Investing Savings and Investing

Why Invest? Hedge against inflation Rise in a general level of prices Investing to increase wealth Invest to save for long term goals Investing is fun and challenging

The Rule of 72 Technique used for estimating the number of years required to double one’s investment at a given rate of return Divide 72 by the rate of return expressed as a percentage To estimate the rate of return required to double your money in a specific time period, divide 72 by the number of years

Risk Risk is the chance that an investment’s value with decrease All investment carries risk Risk takers – those willing to accept more risk in the hopes of getting a greater return Risk averse – less willing to accept risk Who tends to make more money in the long term?

Types of Risk Diversification – spreading the risk among many types of investment Short term risk is lower than long term risk Can you predict the future? Interest rate risk – return on investment will not keep pace with inflation

More Kinds of Risk Political risk – government actions that impact business conditions (regulations, tariffs, etc) Market risk – caused by business declines or interest rate fluctuations Nonmarket risk – risk unrelated to market trends (unpredictable) Company or industry risk – events that effect only one company or industry

Criteria For Choosing an Investment Degree of safety Degree of liquidity Expected dividends or interest Expected growth Reasonable purchase price and fees Tax benefits

Investment Strategies Define your financial goals Go slowly Follow through – implement your plan Keep good records Seek good advice Stay current and informed Know your risk profile and comfort zone

Sources of Investment Information Newspapers Investor Services and Newsletters Financial Magazines Online financial or news sites Brokers Full service brokers provide clients with analysis and opinions based on their knowledge and industry information Discount brokers buy and sell securities for clients at a reduced price

Additional Sources of Financial Info Financial advisors or certified financial planners Usually receives a fee for service Annual reports or 10-Ks are a summary of a corporation’s financial results for the year Online investor education Motley Fool ( Teen investor (