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Investments
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Purpose of Investments


Investments constitute something that is
purchased for future benefit (money, experience)
Promotes economic growth and contributes to a
nation’s wealth
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Financial System

Is a network of savers, investors, and financial
institutions that work together to transfer savings
to investors.
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Financial Intermediaries
 Financial
Intermediaries –are financial
institutions that lend the funds that
savers provide to borrows.
 Commercial
 Savings
 Credit
Banks
& Loans
Unions
 Savings
 Mutual
Banks
Savings Banks
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Investing “Trade-Offs”

Liquidity- Savings accounts are good for immediate cash, but
pay a low interest rate

Return- the money an investor receives over and above their
initial investment

Risk- Anything insured by the gov’t carries no risk compared
to investments with high risks (but greater rewards), such as
investing in the stock market
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Mutual Fund and CD’s
 An
investment company that pools money to invest in
several different stocks on behalf of a group of investors.
The fund is managed by a professional investment manager.
(Includes Pension Funds- IRA’s)

(A package O’ stocks)
 CD’s
are common form of investment issued
through banks for 2yrs. @ 4% interest
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Bond

An investment in a corporation or a government body through a
loan. If you purchase a bond, you are loaning money with the
expectation of interest compounded on your investment.

Savings Bonds, Municipal Bonds, Corporate Bonds, Junk Bonds
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What is a Stock?
 Ownership
of shares in a corporation. Stockholders
share a portion of the profit or loss incurred by the
company.