unit 3 - investing: making money work for you

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Unit 3 - Investing: Making Money Work for You. Saving/Investing Options. Savings Account Certificate of Deposits (CD’s) Stocks Bonds Mutual Funds Retirement Plans. Some background Info…. Money grows on the principle of interest - PowerPoint PPT Presentation

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Unit 3 - Investing: Making Money Work for YouNEFE High School Financial Planning ProgramUnit Three Investing: Making Money Work for You

Saving/Investing OptionsSavings AccountCertificate of Deposits (CDs)StocksBondsMutual FundsRetirement PlansNEFE High School Financial Planning ProgramUnit Three Investing: Making Money Work for YouSome background InfoMoney grows on the principle of interest

Compound interest- interest earned on both your principal (money you invested) and on the interest it earns

NEFE High School Financial Planning ProgramUnit Three Investing: Making Money Work for YouInvesting Weekly at 5% Interest3-BAmount SavedPer WeekValue After10 Years$ 7.00$ 14.00$ 21.00$ 28.00$ 35.00$ 4,720$ 9,440$ 14,160$ 18,880$ 23,600

1NEFE High School Financial Planning ProgramUnit Three Investing: Making Money Work for YouInvestment ToolsThe basic tools for most investors includeStocksBondsMutual Funds

Together known as securities

NEFE High School Financial Planning ProgramUnit Three Investing: Making Money Work for YouA bit about RiskInvestments pay a percentage in interest as determined by a bank, stock market or federal reserve.

The greater the risk the greater the return(or the greater the risk the greater the fall )NEFE High School Financial Planning ProgramUnit Three Investing: Making Money Work for YouStocksStock: a share of a companyWhen you buy a share you are actually buying a small piece of the company

-Buy certificates of stock that change value over time-Usually based on the well being of the company you invest inNEFE High School Financial Planning ProgramUnit Three Investing: Making Money Work for YouHow do stocks pay?Have money invested in stock itself and opportunity to collect dividends

Dividends: Money paid to share holders when company claims a profit

NEFE High School Financial Planning ProgramUnit Three Investing: Making Money Work for YouA $1,000 investment a decade ago would today be worth:

Apple (AAPL) -- $32,280Southwestern Energy (SWN) -- $31,880Cliffs Natural Resources (CLF) -- $26,460Range Resources (RRC) -- $12,440

NEFE High School Financial Planning ProgramUnit Three Investing: Making Money Work for YouBondsWhen you buy a bond you are essentially making a loan of money to a company or governmentCompanies/Government issue bonds to raise money

Designed to pay a specified rate of interest at the end of a certain period of timeex. 10 year $100 bond guaranteed to pay 6%/yearNEFE High School Financial Planning ProgramUnit Three Investing: Making Money Work for YouMutual FundsInvests in a number of different tools

Could include investments in stocks, bonds, foreign stocks and othersChoose due to diversification: dont have all your money invested in one place

Most retirement plans invest in mutual fundsNEFE High School Financial Planning ProgramUnit Three Investing: Making Money Work for YouRetirement PlansTypes of retirement plansIRA (personal retirement plan)401K (sponsored by company)Stock Ownership (in company employed)Profit Sharing Plan NEFE High School Financial Planning ProgramUnit Three Investing: Making Money Work for YouInvesting Annually to Achieve a Goal3-CValue of $201 Year2 Years4 Years6 Years4%5%6%8%10%$20.80$21.00$21.20$21.60$22.00$21.63$22.05$22.47$23.33$24.20$23.40$24.31$25.25$27.21$29.28$25.31$26.80$28.37$31.74$35.4354321Building.NEFE High School Financial Planning ProgramUnit Three Investing: Making Money Work for YouInvesting a $10,000 Lump Sum3-E11%10%9%8%7%6%5%12%InterestRate5Years20Years15Years10Years$12,763$17,623$16,851$16,105$15,386$14,693$14,026$13,382$16,289$31,058$28,394$25,937$23,674$21,589$19,672$17,908$20,789$54,736$47,846$41,772$36,425$31,722$27,590$23,966$26,533$96,463$80,623$67,275$56,044$46,610$38,697$32.0711NEFE High School Financial Planning ProgramUnit Three Investing: Making Money Work for You145 years at 5% 12,763Rule of 723-H72Interest Rate=Years Needed toDouble Investment72Interest RateRequired=Years Needed toDouble InvestmentNEFE High School Financial Planning ProgramUnit Three Investing: Making Money Work for YouRule of 72: $10,000 Invested3-I6121824Year3%6%12%INTEREST RATE$20,000$40,000$160,000$20,000$40,000$80,000$20,000NEFE High School Financial Planning ProgramUnit Three Investing: Making Money Work for YouFinancialPlanningPyramidPennyStockCommo- ditiesCollectiblesSpeculative Stock / Bonds /Mutual FundsRealEstateBlue-ChipCommonStockGrowthMutual FundsHigh-GradeConvertibleBondsHigh-GradePreferredStockBalancedMutual FundsHigh-GradeCorporate Bondsor Mutual FundsHigh-GradeMunicipal Bondsor Mutual FundsMoney MarketAccountsor Mutual FundsCertificatesof DepositU.S. SavingsBondsInsured Savings / Checking AccountsTreasuryIssuesHighest RiskHighest EarningsLower RiskLower Earnings3-JNEFE High School Financial Planning ProgramUnit Three Investing: Making Money Work for YouNEFE High School Financial Planning ProgramUnit Three Investing: Making Money Work for YouInterest Rate3%24 Yrs.$8004%6%8%12%6 Yrs.9 Yrs.12 Yrs.18 Yrs.$400$400$400$200$200$200$200$200The Impact of Higher Returns on Savings and InvestmentsRule of 72: The approximate frequency with which $100 doubles at specific interest rates3-K21NEFE High School Financial Planning ProgramUnit Three Investing: Making Money Work for You

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