1. Investing

2. Stocks ○ What is it? ○ A share of ownership in a company ○ How does it earn money ○ Buy low, sell high – sell the stock for more than you bought it for ○ Dividends – share of company profits distributed to stockholders

3. Advantages ○ Higher returns than savings accounts ○ Your money grows when the economy grows(usually) ○ Ownership in large companies

4. Disadvantages ○ High Risk ○ if a company does poorly you can lose money ○ If a company goes bankrupt you can lose all of your money ○ Stock prices fluctuate ○ The stock market goes up and down so you don’t want to invest in much stock if you need your money soon

5. Bonds ○ What is it? ○ A loan that you give to a company or government ○ How does it earn money ○ Interest - You loan a company money, they pay you back over time with interest ○ Buy low, sell high – sell a bond for more than you bought it for

6. Advantages & Disadvantages ○ Advantages ○ Higher returns than bank accounts ○ Less risky than stock (usually) ○ Disadvantages ○ Bond prices go up and down ○ May lose your money if a company goes bankrupt ○ https://www.youtube.com/watch?v=7t6o- wahxF4&index=9&list=WL https://www.youtube.com/watch?v=7t6o- wahxF4&index=9&list=WL

7. Exit Slip Explain in your own words: What is the difference between a stock and a bond?

8. After today I can... I can explain what a mutual fund is and tell why it is preferable to single stocks We’ve talked about stocks, now let’s look at Mutual Funds https://www.youtube.com/watch?v=PWoLPac WPYM&list=WL&index=13

9. Mutual Funds ○ What is it? ○ Collection of stocks or bonds ○ Investors pool money to buy ○ How does it earn money? ○ Depends on the investment selected (mutual fund type) ○ Stocks earn like stocks ○ Bonds earn like bonds

10. Advantages & Disadvantages ○ Advantages ○ Lower risk because money is spread out among different investments ○ Professionally managed ○ Many different types of funds ○ Disadvantages ○ Risk of losing money if investments do poorly ○ https://www.youtube.com/watch?v=- bLeRnOHq-8&list=WL&index=12 https://www.youtube.com/watch?v=- bLeRnOHq-8&list=WL&index=12

11. After today I can... I can explain how money can be made off of investing in real estate.

12. Real Estate ○ What is it? ○ Owning property such as residential homes, apartment building, and commercial properties ○ How does it earn money? ○ Buying low, selling high ○ Rental income

13. Advantages & Disadvantages ○ Advantages ○ Generally real estate values increase over time ○ Rent is a nice opportunity for residual income ○ Disadvantages ○ High cost to get started ○ Unexpected expenses (repairs, no rent, etc.) ○ Sometimes values drop ○ https://www.youtube.com/watch?v=IJk0vH0Qo us https://www.youtube.com/watch?v=IJk0vH0Qo us

14. After today I can... I can explain why commodities are at the top of the risk pyramid for investments

15. Commodities ○ http://www.investopedia.com/articles/optioni nvestor/09/commodity-trading.asp http://www.investopedia.com/articles/optioni nvestor/09/commodity-trading.asp ○ What is it? ○ Investing in energy, metals, livestock & meat, and agricultural products ○ How does it earn money? ○ Buying low, selling high

16. Advantages & Disadvantages ○ Advantages ○ Helps businesses plan for price swings ○ Precious metals do well when the stock market is down ○ Disadvantages ○ Very speculative - there’s not a lot of ways to tell what is going to happen in the market ○ Influenced by outside factors that are often unpredictable ○ Large swings in prices ○ https://www.youtube.com/watch?v=IJk0vH0Qo us https://www.youtube.com/watch?v=IJk0vH0Qo us

17. Types of mutual funds ○ Small cap funds- Small companies ○ Mid cap funds - Mid-sized companies ○ Large cap funds - Large companies ○ Turn & talk - which is the most risky?

18. Types of mutual funds ○ Value funds - companies whose stock prices are below where they should be ○ Growth funds - companies that are likely to grow and have an increase in stock price ○ Income funds - companies that are likely to pay dividends ○ Discuss in groups: Why do you suppose income funds are less risky than value funds or growth funds?

19. Types of mutual funds ○ International funds - companies based outside of the United States ○ Emerging market funds - companies headquartered in countries that are not yet industrialized ○ Turn & talk: Which of these funds has more risk? Why?

20. Bond Mutual Funds ○ Investment grade funds - invest in stable government or corporate bonds that are considered high-quality ○ High-yield funds - invest in lower-quality bonds that offer higher interest but at a greater risk ○ Short-term bond fund - bonds that will be paid back soon ○ Long-term bond fund - bonds that will be paid back after a long period of time

21. Bond Mutual Funds ○ Turn & talk - why do you suppose high-yield funds pay higher interest? When would someone want to invest in those funds?

22. Calculating Simple Interest Interest = Principal x rate x time Ex: I invest $5000 in a bond that pays 3% interest annually. How much interest would I make in 5 years? I = PRT I = 5000 x.03 x 5 I = $750

23. Calculating Simple Interest I have $3000 in a CD that earns 1% interest. How much interest will I earn in 2 years? I = PRT I = $3000 x.01 x 2 I = 60 Try It! - I have $6000 in a mutual fund that earns 5% a year. How much interest will I earn in 8 years?

24. Compound Interest With simple interest, you earn money on your original investment only. With compound interest, you earn interest on your interest (in addition to the principal) https://www.youtube.com/watch?v= wf91rEGw88Q Turn & talk - what is the difference between simple and compound interest?

25. Compound interest I have $10000 in a mutual fund that averages 7% per year. Consider the impact of compound vs. simple interest. Simple interest - Year 1 =.07 x 10,000 = $700 Year 2 =.07 x 10,000 = $700 Year 3 =.07 x 10,000 = $700 After 3 years you would have $12,100 Compound interest = Year 1 =.07 x 10,000 = $700 Year 2 =.07 x 10,700 = 749 Year 3 =.07 x 11,449 = 801.42 After 3 years you would have $12,250.43

26. Compound interest https://www.youtube.com/watch?v=immQX0R KFY0 A look at some sample numbers: http://www.fool.com/how-to-invest/personal- finance/credit/step-1-change-your-life-with- one-calculation.aspx Why would someone take the risk of the stock market over a savings account? How much do you need to save a month to end up with more than $400,000?

27. Compound interest Consider these numbers: http://www.thesimpledollar.com/how- important-is-it-to-start-early/ A look at 2 people: http://thecollegeinvestor.com/ultimate- retirement-savings-guide/#compound This is why it is important to start investing early!

28. 401K ○ What is it? ○ A company retirement plan in which money is put in pre-tax for retirement ○ Before taxes

29. How does it earn money? ○ Depends on which investment you choose ○ Risk – depends on which investment you choose

30. Advantages ○ Money goes in tax free ○ Money grows tax free ○ Company match – when you put money into your 401K your company will also put that amount into your 401K up to a certain % ○ Turn & talk - why is the money going in tax free an advantage?

31. Disadvantages ○ Pay taxes when you withdraw the money ○ Max. contribution of $17,000 a year ○ Penalty if you take out the money before 59 ½ (10% penalty) https://www.youtube.com/watch?v=tP4zWCS4 dMM&list=WL&index=18

32. IRA ○ What is it? ○ Individual retirement account in which pretax dollars are invested for retirement (money put in tax free) ○ How does it earn money? ○ Depends on the investment you pick (mutual fund, single stocks, bonds, money market account, CD, etc.) ○ Risk ○ Depends on the investment

33. IRA - Advantages ○ Don’t pay taxes when the put the money in ○ Grows tax-free

34. IRA - Disadvantages ○ Penalty if you take money out before 59 ½ (10%) ○ Maximum contribution $5500 ○ Pay taxes when you take the money out ○ Stop & think - what is the difference between a 401K and an IRA?

35. 403b ○ Just like a 401K but for non-profits

36. Roth IRA ○ What is it? ○ Individual retirement account in which you pay taxes before you put the money into the account ○ How does it earn money? ○ Depends on the investment chosen ○ Risk ○ Depends on the investment

37. Roth IRA advantages ○ Taxes are taken care of 1 st – Money grows tax-free and is withdrawn tax-free ○ CAN take out principle without a penalty

38. Roth IRA disadvantages ○ Owe taxes on the money before you put it in ○ Maximum contribution $5500 a year ○ 10% penalty if you take the money out before 59 ½ ○ https://www.youtube.com/watch?v=DR- X2wIMi1U&index=3&list=WL https://www.youtube.com/watch?v=DR- X2wIMi1U&index=3&list=WL

39. 529 Plan ○ What is it? ○ College savings plan from which money can be taken out tax free ○ How does it make money? ○ Depends on investment ○ Risk ○ Depends on investment

40. Advantages ○ Money grows tax free ○ Withdraw money tax free

41. Disadvantages ○ Pay taxes before you put the money in ○ Penalty if you use the money for things other than education