Part 2Personal Finance

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 2Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• The process of setting aside money and putting it to work by having it earn ______________or dividends or gain __________ in the equities market with the idea of having additional funds to use in the future is described as saving and investing.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 3Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• ___________ issued and guaranteed by the Federal Government

• Buying a Treasury Bill (T-Bill) is best for investors who are looking for a ________________________ investment. They are considered risk-free since they are backed by the ____________ Government.

• http://www.investopedia.com/video/play/treasury-bill/

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 4Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

_______________of residential or commercial property or land

Real estate can be time consuming but the potential for returns is _____________

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 5Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• When renting as an investment, you have the ________ that if your property is not rented, you will lose your ____________.

• As the landlord, you are responsible for maintenance of the property. These ________________ can generally be deducted from your taxes.

• http://www.investopedia.com/video/play/intro-to-investment-real-estate/

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 6Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Futures Options Collectibles

Type of return depends on the investment

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 7Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• A futures contract is a type of derivative instrument, or financial contract, in which two parties agree to transact a set of financial instruments or physical commodities for future delivery at a particular price. If you buy a futures contract, you are basically agreeing to buy something that a seller has not yet produced for a set price. But participating in the futures market does not necessarily mean that you will be responsible for receiving or delivering large inventories of physical commodities - remember, buyers and sellers in the futures market primarily enter into futures contracts to hedge risk or speculate rather than to exchange physical goods (which is the primary activity of the cash/spot market). That is why futures are used as financial instruments by not only producers and consumers but also speculators.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 8Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• The primary difference between options and futures is that options give the holder the right to buy or sell the underlying asset at expiration, while the holder of a futures contract is obligated to fulfill the terms of his/her contract.

In real life, the actual delivery rate of the underlying goods specified in futures contracts is very low. This is a result of the fact that the hedging or speculating benefits of the contracts can be had largely without actually holding the contract until expiry and delivering the good(s). For example, if you were long in a futures contract, you could go short in the same type of contract to offset your position. This serves to exit your position, much like selling a stock in the equity markets would close a trade.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 9Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

When a company raises money from investors and invests that money in stocks, bonds or other securities. An investment

which holds a wide __________ of different investment instruments, providing __________________ (reducing your

risk by investing in different types of securities)

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 10Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Reduces investment

risk

Fees may be high

Saves investors

time

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 11Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Ariana invests in one company’s

stock

Company C has had a bad year

and their market price drops

significantly.

Ariana may lose her $150

investment

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 12Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• Market price of companies C and F decreased

• Market price increased for all other companies

Ariana has reduced her

investment risk and may still earn

money

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 13Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 14Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Investing in a _________ fund is an automatic

form of portfolio

diversification

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 15Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Government encourages people to invest in certain types of investments

Tax-advantaged investments

reduce, defer or adjust the current

year ________ liability

Most common:•Retirement•Education

Savings and investments are a form

of __________ income and therefore subject to income tax

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 16Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

OR

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 17Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 18Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

The trade-off to tax

advantages is most

accounts have

__________ if money is withdrawn

early

There are many other types of plans available

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 19Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• A company offers a defined-contribution ____________ plan which means that upon retirement the employee will receive the total amount of money contributed __________ investment earnings.

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© Take Charge Today – August 2013 – The Fundamentals of Investing– Slide 20Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• Under normal circumstances, _______________ from a Roth IRA before retirement age are subject to both _________ and a __________. However, use of funds for education, purchase of a first home and medical emergencies are three situations which permit the holder of the IRA to use savings in the funds _____________ incurring a penalty or paying taxes on the amount withdrawn.

• http://www.investopedia.com/video/play/roth-versus-ira/