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INVESTING for your future. Personal Finance – Unit 5. How Much $ will YOU need when you retire?. How will you get it?. Investing is like gambling…. But “EDUCATED”. Are You a Risk Taker?. Which best describes your feeling about investing? Better safe than sorry Moderation in all things - PowerPoint PPT Presentation


  • Personal Finance Unit 5

  • Which best describes your feeling about investing?Better safe than sorryModeration in all thingsNothing ventured, nothing gained

  • 2. Which is the most important to you as an investor?You receive a steady incomeYou receive a steady income and growthThe price of your investments rises rapidly

  • 3. You won! Which prize would you pick?$4,000 in cashA 50% chance to win $10,000A 20% chance to win $100,000

  • 4. The stocks you own have dropped 20% since last quarter. The market experts are optimistic. What would you do?Sell to avoid more lossKeep stocks, wait for reboundBuy more stocks b/c theyre cheaper now

  • 5. The stocks you own have gone up 20% since last quarter. You have no further information. What would you do?Sell & take gainsKeep stocks, hope it goes up higherBuy more stocks b/c they might go higher

  • 6. Would you borrow money to take advantage of a good investment opportunity?NeverMaybeYes

  • 7. How would you characterize yourself?I dont like taking risksIm a moderate risk takerI enjoy taking risks

  • 1 Points for all As2 Points for all Bs3 Points for all Cs

  • 7-11: youre a conservative investor who prefers to minimize financial risks12-16: Youre a moderate risk taker17-21: Youre comfortable taking risks in pursuit of greater returns

  • Lets Get Started!

  • Starting to InvestReasons for InvestingHow to Choose an InvestmentWise Investment PracticesRisk and ReturnTypes of Retirement Plans

  • Put-and-Take AccountMoney left in savings/checking for you to use as neededShould include an emergency fund (6-9 months of salary)

  • Financial emergencies can come in the form of a job loss, significant medical expenses, home or auto repairs or something youve never dreamed of. The last thing you want to do is be forced to rely on credit cards or a loan which could simply compound the problem.

  • Systematic InvestingInvesting on a regular and planned basisRegularly set aside money each month for investing to meet long-term goalsHigher risk in the beginning, lowest risk near retirementRetirement-planning

  • Safety (minimal risk of loss)High LIQUIDITY (getting your money quickly)High dividends or interestGrowth in value that exceeds the inflation rateReasonable (low) purchase price (initial cost)Tax benefits (saving or postponing tax liability)

  • Define your financial goalGo slowlyFollow throughKeep good recordsSeek Good Investment AdviceKeep investment knowledge currentKnow your limits risk tolerance, how much you can afford to lose

  • Stay within your Circle of Competence

  • RISK is the chance that an investments value will decrease.All investments have riskGREATER RISK = GREATER POTENTIAL RETURNSDIVERSIFICATION means spreading risk among many types of investment

  • Interest-Rate Risk The chance that the investments return will not keep pace with inflationMarket Risk caused by business declines, national/world events, interest rate fluctuations

    Political Risk Gov. actions that may decrease the success of an investmentCompany/Industry Risk actions that affect one company/industry

  • The US government puts sanctions on China, causing the price of Chinese companies stock to decrease

  • Your stock portfolio only saw returns of 1.5% last year, but your 60 Month Bank CD is earning 2% interest.

  • NEW YORK (CNNMoney) -- As it attempts to revive a once-great luxury brand, Ford's is renaming its Lincoln division as the Lincoln Motor Co., the automaker said Monday (12/3/2012)

  • Americans unexpectedly pared spending in October as superstorm Sandy depressed wages, showing the worlds largest economy is cooling as lawmakers seek ways to avoid the so-called fiscal cliff. (BusinessWeek, 11/30/12)

  • But what can you INVEST in?


  • Government SponsoredPersonal PlansAnnuitiesEmployer Sponsored

  • SOCIAL SECURITYHow it works:People contribute while they are working and get a portion of it back when they reach age 65

  • An insurance product that pays out income, and can be used as part of a retirement strategyA popular choice for investors who want to receive a steady stream of income in retirementYou make an investment in the annuity, and it then makes payments to you on a future date or series of dates

  • Company retirement plans in which a retired employee receives a specific amount based on salary history and years of service, and in which the employer bears the investment risk. The employee, the employer, or both may make contributions.

  • PENSIONSWorkers pay a percentage of their salary towards the pension each paycheck. This is typically three to five percent per paycheck. In turn, the company the employee works for will help the employee finance his retirement.The government guarantees pension benefits to a certain extent

  • The employer and/or employee make contributions, and the final benefits depend on how much was in the account and the rate earned by the account's investments. The federal government does not guarantee a participant's benefits; instead, the plan is "participant-directed", meaning that the employee makes the investment decisions based on the employer's options.

  • Most common type of employer-sponsored planUsed with for-profit companiesAllows employees to save pre-tax dollarsSome companies MATCH employee contributionsMAX contribution
  • Similar to 401(k), but used for non-profit organizationsUsually not matched by employer

  • An employer alone makes contributions based on an employee's current-year compensation.Contributions are discretionary and may vary year-to-year, may also include stock options

  • A type of profit sharing plan, where contributions are made in the form of company stock.

  • 2,800 firms are listed on the NYSE (thousands more on the AMEX, and NASDAQ)Out of all this companies, how does one pick the stocks most likely to increase in price?Recognize that you cannot know it allSelect a few companies to research, then follow their progress closelyFind a few good places to get stock information.

  • NEWSPAPERSFinancial pages of local newspapersThe Wall Street JournalBarrons

  • INVESTOR SERVICESCompanies that provide extensive financial data to investorsMoodys Investor Services ( and Poors Reports ( Fool ( ( Finance (

  • FINANCIAL MAGAZINESBusinessWeek, Forbes, Money, Fortune, Kiplingers Personal Finance, The Economist

  • FULLSERVICE BROKERS: provide clients with analysis and opinion based on their judgments and the opinions of experts at the company

  • DISCOUNT BROKER: buy and sell securities for clients at a reduced commission, with little or no investment advice, may be online

  • FINANCIAL ADVISORSLiberty Investment Management31 Buffalo StreetHamburg, NYWaring Financial Group38 Lake StreetHamburg, NYAleksandrowicz & Associates Inc265 Union St # 102Hamburg, NYSaperston Asset Management172 Lake StreetHamburg, NY

    Gallagher Bassett41 Maple AvenueHamburg, NYClark & Co Wealth Management LLC12 Norwood AvenueHamburg, NYDavis Financial6101 S Park Ave # 1Hamburg, NYThe Evans Agency5999 South Park AvenueHamburg, NYwork at financial institutions to help guide investors

  • SOURCES OF FINANCIAL INFO.ANNUAL REPORTS AND FINANCIAL STATEMENTSAn ANNUAL REPORT is a summary of a companys financial results for the year and prospects for the futureFiled with the Securities and Exchange Commission (SEC)


  • Visit all the sites mentioned in class today.Browse the sites to see which you find easy to navigate and informative.Choose three stocks that you think might be worth the investment and write down the names and stock symbols of the company.

  • Time Value of MoneySimple InterestCompound InterestThe Rule of 72Return on Investment

  • The relationship among time, money and rate of interest.Example: You put $100 in your dresser drawer and keep it for one year. At the end of the year, you still have $100. But in a year, $100 may buy less than it does now because of INFLATION.

  • Amount you will earn on an investment if you dont let the interest compound (rollover from one year to the next)Principal Balance X Interest Rate X Time in Years = Earned InterestPRT = I

  • The idea of earning interest on interest. You put $100 into an investment that earns 10% a year. At the end of the year, you have $110 in the account. That $110 stays in the account for a year and earns another 10%, now you have $121 in the account. This keeps going and goingSee how it works!

  • A = P (1 + i) nA = Amount in accountP = Principal Investmenti = Interest raten = Number of years

  • Used to find out how long it will take you to double your money at a certain interest rate.

    Example: How long will it have an investment to double if it is earning 7% a year? = 72/7 = 10.2 years.

    72 Interest Rate = number of years

  • The amount of money you make on an investment, expressed as a percentage of your initial investment.

    A ROI over 100% means that you are doubling money.

    Return = (Ending Value Beginning Value) Beginning Value

  • Form of ownership in a corporationStockholders get dividends and appreciated stock valueCorporations get EQUITY CAPITAL ($ they can use for anyt


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