Investing OpportunitiesUsing Investment Opportunities as a Means to Increase Individual Wealth

BIG IDEA•Banks, brokerages and insurance companies provide access to investments such as certificates of deposit, stocks, bonds and mutual funds

•Used as a means to achieve personal financial goals

Certificates of Deposit• Purchased through

banks or brokerage firms

• Fixed-income investments for a term with a fixed amount of interest paid by the financial institution

• End of the term = financial institution pays principal and interest earned

• Insured by the federal government

Certificates of Deposit•Tips from the FDIC (Federal Deposit Insurance Corporation)

Certificates of DepositProvide a guaranteed return on your investment

May not have a high rate of interest – depends on rate set by banks (FED)

A secure way to save money and increase wealth

Must wait until the term limit is up to “cash out” the CD

Stocks•Shares of a company that can be purchased by investors through brokerage firms

•Investors are paid dividend and can make a profit if sold higher than the purchased price

•Can purchase into companies that are listed in different stock markets▫Domestic and International stock markets exist

StocksAvailable only through brokerage firms

Firms usually require a fee for each transaction

May yield a high return on investment – opportunity for tremendous wealth gain(principal amount plus interest)

May yield no return on investment = opportunity to lose every cent invested (principal amount plus interest)

Allows an individual to “own” a piece of an industry

Bonds • Investment instruments that are generally low-yield and low-risk

• Offered by private organizations and governmental units

• Basically – the bond “seller” borrows the money of the investor and offers a return on the investment after a prescribed term

BondsGuaranteed return on investment

Low investment returnTypically insured by the government – especiallyif it is a government bond

May be “cashed in” at private financial institution

Mutual Funds and Annuities•Hold diversified investments in stocks,

bonds, and money market accounts to limit investor risks

•Purchased through brokerage firms or insurance companies

•Mutual Fund – firm invests contribution along with the contributions of other people = ability to purchase more expensive or larger shares of stocks

•Annuity – fixed payment over time with an established termination date

Mutual Funds and Annuities Annuity

– Guaranteed payment– Often used for retirements: investor deposits unlimited amounts of money into a tax-free account- Often has high fees or penalties for cashing out early

Mutual Fund – Reduces individual risk-Diversifies investments-Professionally managed- Often expensive-Not always reliable performance

Generalized Information - All listed investments involve a fee from the financial institution

Brokerage Firms Banks and Credit Unions

• Provide the services of financial professionals who have the time and expertise to guide and monitor an individual’s investments

• Investors with time and knowledge can monitor and make investments online using online brokerage firms (E-Trade)

•provide basic financial services

•savings, investing, loans, and other fundamental forms of money management

•Readily accessible