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InvestmentsInvestments

+Purpose of Investments

Investments constitute something that is purchased for future benefit (money, experience)

Promotes economic growth and contributes to a nation’s wealth

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Financial System Is a network of savers, investors, and financial institutions that work together to transfer savings to investors.

+Financial Intermediaries

Financial Intermediaries –are financial institutions that lend the funds that savers provide to borrows.

Commercial Banks

Savings & Loans

Credit Unions

Savings Banks

Mutual Savings Banks

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+Investing “Trade-Offs”

Liquidity- Savings accounts are good for immediate cash, but pay a low interest rate

Return- the money an investor receives over and above their initial investment

Risk- Anything insured by the gov’t carries no risk compared to investments with high risks (but greater rewards), such as investing in the stock market

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Mutual Fund and CD’sMutual Fund and CD’s

An investment company that pools money to invest in several different stocks on behalf of a group of investors. The fund is managed by a professional investment manager. (Includes Pension Funds- IRA’s)

(A package O’ stocks)

CD’s are common form of investment issued through banks for 2yrs. @ 4% interest

+BondBond

An investment in a corporation or a government body through a loan. If you purchase a bond, you are loaning money with the expectation of interest compounded on your investment.

Savings Bonds, Municipal Bonds, Corporate Bonds, Junk Bonds

+What is a Stock?What is a Stock?

Ownership of shares in a corporation. Stockholders share a portion of the profit or loss incurred by the company.