Saving & Investment G12 Business Studies PDF

Saving & Investment G12 - Business Studies Learning Objectives: Define saving & investment Evaluate saving option to meet long and short term goals Evaluate investment options to meet long and short term goals.  What is Saving? What is Investment? Saving is t...

Saving & Investment G12 - Business Studies Learning Objectives: Define saving & investment Evaluate saving option to meet long and short term goals Evaluate investment options to meet long and short term goals.  What is Saving? What is Investment? Saving is the portion of income not An investment is an asset or item spent on current expenditures. In acquired with the goal of generating other words, it is the money set income. When an individual aside for future use and not spent purchases a good as an investment, immediately. the intent is not to consume the good but rather to use it in the future to create wealth.  Investing vs. Saving Saving is accumulating money for future use and entails no risk, whereas investment is the act of leveraging money for a potential future gain and it entails some risk. Though both have the intention of having more capital available in the future, each go about growing in a very different way. One aspect this is most transparent is the process of saving for a down payment on a home. Many advisors will suggest parking cash in a safer investment vehicle when saving for an important major purchase. Because investing incurs a higher degree of risk, an individual must compare what implications of loss of principle would be to their future plans.  Investing vs. Saving Saving and investing are often intertwined because each may have a stated yield or rate of return. Another primary difference is the federal insurance coverage on certain accounts. The FDIC offers insurance coverage for bank accounts balances up to $250,000; this type of financial guarantee is often not present in investing.  Savings Account Types of Money Market Account savings Certificate of Deposit  Types of savings - Saving Account - - Money Market - Certificate of Deposit Account - - earns interest and offers quick access to earns interest and may usually has the highest funds. provide check-writing interest rate among privileges and ATM savings accounts, but access. no access to funds.  Stocks Bonds Mutual Funds Types of Real Estate Investment Commodities (Gold) Cryptocurrency  A stock represents a share in the ownership of a company, including a claim on the company's earnings and assets. As such, stockholders Stocks are partial owners of the company. When the value of the business rises or falls, so does the value of the stock.  Bonds are issued by governments and corporations when they want to raise money. By buying a bond, you're giving the issuer a loan, and Bonds they agree to pay you back the face value of the loan on a specific date, and to pay you periodic interest payments along the way, usually twice a year.  A mutual fund is a pool of money managed by a professional Fund Manager. It is a trust that collects money from a number of investors Mutual Funds who share a common investment objective and invests the same in equities, bonds, money market instruments and/or other securities.  Real estate investing involves the purchase, management and sale or rental of real estate for profit. Someone who actively or passively invests in real estate is called a real Real Estate estate entrepreneur or a real estate investor. Some investors actively develop, improve or renovate properties to make more money from them.  Commodity funds invest in raw materials or primary agricultural products, known as commodities. These funds invest in precious Commodity metals, such as gold and silver, energy resources, such as oil and natural gas, and agricultural goods, such as wheat.  Cryptocurrency is a digital currency, such as Bitcoin, that is used as an alternative payment method or speculative investment. Cryptocurrency Cryptocurrencies get their name from the cryptographic techniques that let people spend them securely without the need for a central government or bank.  Step 1: Evaluate Your Current Situation Step 2: Determine Your How to make Goals an Investment Step 3: Identify Your Risk Plan? Tolerance Step 4: Make Your Decision  Investment Plan Step 1: Evaluate your current situation. Step 2: Determine your goals Defining your present financial situation is the The next step toward making an investment plan first step in making an investment plan for the is to determine your objectives. Why do you future. You have to figure out how much money need to invest? You also need to identify a you’ll need to invest. This will allow you to timeline for your target, or time horizon. Want to evaluate how much you can afford to invest see rapid growth, or are you interested in seeing reasonably. It is important to contemplate on growth in investment over time? You can how accessible you want your investments to summarize all of your objectives in three main be. If you might need to cash in on your categories: security, growth, and income. investment quickly, you’d rather invest in more liquid assets, such as stocks, than in something like real estate.  Investment Plan Step 3: Identify your risk tolerance The third step includes deciding how much risk you are preparing to take. The younger you are, the more chance you can take because the portfolio has time to recover from any losses. If you’re older, you’d need to look for less risky investments and instead invest more money upfront to stimulate growth. Besides, riskier investments have the possibility for significant returns along with major losses as well. Taking an opportunity on an undervalued stock or piece of land may prove fruitful, or you might lose your investment. If you are looking over the years to build wealth, you might want to choose a safer route to invest.  Investment Plan Step 4: Make your decision The final step is to make decisions about where to invest. There are many different accounts you can take advantage of for your investment. Your budget, priorities, and appetite for risks will help guide you towards the right types of investment. Wherever you wish to invest, make sure your portfolio is diversified. To optimize your growth and stability, it’s best to assign your assets to a few different types of investments that match your priorities and risk tolerance. Once you have reached this step in the process, finding a financial advisor might be necessary. A consultant can help you identify the best ways to invest your money based on your current financial situation and objectives