Managing Your Investments
Chapter 11 Notes
Money Management
Got the Safety Net, Now What…?

Once you’ve got a bit of emergency cash stashed away in some type of conservative savings
plan … then what? _________________________________________, BABY!

Investments can run the gamut from conservative to risky. _____________________________
____________________________________________________________________________
Investment Essentials

________________________________ is the use of your savings to earn a financial return.

The overall objective, is obviously, to earn MORE MONEY with your money!

____________________________________________________. Once you have a safe cushion
stashed away, _________________________________________________________________.
Reasons for Investing

To _______________________________________

To _____________________________________ and earn a better return on your savings!

(You can do better than standard bank interest rates!)

To _____________________________________ now and in the future!

To _____________________________________

To _____________________________________

___________________________________________________________________. You
want to seek out investments that are growing faster than the rate of inflation!
Risk

Investing involves some _________________________! The greater the risk you are willing to
take the greater the potential returns.

Risk in an investment means _____________________________________________________.

On the other hand, ____________ in an investment means _____________________________.

Different types of risk include:

Short-Term vs. Long-Term Risk, Inflation and Interest Rate Risk, Political Risk, Market
Risk, and Company or Industry Risk.

How comfortable you are with risk will play a key factor in your decision-making as an investor.
Investment Strategies

Many individuals ____________________________ start an investment plan because they don’t
think they have enough money! _____________________________________! Even small
amounts of money can do miracles over time!

Investing wisely over a period of time is hard… the suggestions that follow, however, may make
this task easier for you!
Criteria for choosing an investment

The Dream investment would accomplish all of the following

_____________________________________

_____________________________________

_____________________________________

_____________________________________

_____________________________________

_____________________________________

Obviously, this “dream investment” is hard to obtain. You may not find an investment that does
all of this. BUT the more of these criteria that are met, the more desirable the investment!
Managing Your Investments
Chapter 11 Notes
Money Management
Wise Investment Practices
 People commonly make one or more serious mistakes in connection with their investment
practices. Some are minor; others are serious. If you wish to avoid mistakes follow this advice:
 _____________________________________
 _____________________________________
 _____________________________________
 _____________________________________
 _____________________________________
 _____________________________________
Sources of Financial Information
 __________________________________________ – most newspapers have finance sections.
 The Wall Street Journal is a top-notch daily resource. Barron’s is a weekly newspaper that
has great info. Both of these are available online as well!
 The most widely reported and followed financial index is the
__________________________ ____________________. Often simply called the
__________________, it is an index of the price movements of thirty major industrial
corporate stocks listed on the New York Stock Exchange.
 The New York Stock Exchange Index and the NASDAQ are also very widely reported.
These measure the overall impact of EVERY stock traded on that exchange on a given
day.
 ________________________________________ – For Example: Money, Fortune, & Kiplinger’s
 ________________________________________ – corporations are required to provide financial
information to potential investors once a year. These reports outline the financial condition of the
company.
 ________________________________ – buy and sell stocks for you. provide you with research
and advice.
 ________________________________ – buy and sell stocks for you. Usually provides little to no
advice. _______________________________ – professional investment planners who are trained
to give intelligent overall investment advice based on your goals, age, net worth, occupation,
investment experience, lifestyle, & family responsibilities.
Investment Options
___________________________________________________________________.
 A ____________________ of stock is ____________________________________.
 The owner of stock is called a _________________________ or a
__________________________.
 When you are a stockholder, you will share in the companies profits, which can be paid to you
with higher stock prices and/or dividends.
 We will go into much more detail on stocks in Chapter 12!
 __________________________________________________________________.
 For example, a corporation may sell bonds to raise money. You give them money for the
bond. They agree to pay you back the price of the bond PLUS a given interest rate after a set
period of time has passed. (Ex: A $1,000, 1 year, 6% bond)
 We will go into more detail on bonds in Chapter 13!
Managing Your Investments
Chapter 11 Notes
Money Management


_________________________________________________ – When you buy a savings bond
you are, in effect, loaning money to the U.S. Government.

The most common type of Bond is the ___________________________. These are
bonds purchased for less than their maturity value.

For example you pay $25 for a bond that will be worth $50 at maturity. You hang
on to it until it matures (usually ten years).

Very safe option with a decent return, better than most cd’s and traditional savings
accounts. Also, interest earned is exempt from state and local taxes (you do have
to pay federal tax though!)
___________________________________________________ – U.S. Treasury Bills, Notes,
and Bonds are available. Maturities range from a few months up to to10 years. Interest Rates
vary but go up as the length of time until maturity goes up.

Note, the interest earned on these types of investments is also exempt from state and
local income taxes. (Not federal though!)
Mutual Funds and Retirement Plans

Suppose you have $500 to invest but do not know which stocks or bonds to buy, when to buy
them, or when to sell them? You can buy shares in a large, professionally managed company
called a _______________________________________.

A mutual fund
_________________________________________________________________________
_____________________________________________________________________________
_______.

Two major advantages of a mutual fund are:

__________________________________________________________ AND

_________________________________ – which means investment in a wide variety of
securities.

__________________________________ are the fastest growing segment of the United States
Financial Services Industry. We will go into more detail about Mutual Funds in Chapter 14!

__________________________________ – There are a wide variety of retirement plans that
you can put money into regularly. Most of these plans have great tax advantages. They allow
you to avoid paying taxes on that income until you actually withdraw it from the retirement
account years later. That can be huge! We will discuss retirement plans in more detail in Chapter
15.
Real Estate

Many people like to invest in Real Estate – ______________________________________!

While this type of investment usually represents a large and often illiquid investment of cash, it
has proven to be protection against inflation in most parts of the U.S.

Real Estate investments also have great tax benefits. Certain costs of home ownership are
deductible and therefore lower taxable income. That is huge!

We will go into more detail about real-estate investing in Chapter 14.