earnings The Technical Theory Based on the idea that a stock’s value is really determined by forces in the stock market itself The Efficient Market Theory Stock price movements are purely random

How to Buy and Sell Stock Stocks Chapter 18 Section 3 Buying and Selling Stocks How to Buy and Sell Stock Ways to Buy and Sell Stock Full-Service Brokerage Firm Discount Brokerage Firm Trade Stocks Online The biggest difference is the commission.

How to Buy and Sell Stock Stocks Chapter 18 Section 3 Buying and Selling Stocks How to Buy and Sell Stock Types of Orders Market Orders Limit Orders Stop Orders More and more people are using their computers to make securities transactions.

Investment Strategies Stocks Chapter 18 Section 3 Buying and Selling Stocks Investment Strategies Long-Term Techniques Short-Term Techniques Buy-and-Hold Buying on Margin Dollar Cost Averaging Selling Short Direct Investment and Dividend Reinvestment Plans

Why Do Corporations Sell Bonds? Bonds and Mutual Funds Chapter 19 Section 1 Corporate and Government Bonds Corporate Bonds Why Do Corporations Sell Bonds? To raise money when they can’t sell stock To finance regular business activities To reduce tax burden

Why Investors Buy Bonds Bonds and Mutual Funds Chapter 19 Section 1 Corporate and Government Bonds Why Investors Buy Bonds Why Are Bonds Considered a Safe Investment? Interest income Increased value over time Face value is repaid at maturity

Government Bonds and Securities Bonds and Mutual Funds Chapter 19 Section 1 Corporate and Government Bonds Government Bonds and Securities Treasury Bills Treasury Notes Government Bonds and Securities Treasury Bonds Treasury Inflation-Protected Securities (TIPS) Series EE Savings Bonds Series I Savings Bonds

Determining Investment Value Bonds and Mutual Funds Chapter 19 Section 2 Investing in Bonds Determining Investment Value Sources of Information on Bonds Government Reports and Research Annual Reports The Internet Business Magazines

Determining Investment Value Bonds and Mutual Funds Chapter 19 Section 2 Investing in Bonds Determining Investment Value Bond Ratings

Determining Investment Value Bonds and Mutual Funds Chapter 19 Section 2 Investing in Bonds Determining Investment Value Bond Ratings

Defining Mutual Funds What Is a Mutual Fund? Bonds and Mutual Funds Chapter 19 Section 3 Mutual Funds Defining Mutual Funds What Is a Mutual Fund? A mutual fund is an investment alternative in which investors pool their money to buy stocks, bonds, and other securities based on the selection of professional fund managers who work for an investment company.

Professional Management Bonds and Mutual Funds Chapter 19 Section 3 Mutual Funds Defining Mutual Funds Why Buy Mutual Funds? Professional Management Diversification

Making an Informed Decision Bonds and Mutual Funds Chapter 19 Section 4 Investing in Mutual Funds Making an Informed Decision Sources of Information on Mutual Funds Newspapers Quotations Prospectuses Annual Reports Financial Publications Professional Advice Internet

Real Estate and Other Investments Chapter 20

Real Estate Investment: Pros and Cons Real Estate and Other Investments Chapter 20 Section 1 Real Estate Investments Real Estate Investment: Pros and Cons Illiquidity Declining Property Value Disadvantages of Real Estate Investments Lack of Diversification Lack of a Tax Shelter Management Problems

The Fluctuating Price of Gold Real Estate and Other Investments Chapter 20 Section 2 Precious Metals, Gems, and Collectibles Gold The Fluctuating Price of Gold The price of gold rises when people believe that war, political unrest, or inflation may be coming.

Gold 20 Real Estate and Other Investments Section 2 Chapter 20 Section 2 Precious Metals, Gems, and Collectibles Gold

Other Precious Metals 20 Real Estate and Other Investments Section 2 Chapter 20 Section 2 Precious Metals, Gems, and Collectibles Other Precious Metals Other Precious Metals That Rise in Value in Uncertain Times Silver Platinum Palladium Rhodium Why Are Precious Metals Tricky? Storage Correctly predicting the market

Real Estate and Other Investments Chapter 20 Section 2 Precious Metals, Gems, and Collectibles Precious Gems The primary risk of precious gems is the great fluctuation in prices, which can be influenced by global, economic, and political factors.

Stocks and bonds have proven to be the most stable type of investment. Real Estate and Other Investments Chapter 20 Section 2 Precious Metals, Gems, and Collectibles Planning Investments Stocks and bonds have proven to be the most stable type of investment.

Assignment Using these power points and what we discussed in these four Chapters, write a paragraph describing what types of investments you plan on investing in and WHY? you chose these. Are you a risk taker or not? You MUST discuss AT LEAST three different types of investments.