Where should i invest
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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?

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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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