Introduction to Business© Thomson South-Western

ChapterChapterChapterChapter

Savings and Investment Strategies19-119-1 Saving and investment planning

19-219-2 Stock investments

19-319-3 Bonds and mutual funds

19-419-4 Real estate investments

19-519-5 Other investments

1919

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LESSON 19-1

Saving and Investment Planning

Goals Explain the basics of saving and investing. Identify types of savings and investments. Discuss factors to consider when evaluating

savings and investment alternatives.

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Key Terms

saving investing yield liquidity

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SAVING AND INVESTMENT BASICS Savings and investment activities Determine investment goals The growth of savings

Interest Compound interest

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COMPOUND INTEREST (QUARTERLY)

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>> C H E C K P O I N T

How does saving influence economic activity?

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SAVING AND INVESTMENT CHOICES Savings plans

Savings account Certificate of deposit Money market account

Securities Stock investments Bond investments Mutual funds

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SAVING AND INVESTMENT CHOICES Alternative investments

Real estate Commodities Collectibles

(continued)

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>> C H E C K P O I N T

What are the nine main categories of saving and investment alternatives?

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EVALUATING SAVINGS AND INVESTMENTS Safety and risk Potential return Liquidity Taxes

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>> C H E C K P O I N T

What are four factors to consider when selecting an investment?

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LESSON 19-2

Stock Investments

Goals Compare the two major types of stock. Describe the activities involved with

buying or selling stock. Identify factors that affect the value of a

stock.

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Key Terms

preferred stock common stock stockbroker stock exchange market value

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TYPES OF STOCK

Preferred stock Common stock

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>> C H E C K P O I N T

How does preferred stock differ from common stock?

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STOCK TRANSACTIONS

Using a stockbroker Online investing Stock exchanges Changing stock values

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>> C H E C K P O I N T

What is the purpose of a stock exchange?

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STOCK SELECTION

Stock information sources Economic factors

Inflation Interest rates Consumer spending Employment

Company factors

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FOUR-STEP PROCESS FOR DECIDING STOCK PURCHASES

1.1. Observe and analyze economic and social trends.

2.2. Determine industries that will be affected.

3.3. Identify companies in those industries.

4.4. Decide whether to buy, sell, or hold the stock of those companies.

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>> C H E C K P O I N T

How do various economic factors affect stock prices?

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LESSON 19-3

Bonds and Mutual Funds

Goals List types of government bonds. Describe features of corporate bonds. Describe various types of mutual funds.

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Key Terms

municipal bond corporate bond mutual fund

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GOVERNMENT BONDS

Municipal bonds U.S. savings bonds Other federal securities

Federal notes (T-notes) Treasury bills (T-bills) Treasury bonds (T-bonds)

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>> C H E C K P O I N T

List the types of bonds issued by the federal government of the United States.

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CORPORATE BONDS

Bond components Bond values

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>> C H E C K P O I N T

What affects the value of a bond?

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MUTUAL FUNDS

A mutual fund is an investment fund set up and managed by companies that receive money from many investors.

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TYPES OF MUTUAL FUNDS

Aggressive-growth stock funds Income funds International funds Sector funds Bond funds Balanced funds

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MUTUAL FUND VALUES

Shares of the mutual fund Value of each share Net asset value (NAV) Operating expenses Earnings

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>> C H E C K P O I N T

What are the main types of mutual funds?

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LESSON 19-4

Real Estate Investments

Goals Describe home buying activities. Explain the benefits of home

ownership. Discuss the costs of home ownership.

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Key Terms

real estate mortgage equity assessed value

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SELECTING HOUSING

Renting your residence Owning a mobile home Buying a home Services of real estate agents Other real estate professionals Buying a condominium

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>> C H E C K P O I N T

What are four available housing alternatives?

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BENEFITS OF HOME OWNERSHIP Tax benefits Increased equity Pride of ownership

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>> C H E C K P O I N T

What are the main benefits of home ownership?

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COSTS OF HOME OWNERSHIP Property taxes Interest payments Property insurance Maintenance

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>> C H E C K P O I N T

What are common costs of home ownership?

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LESSON 19-5

Other Investments

Goals Discuss types of commodity

investments. Explain the use of collectibles as an

investment.

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Key Terms

commodities futures contract collectibles

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COMMODITIES AND FUTURES Commodity exchanges Agricultural commodities Gold, silver, and precious metals Currency and financial instruments

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>> C H E C K P O I N T

What types of commodities are commonly used with futures contracts?

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COLLECTIBLES

Types of collectibles Collectible values

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>> C H E C K P O I N T

What are common types of collectibles?