1. Investing Basics

2. Investing
Investing – saving in a way that earns income Forms of Investing – savings accounts, CDs, money market accounts, stocks, government bonds

3. Investing (cont.)
There is no “right” way to invest – it must fit your personal financial situation Considerations: 1. age – How soon will you retire? 2. salary - What is the right amount to risk? 3. financial responsibilities - Do you have a family to support? Are you in debt? 4. risk tolerance – What is a comfortable risk level? 5. values – Do your investments reflect your values?

4. Risk Risk – the chance that an investment will decrease in value
All investments involve risk
-Almost no risk for bank accounts and government bonds
-High risk for investment in businesses

5. Return
Return – the income you earn on an investment Rule of Thumb – the greater the risk, the greater the potential rate of return

6. Diversification
Diversification – investing in various businesses with different levels of risk
Reduces the overall risk of loss
-If one investment loses, the others could gain and your money still increases

7. Diversification (cont.)
Diversify according to financial needs -Young – more years to earn – may want to be more risky -Older – saved enough to retire – may want to be less risky

8. Risk Tolerance Quiz
Tolerance – the level of risk that is comfortable for you

9. Sample Risk Tolerance Quiz

10. Aggressive investors (20-28 pts)
An aggressive investor is an investor who is willing to accept a higher degree of investment risk in exchange for a chance to earn a higher rate of return.
Investment risk is the volatility of investment returns. A basic investing principle states that a higher degree of investment risk is required to earn a potential higher rate of return.

11. Moderate investors (15-19 pts)
An investor who is willing to accept some investment risk in exchange for a chance to earn a higher rate of return. Investment risk is the volatility of investment returns.
A basic investing principle states that a higher degree of investment risk is required to earn a potential higher rate of return. On the risk-tolerance scale, a moderate investor is in between an aggressive and conservative investor.
This means you are willing to accept some risk in exchange for a potential higher rate of return.

12. Conservative Investors (under 15pts)
An investor who is unwilling to accept a higher degree of investment risk in exchange for a chance to earn a higher rate of return. Investment risk is the volatility of investment returns.
A basic investing principle states that a higher degree of investment risk is required to earn a potential higher rate of return.