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Where should I invest? . SSEPF1 The student will apply rational decision making to personal spending and saving choices. a. Explain that people respond to positive and negative incentives in predictable ways. b. Use a rational decision making model to select one option over another.

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where should i invest

Where should I invest?

SSEPF1 The student will apply rational decision making to personal spending and saving choices.

a. Explain that people respond to positive and negative incentives in predictable ways.

b. Use a rational decision making model to select one option over another.

c. Create a savings or financial investment plan for a future goal.

where can i invest
Where can I invest?
  • Stocks
  • Real Estate
  • Mutual Funds
  • Insured Certificates of Deposit
  • Insured Savings Accounts
  • U.S. Savings Bonds
why should i invest
Why should I invest?
  • Rates of return are sometimes higher than regular savings
  • Saving/investing for future allows you to expand your overall fortune
what do i mean fortune
What do I mean…fortune?
  • Simple Interest – interest is earned on initial investment only
  • Compound Interest – interest is earned on initial investment AND interest already earned
example of compound interest 100
Example of Compound Interest ($100)
  • Simple
  • $100 investment
  • Interest on initial investment 10% = $10
  • Total = $110
  • Next round
  • Interest on initial investment 10% = $10
  • Total = $120
  • Compound
  • $100 investment
  • Interest on initial 10% = $10
  • Total = $110
  • Next Round
  • Interest on total 10% = $11
  • Total = $121
leave it for 5 years or 10
Leave it for 5 years…or 10
  • Simple
  • Year 1 = $110
  • 2 = $120
  • 3 = $130
  • 4 = $140
  • 5 = $150
  • 10 = $200
  • Compound
  • Year 1 = $110
  • 2 = $121(110 + 11)
  • 3 = $133 (121 + 12)
  • 4 = $ 146 (133 + 13)
  • 5 = $ 160 (146 + 14)
  • 10 = $ 256
things to remember
Things to remember
  • With CD’s – long-term = high initial investment and higher interest; short-term = low initial investment and low interest
  • Bonds – similar to CD’s
  • Stocks – depending upon type, price could be low or high. The “safer” the option, the less likely you are to earn quick money.
  • The longer your investment stays invested, the more likely it is to earn money.
  • S&P 500 returns – 2010 14.32 – 2009 27.112008 - 37.22
for your activity
For your activity
  • Financial Risk – risk of losing the money (1 – repays easy 2 - repays with difficulty 3 – cannot repay)
  • Market Risk – prices will change (1 – will not earn a lot 2 – earns a little 3 – earns a lot)
  • Liquidity Risk – Ability to turn investment into cash (1 – easy to make into cash 2 – somewhat difficult to turn into cash 3 – very hard to turn into cash)
  • Inflation Risk – Risk that investment will have LOWER return than inflation (1 – no worry about inflation 2 – a little worry about inflation 3 – inflation is probably higher than your earnings)
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