ON YOUR OWN SHEET OF PAPER – FILL IN THE CHART

Company Price Per Share

No. of Shares Owned

Amount Invested

New Price per share

1 Year Later

American Cellular

$5

Big Box Stores

$20

Biotech Industries

$10

General Grocery

$20

Giant Auto $10

Gold Mining Group

$5

Total Value

ONE YEAR LATER American Cellular stock – $8 Big Box Stores- $23 Biotech Industries - $ 8 General Grocery - $22 Giant Auto - $ 11 Gold Mining Company- $4

QUESTIONS!!!! ANSWER ON THE BACK!

1. Did the price per share of the investment club increase or decrease?

2. What do you think determined whether the price per share of the investment club increased or decreased?

3. If you had a real investment club and bought stock, what would you do to increase the value of investments one year later?

4. Assume that more students want to join your investment club and purchase shares. What price would you charge them? Why?

STANDARD

SSEPF2c- Give examples of risk and return SSEPF2d- Evaluate a variety of savings and

investment options

INVESTMENT

When a person invests money, they are taking a risk and hoping to make money in the long run.

RISK VS. RETURN

Risk: the chance the investment might actually end up losing money rather than making it

Return: the eventual payoff of the investment

Risk Return Risk Return

TYPES OF INVESTMENTS

Certificate of deposit (CD’s): loans investors make to Financial institutions

Instant access carries a penaltyLow interest rates but very safe

TYPES OF INVESTMENTS

Bonds: a loan to the government or a company

Higher return offered than with CD’s

Low risk through the government; have a higher risk through a corporation

TYPES OF INVESTMENTS

Stock: part ownership in a corporation

Can be very risky, but can also receive high returns

Bear Market= stock market falling

Bull Market= stock market is increasing

TYPES OF INVESTMENTS

Real estate: buying, selling, and managing properties

Very Risky but can also have a huge return

TYPES OF INVESTMENTS

Mutual fund: pool money from a number of investors to buy a range of stocks

Investors to avoid the risk that comes from owning any one asset. In other words, mutual funds make it easy to diversify.

THE PYRAMID OF RISKS AND RETURN

Highest Risk — Highest Potential Return or Loss

THREE RULES FOR BUILDING WEALTH

1. Start early.• Give money time to grow.

THREE RULES FOR BUILDING WEALTH

2. Buy and hold.• Keep your money invested.

THREE RULES FOR BUILDING WEALTH

3. Diversify. • Don’t put all your eggs in one basket.

One Stock

Stocks

Savings

Bonds

Bank CD’s

THE STOCK-MARKET ROLLER COASTER

If you buy and sell on the ups and downs, you may lose money.

But if you hold on for the long term, the ups are greater than the downs.