HDMG - Module Overview

How Does Money Grow?

Growing your money takes education, time, and attention. In Atlas Shrugged, Ayn Rand remarked: "Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver." Growing your money takes education, time, and attention. In this module, we will examine a number of investment opportunities: government securities, stocks, bonds, and even life insurance investments. Not only will we look at different investment opportunities, but we will also investigate how each opportunity fits into a financial plan to meet individual financial needs.

Essential Questions

  • How do government securities differ from other types of investments?
  • What savings instruments do banks offer?
  • What is the stock market and how does it work?
  • How does asset allocation help investors accomplish goals?

Key Terms

risk: exposure to a chance of loss or damage

return: the income or profit arising from such transactions as the sale of land or other property

diversification: Diversification is a risk management technique, related to hedging, that mixes a wide variety of investments within a portfolio.

taxes: Taxes are charges against a citizen's person or property or activity for the support of the government.

life stage: A distinguishable time frame in an individual's life characterized by unique and relatively stable behavioral and/or physiological characteristics that are associated with development and growth is a life stage.

estate planning: Estate planning is a strategy for leaving property to loved ones and minimizing the impact of federal and state estate taxes.

Time Value of Money: The time value of money is a name given to the idea that the use of money costs money. A dollar today is worth more than a dollar tomorrow because of interest costs

Annual Rate of Return: Annual rate of return is the percentage of money earned on an investment in one year.

Certificate of Deposit: A certificate of deposit, also called a "CD", is a savings product that requires the investor to leave the money in the bank for a specific time period.

Mutual Fund: A mutual fund is a savings product operated by an investment company that raises money from shareholders to invest in assets.

Rate of Return: Rate of return is the money made through an investment, usually presented as a percentage (income earned / amount of the investment = rate of return).

Stocks: Stocks are an investor\'s shares of a corporation, entitling the holder to dividends and other rights of ownership.

U.S. Savings Bond: U.S. Savings Bonds are non-transferable savings products issued by the U.S. government that matures in a set period of time.

coupon rate: Coupon rate is the annual interest rate noted on the bonds expressed as a percentage of face value

face value: The dollar value of a security as stated on the bond certificate.

maturity: A bond's maturity is the length of time until the face value of the bond must be repaid.

zero coupon bond: A zero coupon bond does not pay annual interest, rather interest is collected by buying the bond at a discount or below face value.

par: A bond is said to sell at par when it sells for face value.

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