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SAVINGS AND
INVESTINGPersonal Finance
DIVERSIFICATION Spreading out the risk of a portfolio over
many different types of investmentsMutual Funds
Collect small amounts money from many investors
Buy small amounts of equities from many sources
Money Market
RISK VS. RETURN Balances like a teeter-totter Depends on the goals of the saver
Time IncomeExpenses
LIQUIDITY Measures how available the money is for
the saver Period of time it takes for saver to get
the money and spend it
BALANCING RISK/RETURN AND LIQUIDITY
safe
safemoderaterisky
moderate
riskymoderatesafe
risky
safemoderaterisky
DOLLAR-COST AVERAGING Directing regular, small amounts of
money toward the stock market10 % gross income each paycheckBuy lowSell high
BUYING STOCK Minor ownership in the company
Common Performance dividends; voting rights
Preferred Fixed dividends; no voting rights
Convertible Fixed dividend; voting rights
How to Read a Stock Table Stock Market Game Sign-up Form
STOCK EXCHANGES Markets for the sale of stock
NYSE – New York Stock ExchangeNASDAQ – National Association of
Securities Dealers Automated QuotientOTC – over the counterNYME – New York Mercantile ExchangeCBT – Chicago Board of Trade
STOCK INDICES Conglomerate averages Measure the performance of the market General overview
DJIA – Dow Jones Industrial AverageS&P – Standard and PoorsBNOX – Bloomberg
Northeastern Ohio Index
PERFORMANCE Bull Market
Steady rise of the market Bear Market
Steady decline of the market
PIT
►Place where trades are transacted►Card Game
Objective to corner the marketSame number of commodities as
playersWild cards►Bull►Bear
IRA Individual Retirement Arrangement
Usually tax deferredMay be matched by companyRoth is tax sheltered401(k) – IRS code for tax purposes403(b) – created for employees of non-
profits
COMPOUND INTEREST Interest calculated on the initial
principal and also on the accumulated interest of previous periods of a deposit or loan.
CONTRIBUTING $416/MONTH AT 8% ANNUALLY Pay in 40 YEARS = $1,472,039.32 Pay in 10 YEARS = $847,916.14 WAIT 10 YEARS = $628,672.36
BABY STEPS Dave Ramsey
http://www.daveramsey.com Small, smart steps will get you to
securityA place where your money is working for
youNot you working for your money
Be Radical In decision making, not spending
Be Intentional“On paper, on purpose”
STEPS $1000 Emergency Fund $0 of Personal Debt 3-6 Months of Living Expenses 10-15% in a Retirement Account College Funding
For childrenScholarshipsWork
20/20* Down Payment/Life of the Loan (House)
50/50* Living/Giving
INVESTMENT COUNSELING ACTIVITY Work in groups to devise an investment
strategy for 6 different households.Each have unique circumstancesEach have $50,000 to useYou have 30 minutes
5 minutes per scenario Remember the Baby Steps Consider the investment strategies we just
learnedLiquidity, Diversification, Risk vs. Return
