1. Reading: Intro. To Investing
ANSWER KEY: B C A D

2. The Basics of Investing
Stocks, Bonds & Cash Accounts

3. Why Invest Money?
Purchasing power = amount of goods/services money buys
Money loses purchasing power overtime
Prices for goods rise on average +2.5% per year
rising prices is called inflation
Investors must earn more than the rate of inflation for purchasing power to rise

4. Types of Investments: 4 Asset Classes
Stocks:
Over 5000 stocks to choose from!
Bonds:
Government bonds, corporate bonds, mortgage bonds
Cash Accounts:
Checking account, CD’s, money markets
Real Estate
Residential, commercial, houses, apartments, etc….

5. Returns before inflation = nominal return
Real & Nominal return per year by Asset Class
Returns before inflation = nominal return .
= real return
Savings
Account

6. Risk vs. Reward? Holding period = when do you need your money back?
Time horizon determines which asset class you should invest in
The longer the holding period----the more risk you should take!
Stocks = long term investment (5-years or longer)
Bonds = medium term investment ( 1-3 years)
Bank CD’s = short term investment (30 days to 2 years)

7. Process of picking sectors to invest in
Asset Allocation
Process of picking sectors to invest in
I think
I’m brilliant
very high risk
Cash
Account
Bonds
Stocks
no risk med. risk high risk

8. How Money Grows! Money grows exponentially as it compounds
The power
of compound
interest!
$10,000 invested at 4% return for 30-Years:
$33,000
$10,000 invested at 15% return for 30-years
$875,000

9. Rule of “70”
70/INVESTMENT RETURN = approx. # Years for prices to double
70/2% = 35 years
70/5% = 14 years
70/10% = 7 years
70/15% = years
You can also
Use this to calculate
Investment returns

10. Bonds
Bonds: are a loan to a Gov’t or business where you earn interest every year until you are paid back.
If the company goes bankrupt => you usually will not be paid back!
You buy
a Bond
U.S. Gov’t
5-Year Bond
$1,000
Gov’t pays you 2% interest per year
$20 per year
Plus $1,000 in 5 years
$1,000 turns into $1,100 over 5 Years

11. Stocks
Investors buy shares (stock) in a company and then become part owners
A company will issue stock to raise money to expand their business
Some companies pay dividends on their stock (similar to interest on a bond)
Investment Banks help companies issue stock
IPO = initial public offering
When a new company sells stock for the 1st time
Many employees in an IPO own “stock options”

12. Recent IPO’s

13. Self Efficacy
“False” Self Esteem
Resiliency