UNIT 5: SAVING AND INVESTING

Section 3: How to invest?

I CAN

Explain how to invest Define capital gains, commissions,

stockbroker, maturity date, market value Evaluate the pyramid of investment

Investing in Stock

To invest in a stock, you have to use a stockbroker This is a professional licensed

to trade stocks. You will pay him a COMMISSION

for investing on your behalfThe first think your broker will

do is to advise you on risk. Unlike banks that are FDIC insured you can LOSE all of your money investing in stock.

The HIGHER the risk, the MORE money you could MAKE/LOSE

The LOWER the risk, the LESS money you could MAKE/LOSE

Don’t LOSE your MONEY

Invest at the appropriate risk. If you are investing for your retirement start at a higher risk and reduce risk as you near retirement

DIVERSIFY: put your money in many places. Rather than putting all of your money in 1 stock, invest in mutual funds, which often include 100 stocks of varying risk. Its unlikely that all 100 companies will go out of business and you’ll lose everything!!

When you invest, you should know: Capital gains are: An increase in the value of

an investment that gives it a higher worth than the purchase price. YOU MADE $$$$

Dividends are: A distribution of the profits of companies you have invested in.

Market Value refers to: the price stock is being sold for

Maturity date is: the date at which your loan is paid in full or your money can be removed without penalty from its account

CAN I?

Explain how to invest Define capital gains, commissions,

stockbroker, maturity date, market value Evaluate the pyramid of investment

I can prove this by completing the 5.6 worksheet

Look over the 5.7 information sheet to help you with your performance event.