SIG - Saving & Investing Goals Module Overview
Saving & Investing Goals Module Overview
Introduction
Who wants to be a millionaire? More importantly, who knows how to become a millionaire? In the U.S., a small percentage of the population is born into wealth. Many of those families have mastered the science of investing. They are able to increase their net worth by making their money work for them. Most people only think of the stock market when talking about investing, however there are several other options that will allow both conservative and aggressive risks to increase your wealth. In this module, you will learn the difference between saving and investing and the different types of investments. Although all investments come with some type of risk, you will learn how to research and determine which ones are the safest and likely to do well.
Essential Questions
- What is the purpose of financial planning?
- What is the relationship between saving and investing and why should you do it?
- What are the different classification of investment options?
- What are the different types of retirement accounts?
- How does the rule of 72 work for investments?
- How are investments bought and sold and what is the risk?
- How are financial markets regulated to protect investors?
Key Terms
Saving: the process of setting money aside for a future date instead of spending it today
Investing: the process of setting money aside to increase wealth over time and accumulate funds for long-term financial goals such as retirement
Rule of 72: a formula designed to help people estimate how long it will take to double their money at a certain expected interest rate
Compounding of interest: when money is earned on the total amount in the account including the initial deposit and interest that has already been credited to the account
Stock: ownership in a corporation
Share: a unit of stock owned by an investor
Shareholder: a person who owns one or more shares of stock
Portfolio: collection of investments owned by an investor
Dividend: amount of money an investor is paid for each share of stock owned in a company's earnings through paid employment, as profit, or from investments
Bond: a loan made by an investor to a government or company with the promise that the principal amount borrowed will be repaid, usually with interest, at a specific time, usually a year or more in the future
Issuer: the government or company that borrows the money
Holder: the person or company who purchases the bond
Coupons: interest payments made by the bond issuer to the bond holder
Certificates: documents issued by a government or company that include the name of the issuer, the interest rate and the bond's maturity date
Face amount: the amount of money borrowed by the issuer
Coupon rate: the annual percentage interest rate paid on the bond
Maturity date: date by which the issuer must repay the principal amount borrowed
Price amount: price the investor must pay for the bond
Cost of funds: the interest rate that the issuer must pay on the bond
Fair market price: the price that a reasonable investor would expect to pay for the bond
Yield to maturity: the market rate of interest on the bond
Fluctuations: changes in the value of bonds
Mutual fund: a portfolio of many different investments managed by professionals and subject to laws and regulations designed to protect individual investors
Asset: anything you own to which a monetary value can be assigned
Asset allocation: a way to divide investments to minimize risk and maximize returns
Bond yield: the amount of return an investor will receive on a bond
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