Introduction to

Investing
Take Charge of Your Finances.

By Anmol Goel

https://www.linke
din.com/in/anmol
-g-215a96a9/
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Saving vs. Investing

Savings is for short-term goals and emergencies

You should have 3 – 6 months of

Remember salary in savings BEFORE you start
: The
purpose of investing.
savings is to Investing is for long-term goals, such
develop
financial as college or retirement.
security.
© Family Economics & Financial Education – June 2010 – Investing Unit – Introduction to Investing – Slide 2
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
 1.12.1.G1

What is Investing?
• The purchase of assets with the goal of increasing future
income
• Focuses on wealth accumulation
• Appropriate for long-term goals

© Family Economics & Financial Education – June 2010 – Investing Unit – Introduction to Investing – Slide 3
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
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Rate of Return
• Return is money that you earn from your investment.
• The Rate of Return is the total return on an investment
expressed as a percentage of the amount of money
invested.

Investments
usually earn Amount
Total of Rate of
higher rates Return Money Return
of return Invested
than
savings © Family Economics & Financial Education – June 2010 – Investing Unit – Introduction to Investing – Slide 4

tools. Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
 1.12.1.G1

What is Derek’s Rate of Return?

Derek invested $900. When he withdrew his money from the

investment, he had a total of $1,050. What is Derek’s rate of
return?

.167 =
$150 $900
16.7%

Derek’s rate of return on investment is 16.7%

© Family Economics & Financial Education – June 2010 – Investing Unit – Introduction to Investing – Slide 5
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
 1.12.1.G1

Power of Compounding

If I invested $10000 with a rate of return of 16.7% for the

next 30 years.
What would be my rate of return?

$1,028,313!

Now imagine that with 100k or 200k?!- over

$200million
© Family Economics & Financial Education – June 2010 – Investing Unit – Introduction to Investing – Slide 6
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
 1.12.1.G1

Risk

POTENTIAL
RETURN RISK

Risk
• The uncertainty regarding the outcome of a
situation or event
Investment Risk
• The possibility that an investment will fail to pay
the expected return or fail to pay a return at all

© Family Economics & Financial Education – June 2010 – Investing Unit – Introduction to Investing – Slide 7
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
 1.12.1.G1

Investment Philosophy

Each individual has a tolerance level for the amount of

risk they are willing to take on

The greater the

Investment Philosophy
risk a person is An individual’s general approach to
willing to
make on an investment risk
investment, the
greater the
Generally divided into three
potential return categories: conservative, moderate,
will be.
and aggressive
© Family Economics & Financial Education – June 2010 – Investing Unit – Introduction to Investing – Slide 8
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
 1.12.1.G1

Types of Investment Tools

Stocks Bonds

Mutual Index
Funds Funds

Speculativ
Real e
Estate Investment
s
© Family Economics & Financial Education – June 2010 – Investing Unit – Introduction to Investing – Slide 9
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
 1.12.1.G1

Stocks
• Stock
– A share of ownership in a company
• Stockholder or shareholder
– Owner of the stock

Usually a
stockholder
owns a very
small part of a
company.

© Family Economics & Financial Education – June 2010 – Investing Unit – Introduction to Investing – Slide 10
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
 1.12.1.G1

Return on Stocks
• If stock is sold for a market price higher than what was paid,
stockholder will receive a return (make money).
• If stock is sold for a market price lower than what was paid,
stockholder will lose money.
• Dividends

If you bought
$1000 of Apple
shares in 2002,
that would now
be worth over
$130000!

© Family Economics & Financial Education – June 2010 – Investing Unit – Introduction to Investing – Slide 11
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
 1.12.1.G1

Stock Markets
• Stocks are bought and sold on stock markets by people called
brokers.

• The main stock markets are:

• New York Stock Exchange (NYSE)
• NASDAQ
• London Stock Exchange (LSE)

© Family Economics & Financial Education – June 2010 – Investing Unit – Introduction to Investing – Slide 12
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
 1.12.1.G1

Portfolio Diversification

Portfolio Diversification- reduces

risk by spreading investment money
among different investment tools

Creates a collection of
investments that will increase
return while reducing risk
Referred to as
“Building a
Portfolio.” The main goal of diversification
is to reduce risk.

© Family Economics & Financial Education – June 2010 – Investing Unit – Introduction to Investing – Slide 13
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
 1.12.1.G1

Mutual Funds
• Mutual fund- invests money in a diversified
portfolio of stocks and bonds.

•Individuals buy shares

•The money is used to purchase stocks, bonds, and

other investments.

Always •Profits returned to shareholders monthly,

research the
fees charged
quarterly, or semi-annually in the form of
by a mutual dividends.
fund.

© Family Economics & Financial Education – June 2010 – Investing Unit – Introduction to Investing – Slide 14
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
 1.12.1.G1

Market Indexes
• A market index is the value of a group of stocks or other
investments.

• Market indexes are intended to represent an entire stock

market and thus track the market's changes over time.

Dow Jones Industrial Average (DJIA or “The Dow”)

30 large companies traded on NYSE or NASDAQ
Standard & Poors 500 Index (S&P 500)
An index of 500 large companies selected by a committee
Others
Russell 2000, Wilshire 5000

© Family Economics & Financial Education – June 2010 – Investing Unit – Introduction to Investing – Slide 15
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
 1.12.1.G1

Index Fund
• An index fund is a type of mutual fund or
exchange-traded fund (ETF) with a portfolio
constructed to match or track the
components of a market index.

© Family Economics & Financial Education – June 2010 – Investing Unit – Introduction to Investing – Slide 16
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
 1.12.1.G1

Real Estate
• Includes any residential or commercial property or
land as well as the rights accompanying that land.

• A family home is not considered an investment

asset.

• Can be risky and more time consuming but has

Examples of potential for large returns
real estate
investments
include rental
units and
commercial
property.
© Family Economics & Financial Education – June 2010 – Investing Unit – Introduction to Investing – Slide 17
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
 1.12.1.G1

Finding stocks

Beware:
Running (penny)
stocks-
Especially
Market cap
under $1 Billion

© Family Economics & Financial Education – June 2010 – Investing Unit – Introduction to Investing – Slide 18
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
 1.12.1.G1

Rule of 72
Rule of 72
Allows a person to easily calculate when the future value of an
investment will double the principal amount

Number of
years needed
Interes
72 to double the
t Rate
principal
investment

© Family Economics & Financial Education – June 2010 – Investing Unit – Introduction to Investing – Slide 19

Credited for discovering the mathematical

Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
 1.12.1.G1

Jessica’s Credit Card Debt

Jessica has a $2,200 balance on her credit card
with an 18% interest rate. If Jessica chooses
to not make any payments and does not
receive late charges, how long will it take for
her balance to double?
• $2,200 balance on credit card
• 18% interest rate

18% 4 years to
72
= .18 double
© Family Economics & Financial Education – June 2010 – Investing Unit – Introduction to Investing – Slide 20
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
 1.12.1.G1

To Conclude
• Why is personal finance and Investing important?
financial planning helps you set goals.
It is a great source of motivation and commitment.
Financial plans provide a guide for action and decision-making.

• What does it provide us with?

Provides us with passive income, freedom of being your own
boss and financial security

© Family Economics & Financial Education – June 2010 – Investing Unit – Introduction to Investing – Slide 21
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
Any Questions?