This week Next Week

Monday2/25- Chapter 10

Tuesday 2/26- Project Workday

Wednesday 2/27- Chapter 10

Thursday 2/28- Project Workday

Friday 3/1- Chapter 11

Monday 3/4- Project Due, Unit 4 Test

Tuesday 3/5- Poster Workday

Wednesday 3/6- Poster Presentations

Thursday 3/7- Exam-1st/2nd.

Friday 3/8- Exam 3rd/4th

Slide 1

Chapter 10Basics of Saving and Investing

Slide 310-1 Reasons for Saving and Investing

• Savings is money set aside for the future.

• Investing is a strategy to earn more on your money than the rate of inflation.

• Wealth is the accumulation of assets over time.

Slide 410-1 Reasons for Saving and Investing

• Short-Term Goalso Contingency planningo Vacation planning

• Medium-Term Goalso Buying a caro Paying for collegeo Planning a wedding

• Long-Term Goalso Providing for a familyo Buying a house

Retirement is the period of time when you are not working but are able to meet expenses.

Sources of income include:oRetirement plansoSocial securityoSavingso Investments

Slide 510-1 Reasons for Saving and Investing

Slide 610-1 Reasons for Saving and Investing

Amount Invested

Interest Rate

Investment Term

Maturity Value

$10,000 investment 6% 20 years $32,071$10,000 investment 6% 30 years $57,435$1,000 investment 8% 30 years $10,063$1,000 investment 8% 40 years $21,725$1,000 per year investment

5% 20 years $33,066

$1,000 per year investment

5% 30 years $66,439

$1,000 per year investment

5% 40 years $120,800

$100 per month investment

7% 25 years $81,007

$100 per month investment

7% 30 years $121,997

$100 per month investment

7% 40 years $262,481

Slide 7

• The higher the risk, the greater your possible return.

• Risk-free investments are guaranteed by the government—U.S. savings bonds, Treasury bills.

• Return on Investment (ROI) is the amount that savings or investments grow expressed as a percentage.

10-2 Principles of Saving and Investing

Slide 810-2 Principles of Saving and Investing

Example 1: Bought an investment for $500; received dividends of $18 for the year

Return: $18Rate of return: $18 ÷ $500 = 3.6% (annual rate of return)

Example 2: Bought an investment for $500 on March 1; sold it on October 1 for $525.  Return: $25Rate of return: $25 ÷ $500 = 5%Note: The 5% return was received after only 7 months. The annual return would be higher. Calculate the annual ROI as follows:0.05 ÷ 7 months × 12 months = 8.6% (annual rate of return)

Inflation risk Industry risk Political risk Stock risk

Slide 910-2 Principles of Saving and Investing

Investment risk is the potential for change in the value of an investment.

Tax deferral is a postponement of taxes to be paid. oTaxes on gains are not paid until the money is

withdrawn. Tax exemption means savings and

investments are not taxed.oExample: Series EE and Series I savings bonds

are tax-free if used for education.

Slide 1010-2 Principles of Saving and Investing

Slide 11

• Systematic saving involves regularly setting aside cash to achieve goals.

• Systematic investing is a planned approach to making investments on a regular basis.

• Market timing involves buying and selling stocks based on what the market is expected to do.

10-3 Strategies for Saving and Investing

Slide 1210-3 Strategies for Saving and Investing

Investment tracking involves making investment choices by following stock prices over time.

Slide 1310-3 Strategies for Saving and Investing

Slide 1410-3 Strategies for Saving and Investing

• A bull market exists when stock prices are steadily increasing.

• A bear market exists when prices are steadily decreasing.

• Economic conditions (growth or decline) can affect investment strategies.

Slide 15

Dollar-Cost AveragingThe systematic purchase of an equal dollar amount of the same stock at regular intervals

10-3 Strategies for Saving and Investing