1. Understanding Investments

2. If you could have $100 right now or $150 in one year, which one would you choose? Why?

3. Ways to Earn Money Saving and investing can earn money because of benefits like interest and rate of return – Interest = money earned on top of money invested; an incentive to keep your money there – Rate of return = the amount gained or lost on an investment over time Consider the risks and rewards involved – Saving options like CDs (Certificates of Deposit) offer guaranteed interest rates making them low-risk….BUT it takes longer for money to grow because interest rates are lower – Investing options offer higher rates of return, but the rates can be variable (change over time and be more of a risk)

4. Historically, greater risks have reaped greater rewards… …but can also lead to greater losses

5. Investments Consumers buy, sell, and trade investments The government regulates these transactions to ensure equality (S.E.C.) – enforce regulations to reduce the risk of fraud for consumers Different investing strategies offer different types of interest or returns: simple or compound – can be guaranteed or variable interest rates – Simple interest = what you earn by investing money – Compound interest = earning interest on the interest

6. Investing Tips Investment Strategy DefinitionRiskProsCons BondsA type of loan in which you are the lender. You loan money to the government or a corporation with a set interest rate and maturity date Often lower risk, but risk varies depending on 1) the ability of the issuer to repay the loan and 2) interest rate opportunity costs -Usually provides more stability than stocks -Higher interest rate than a savings account -Historically lower returns than stocks -Cashing in before maturity date could result in a loss of principal (original amount)

8. Investing Tips Investment Strategy DefinitionRiskProsCons Mutual Funds A fund managed by a company that includes a portfolio of stocks or bonds Risk varies depending on type of mutual fund -Diversified -You can select different risk levels -Return isn’t guaranteed -Can be subject to expensive management fees

9. Investing Tips Investment Strategy DefinitionRiskProsCons StocksWhen buying a stock, you own partial ownership of a company Different levels of risk – some can be very risky, but not all stocks are subject to ups and downs of the market -Potential for higher returns over the long- term -The market goes up and down regularly, making it an unpredictable investment -Requires a long- term investment to get the best return -no guarantee for additional money above your investment (the return) and you may lose your principal too

10. Investing Tips Investment StrategyDefinitionRiskProsCons BondsA type of loan in which you are the lender. You loan money to the government or a corporation with a set interest rate and maturity date Often lower risk, but risk varies depending on 1) the ability of the issuer to repay the loan and 2) interest rate opportunity costs -Usually provides more stability than stocks -Higher interest rate than a savings account -Historically lower returns than stocks -Cashing in before maturity date could result in a loss of principal (original amount) Mutual FundsA fund managed by a company that includes a portfolio of stocks or bonds Risk varies depending on type of mutual fund -Diversified -You can select different risk levels -Return isn’t guaranteed -Can be subject to expensive management fees StocksWhen buying a stock, you own partial ownership of a company Different levels of risk – some can be very risky, but not all stocks are subject to ups and downs of the market -Potential for higher returns over the long- term -The market goes up and down regularly, making it a volatile investment -Requires a long-term investment to get the best return -no guarantee for additional money above your investment (the return) and you may lose your principal too