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Chapter 10: Saving & Investing

Saving and Investing
by

Leslie Callison

on 30 June 2011

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Transcript of Chapter 10: Saving & Investing

Chapter 10: Saving & Investing Purpose of savings: accumulate money for future use Why? Purpose of Investing: make your money grow What for? Short-term goals Liquidity: measure of ability to turn an asset into cash quickly Long-term goals/needs Financial Security: ability to prepare for future needs and meet current expenses to live comfortably Principles Growth of principal: compound interest is best--earn interest on interest Return on Investment (ROI):
tells how much you will receive on whatever you have invested in Could be cash (interest in a savings account)
Could be increased value (real estate) Contingencies: emergencies or other unplanned or possible events
Need contingency plan or a Plan B Risk and Return:
The higher the risk, the greater the return expected
The lower the risk, the lower the return (your money will not grow as fast, but you are not as likely to lose it) Diversification:
holding a variety of investments for the purpose of reducing risk Stock Market Stocks:
shares of ownership in a corporation Bull Market:
exists when stock prices are steadily increasing Bear Market: stock prices are steadily decreasing Review 1. When do you need to start saving and investing?
2. What is the purpose of saving?
3. What is the purpose of investing?
4. How are risk and return related?
5. What is diversification? Why is it important?
6. What is the ultimate goal of long-term financial planning?
7. What is a bull market?
8. What is a bear market?
9. What is ROI? Tax-deferred:
there are no taxes on gain until the money is taken from the account Where would you want to go if you could pick a spot for a vacation?
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