Chapter 8: Investing and Retirement

Unit 3: Financial Planning and Insurance

Explore Examine the charts, graphics, and reading

excerpts in Chapter 8: Investing and Retirement.

o Make a list of questions you would like to have answered as we go through the chapter.

Introduction WB: Before You Begin, pgs. 162-163

o Review the Learning Outcome objectives and Key Terms

o Complete the “Before” column on the “Measure Your Progress” chart

Journal: 1. List your initial thoughts about investing.2. What do you want to learn about investing?

Investing 101Section 1

Build Wealth and Give Video 1.1 (14 minutes): Basic Rules of

Investing

Journal: 1. As a young adult, what is the most important

thing you can invest in?

Discussion Questions What is the Fifth Foundation?

o Build wealth and give

Why is it important to complete Foundation one through four prior to investing?o Your first priorities in personal finance are to save,

pay cash for large purchases, and avoid going into debt. Once you established those money foundations, you can focus on building wealth.

Cause and Effect Activity

Nothing is achieved without a plan.

Write down two long-term financial goals (pay for college with cash, buy my dream house, retire comfortably, etc.)

Answer the following questions for EACH goal:1. Am I willing to make the financial sacrifices necessary

to meet this goal?2. If I don’t accomplish this goal, what are the

consequences?3. How much money do I need to accomplish this goal

and when will I need it?

Basic Rules of Investing

Video 1.2 (12 minutes): Basic Rules of Investing

Journal: 1. If you were giving advice to a friend, what

would you say are the most important things to know about investing?

Discussion Questions Explain what risk return ratio is.

o The risk return ration is used by investors to compare the expected returns of an investment to the amount of risk they take to get the returns.

Explain what the liquidity of an asset refers to.o Liquidity refers to the availability of an asset.

Discussion Questions

Why does a CD have a slightly higher interest rate than a typical savings account at a bank?o Because a CD requires a longer savings

commitment than a regular savings account.

Explain how diversification helps to protect your wealth.o Having a variety of investments will yield higher

returns and lower risk.

Activity Activity: Individual Fund Tracker (30

minutes, 15 minute weekly follow-up)

Types of Investment

Section 2

Money Markets Video 2.1 (14 minutes): Money Markets

Journal: 1. Explain why single stocks carry a high degree of

risk.

Discussion Questions Which carries higher risk: Money market

accounts or single stocks?o Single stocks

Do bonds typically yield high or low returns?o Low

Explain how mutual funds work.o Mutual funds are made of a pool of money

collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.

Activity Activity:

o Reading a Prospectus (25 minutes)

Mutual Funds Video 2.2 (14 minutes): Mutual Funds

Journal: 1. Which are a better investment, stocks or mutual

funds? Explain your answer.

Discussion Questions

Explain how mutual funds work.o Mutual funds are made of a pool of money

collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.

Discussion Questions What is the main advantage of a mutual fund?

o They give small investors access to professionally managed, diversified portfolios of stocks, bonds, and other securities.

What level of risk do mutual funds carry if well diversified?o Moderate

What is a qualified plan? Give an example of a qualified plan.o A qualified plan is a tax-favored investment. An

IRA is an example of a qualified plan.

Activity Activity:

o Name That Investment (15 minutes)

Qualified Plans Video 2.3 (15 minutes): Qualified plans

Journal: 1. What is real estate?2. Why is it considered an investment?

Discussion Questions What does it mean to have an investment

with a “tax deferred” arrangement?o The holder is taxed at the time of distribution or

withdraw.

What are some of the benefits of adding real estate to your investment portfolio?o By adding real estate, you could maintain your

portfolio returns while decreasing risk.

What are some downfalls of investing in real estate?o It is expensive to buy, sell and maintain; it

requires management.

Discussion Questions What is the stock market?

o The stock market is a generic term that encompasses the trading of securities.

What is the primary difference between the American Stock Exchange and the New York Stock Exchange?o The American Stock Exchange has less stringent

listing requirements than the NYSE and therefore attracts smaller companies.

Activity Activity:

o Stocks vs Mutual Funds (15 minutes)o Investments Compared (20 minutes)o Rule of 72

Employer Benefits and Retirement

PlansSection 3

Employer Benefits and Retirement Plans

Video 3.1 (13 minutes): Employer benefits and retirement plans

Journal: 1. Why do you think it is important to consider both

salary and benefits when applying for a job?

Discussion Questions What is the purpose of an employer benefits

package?o To increase the financial security of staff members,

and in doing so, improve worker retention across the organization.

What are the typical components of an employer benefits package?o Retirement plans, savings plans, insurance, sick

leave, paid vacation, stock options, education reimbursement, and cafeteria plans.

Activity Activity:

o Funding 401(k)s and Roth IRAs (25 minutes)o Monthly Retirement Planning (25 minutes)

Chapter Summary Budget Builder – foundationsU.com/8

Take Action Challenge, pg. 181

Study Guide: Money in Review, pgs. 182-183

Complete the “After” column on the “Measure Your Progress” chart, pg. 163.