The document discusses different types of investments including stocks, bonds, mutual funds, real estate, collectibles, and precious metals. It defines each type of investment and compares their attributes such as required minimum amounts, ability to get initial money back, interest earned, risk of theft, professional management, ease of accessing money, and suitability for short-term or long-term goals. The document also provides examples of recommending appropriate investment types based on an individual's time horizon and risk tolerance.
2. Stocks, Bonds & Mutual Funds
What is investing?
Investing is purchasing a financial product or other
item of value with an expectation of favorable
returns.
What is the purpose of investing?
The purpose of investing is to save money in order
to improve financial well-being.
3. Stocks, Bonds & Mutual Funds
ROI is the rate of revenues received for every
dollar on invested in an item or activity.
ROI rates vary with each
investment.
What is return on investment (ROI)?
4. Stocks, Bonds & Mutual Funds
Stock is an instrument that signifies ownership in a
corporation and represents claim on a share of a
corporation’s assets and profits.
Stocks are typically riskier and long-term
investments.
What are stocks?
5. Stocks, Bonds & Mutual Funds
Bonds are interest-bearing certificates used as a
way for government or business to raise money.
The bondholder lends money to the bond issuer
for a set amount of time and interest. When the
bonds are “sold” back to the issuer, the interest
earned is given to the bondholder.
Bonds are typically low-risk and good for short-
term investments.
What are bonds?
6. Stocks, Bonds & Mutual Funds
Mutual funds are open-ended investments that are
professionally managed and consist of a variety of
investment instruments including stocks, bonds,
options, commodities, and money market
securities.
Diversification provides greater safety and reduces
risk.
Mutual funds are long-term investments.
What are mutual funds?
7. Stocks, Bonds & Mutual Funds
Real estate is a piece of land and any buildings or
structures on it.
Real estate is a long-term investment.
What is real estate?
8. Stocks, Bonds & Mutual Funds
Collectibles are items which have value due to its
rarity and desirability, such as antiques, coins,
cars, and art.
Collectibles are long-term investments.
What are collectibles?
9. Stocks, Bonds & Mutual Funds
Precious metals are natural metals that have
value, such as gold, silver, platinum, and
palladium.
Precious metals are long-term investments.
What are precious metals?
10. Stocks, Bonds & Mutual Funds
Do all investments offer a guaranteed positive
return on investment (ROI)?
NO! Although some investments are more likely
to have a positive return on investment.
11. Stocks, Bonds & Mutual Funds
The greater the risk an investment may lose
money, the greater its potential to provide a
positive substantial return. The inverse is also
true.
How are risk and return related?
12. Stocks, Bonds & Mutual Funds
• Age
• Risk tolerance
• Investment goals
What factors determine the degree of risk
investors take?
13. Stocks, Bonds & Mutual Funds
Very Conservative – seeks to maintain the original value of the
investments and is prepared to accept lower returns for lower risk.
Conservative – seeks relatively stable returns and accepts some
risk through a diversified portfolio.
Moderate – seeks higher medium-term returns and accepts the
possibility of negative returns over short periods.
Aggressive – seeks high long-term returns and accepts the higher
possibility of sustained negative returns over short periods.
Very Aggressive – seeks to maximize long-term returns and accepts
the possibility of greater volatility and short-term capital losses.
Investor Profiles
16. Piggy
Bank
Savings
Account
Individual
Bonds
Mutual
Funds
Individual
Stocks
Real
Estate
Collect-
ibles
Precious
Metals
Do you need a
minimum amount of
money to start/buy
it?
No Maybe Yes Yes Yes Yes No Yes
Can you get initial
money back? Yes Yes Yes Maybe Maybe Maybe Maybe Maybe
Does it pay interest?
No Yes Yes Maybe Maybe No No No
Can someone steal
it?
Yes No No No No No Yes Maybe
Is it professionally
managed? No Yes Yes Yes No No No No
Is it easy to access
the money? Yes Yes No Yes Yes Maybe Maybe Maybe
Best for Long-Term
or Short-Term
Goals? Short Short Short Long Long Long Long Long
Identify the attributes (qualities) for different investments. Answer the questions for each type of investment.
Investment Attributes
17. Stocks, Bonds & Mutual Funds
Uma will be retiring in five years. She needs a
low-risk place to put her money that will earn
interest. Where might she invest? Why?
Bonds would be a good place for her retirement
monies. They are typically low-risk and still pay
interest.
18. Stocks, Bonds & Mutual Funds
Skip will be retiring in 38 years. He has an
emergency fund that could support him for
nine months if something were to happen.
Skip wants his money to work for him and he
is not scared of market fluctuations. Where
might he invest? Why?
Stocks and/or mutual funds would be good options.
Typically, stocks and mutual funds perform well over
time and outperform other investments.
19. Stocks, Bonds & Mutual Funds
Imogene needs to start an emergency fund.
Where might she invest? Why?
A savings account in a bank would be a good option
for her. It is a low-risk investment, easily accessible
and it earns interest.
20. Stocks, Bonds & Mutual Funds
Anne is saving for a new car. She wants to
buy the car in three years. Where might she
invest? Why?
A savings account in a bank would be a good option
for her. She would earn interest, and it is a low-risk
investment.
21. Stocks, Bonds & Mutual Funds
There are different types of investments and
all have different ROI.
The greater the risk on an investment, the
greater the possibility of high returns and also
negative returns.
The type of investment should align with your
investment profile.
