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Investing
How To Make Your Money Work For You ?
What is Investing?
► Definition: The act of committing money or capital to an endeavor with the
expectation of obtaining an additional income or profit
► Why is this important?
► Letting your money work for you investing is NOT gambling
► Why might it be important for you to invest?
► Retirement, plans to buy a house..etc.
Saving and Investig
Remember:
The
purpose of
savings is
to develop
financial
security
Recommend refocusing goals from saving to
investing
Once an appropriate amount of
liquid assets are reached
Why Invest?
► Retirement – would you like to retire early? At all? At your current lifestyle?
► Investing money now allows financial flexibility for your future
► The earlier you start investing, the easier it will be to establish a large
amount of money
How does investing work? Compounding
►
Rate of Return
► Total return on investment expressed as a percentage of the amount of
money invested
Risk
Risk- uncertainty regarding the outcome of a situation or event
Investment Risk- possibility that an investment will fail to pay the expected
return or fail to pay a return at all
POTENTIAL
RETURN
RISK
Inflation
Inflation
Rise in the general level of prices
Inflation Risk
The danger that money won’t be worth as much in the future as it is today
Types of Investment tools
Stocks
A share of
ownership in
a company
A share of
ownership in
a company
Return on Stocks
Share of profits
distributed in cash
to stockholders
Stockholder may
or may not
receive dividends-
depends on
company profit
Current price that a
buyer is willing to pay
for stock
If stock is sold
for a market
price higher than
what was paid
If stock is sold
for a market
price lower than
what was paid
Stockholder will
receive a return
Stockholder will
lose money
Definition
What is
received?
Bonds
Form of lending to a
company or the gov't
(city, state, or federal)
Annual interest is paid to
investor
Once the maturity date is
reached, the principal is
repaid to the bondholder
Definition
Return
Mutual Funds
Mutual fund-
when a company
combines the
funds of many
different investors
and then invests
that money in a
diversified portfolio
of stocks and
bonds
Reduces
investment
risk
Saves
investors
time
Fees may
be high
Index Fund
A mutual fund that
invests in the
stocks and bonds
that make up an
index
A group of similar
stocks and bonds-
Standard
Real Estate
●Any residential or commercial property or land as well as the rights
accompanying that land
●A family home is usually not considered an investment asset
●Can be risky and more time consuming but has potential for large returns
Examples of
real estate
investments
include rental
units and
commercial
property
Specualitve Investments
Futures Options
Commercial
Paper
Collectibles
FINANCIAL RISK PYRAMID
The risk level for specific investment tools may vary
Speculative
Investment
Tools
Increasing
potential for
higher
returns
Increasing
risk
Savings
Tools
Checking
Account
Savings
Account
Money
Market
Deposit
Account
Certificate
of Deposit
Savings
Bonds
Investmen
t Tools
Bonds
Stocks
Mutual
Funds
OptionsCollectibles
Futures
Commercial
Paper
Index
Funds
Real Estate
Portafolio diversification
Portfolio Diversification- reduces risk
by spreading investment money
among a wide array of investment
tools
Creates a collection of
investments that will provide an
acceptable return with an
acceptable exposure to risk
Assists with investment
risk reduction
Taxation
Profits earned on investments
are unearned income
Taxes are often owed on
unearned income
Taxes are due on most investment
returns in the year the unearned
income is received
Conclusion
► Compounding allows your money to make money
► There is no wrong way to invest
► Risk tolerance is a measure of how much risk you can withstand as an
investor, and should be considered when choosing an investment
Adttional Material
► https://www.youtube.com/watch?v=Sbp_t4guM8g&ab_channel=ProactiveThin
ker

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InvestingEnglish.pptx

  • 1. Investing How To Make Your Money Work For You ?
  • 2. What is Investing? ► Definition: The act of committing money or capital to an endeavor with the expectation of obtaining an additional income or profit ► Why is this important? ► Letting your money work for you investing is NOT gambling ► Why might it be important for you to invest? ► Retirement, plans to buy a house..etc.
  • 3. Saving and Investig Remember: The purpose of savings is to develop financial security Recommend refocusing goals from saving to investing Once an appropriate amount of liquid assets are reached
  • 4. Why Invest? ► Retirement – would you like to retire early? At all? At your current lifestyle? ► Investing money now allows financial flexibility for your future ► The earlier you start investing, the easier it will be to establish a large amount of money
  • 5. How does investing work? Compounding ►
  • 6. Rate of Return ► Total return on investment expressed as a percentage of the amount of money invested
  • 7. Risk Risk- uncertainty regarding the outcome of a situation or event Investment Risk- possibility that an investment will fail to pay the expected return or fail to pay a return at all POTENTIAL RETURN RISK
  • 8. Inflation Inflation Rise in the general level of prices Inflation Risk The danger that money won’t be worth as much in the future as it is today
  • 10. Stocks A share of ownership in a company A share of ownership in a company
  • 11. Return on Stocks Share of profits distributed in cash to stockholders Stockholder may or may not receive dividends- depends on company profit Current price that a buyer is willing to pay for stock If stock is sold for a market price higher than what was paid If stock is sold for a market price lower than what was paid Stockholder will receive a return Stockholder will lose money Definition What is received?
  • 12. Bonds Form of lending to a company or the gov't (city, state, or federal) Annual interest is paid to investor Once the maturity date is reached, the principal is repaid to the bondholder Definition Return
  • 13. Mutual Funds Mutual fund- when a company combines the funds of many different investors and then invests that money in a diversified portfolio of stocks and bonds Reduces investment risk Saves investors time Fees may be high
  • 14. Index Fund A mutual fund that invests in the stocks and bonds that make up an index A group of similar stocks and bonds- Standard
  • 15. Real Estate ●Any residential or commercial property or land as well as the rights accompanying that land ●A family home is usually not considered an investment asset ●Can be risky and more time consuming but has potential for large returns Examples of real estate investments include rental units and commercial property
  • 17. FINANCIAL RISK PYRAMID The risk level for specific investment tools may vary Speculative Investment Tools Increasing potential for higher returns Increasing risk Savings Tools Checking Account Savings Account Money Market Deposit Account Certificate of Deposit Savings Bonds Investmen t Tools Bonds Stocks Mutual Funds OptionsCollectibles Futures Commercial Paper Index Funds Real Estate
  • 18. Portafolio diversification Portfolio Diversification- reduces risk by spreading investment money among a wide array of investment tools Creates a collection of investments that will provide an acceptable return with an acceptable exposure to risk Assists with investment risk reduction
  • 19. Taxation Profits earned on investments are unearned income Taxes are often owed on unearned income Taxes are due on most investment returns in the year the unearned income is received
  • 20. Conclusion ► Compounding allows your money to make money ► There is no wrong way to invest ► Risk tolerance is a measure of how much risk you can withstand as an investor, and should be considered when choosing an investment