BizWizBizWiz

Lesson 2Lesson 2

InvestingInvesting

Why do people choose to invest rather Why do people choose to invest rather than keeping their money in a piggy than keeping their money in a piggy bank?bank?

How can you make your money work for How can you make your money work for you?you?

Terms to KnowTerms to Know

Financial goal-Financial goal- the amount of money an the amount of money an investor hopes to make on an investmentinvestor hopes to make on an investment

Investment strategyInvestment strategy- a plan of action - a plan of action taken to achieve a financial goaltaken to achieve a financial goal

Investment portfolioInvestment portfolio- a collection of - a collection of investments owned by an individual or a investments owned by an individual or a groupgroup

Risk ToleranceRisk Tolerance

Risk- the perceived chance of injury, Risk- the perceived chance of injury, damage, or lossdamage, or loss

Most people make decisions involving Most people make decisions involving risk every day, but the degree of risk they risk every day, but the degree of risk they are willing to take depends on their are willing to take depends on their perspective of what they have to lose or perspective of what they have to lose or gain.gain.

High-risk vs. low-riskHigh-risk vs. low-risk

At your tables, list 3 types of activities a At your tables, list 3 types of activities a person with a high risk tolerance might person with a high risk tolerance might be interested in trying.be interested in trying.

List 3 types of activities a person with a List 3 types of activities a person with a low risk tolerance might be interested in low risk tolerance might be interested in trying.trying.

Risk ToleranceRisk Tolerance

3 types3 types Risk AverseRisk Averse Risk NeutralRisk Neutral Risk TolerantRisk Tolerant

Risk AverseRisk Averse

Low risk toleranceLow risk tolerance Prefer lower but safer returnsPrefer lower but safer returns Cannot afford to lose moneyCannot afford to lose money Do not have a lot of extra money in Do not have a lot of extra money in

savingssavings Losing money would create financial Losing money would create financial

stress (cannot pay bills, etc.)stress (cannot pay bills, etc.)

Risk NeutralRisk Neutral

Seek a balance of high- and low-risk Seek a balance of high- and low-risk investmentsinvestments

Can afford to lose some money, but not a Can afford to lose some money, but not a lotlot

Have some money in savingsHave some money in savings Losing money would not create great Losing money would not create great

financial stress (still able to pay bills), but financial stress (still able to pay bills), but losing a lot could be troublesomelosing a lot could be troublesome

Risk-TolerantRisk-Tolerant

High risk-toleranceHigh risk-tolerance Seek higher-risk investments that may Seek higher-risk investments that may

yield higher returnsyield higher returns Financially comfortable position, can Financially comfortable position, can

afford to lose moneyafford to lose money Have a lot of money in savingsHave a lot of money in savings Losing a lot of money would not create a Losing a lot of money would not create a

financially stressful situationfinancially stressful situation

Shopping Spree!!!Shopping Spree!!!

Each table will select a card with a monthly incomeEach table will select a card with a monthly income You will have a chance to go on a shopping spree, but You will have a chance to go on a shopping spree, but

you must have enough money in your bank account to you must have enough money in your bank account to cover your expenses for the next monthcover your expenses for the next month

Rent and bills-$250Rent and bills-$250 Food-$50Food-$50 Transportaion-$50Transportaion-$50 The remaining money will be The remaining money will be disposable income, disposable income,

money available for spending and savingmoney available for spending and saving

Shopping SpreeShopping Spree

ItemItem Video gamesVideo games Amusement park ticketsAmusement park tickets Football game ticketsFootball game tickets Concert ticketsConcert tickets Clothing store Clothing store

certificatescertificates Helicopter ridesHelicopter rides Hot air balloon ridesHot air balloon rides

PricePrice

$20 each$20 each

$30 each$30 each

$40 each$40 each

$75 each$75 each

$100 each$100 each

$200 each$200 each

$250 each$250 each

Risk ToleranceRisk Tolerance

What kind of investor is represented by What kind of investor is represented by Group A? Group B? Group C?Group A? Group B? Group C?