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Basics of Saving and Investing

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Saving and Investing What does it mean to you? While the idea of saving and investing may seem daunting to you, as Americans need to take more personal ... – PowerPoint PPT presentation

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Title: Basics of Saving and Investing


1
Basics of Saving and Investing
  • Debra Pankow
  • September 2003

2
Major Points
  • Difference between saving and investing
  • Risk/rate of return trade-off
  • Time value of money
  • Level of risk tolerance
  • Key factors in personal investment plan/asset mix

3
Savings vs Investment
  • Safe
  • Easily Accessible
  • Low return
  • Short-term goals
  • Risk
  • Volatile in short time frame
  • Potential appreciation
  • Mid Long-term goals

4
Comparing the Returns
Savings Account Stocks
Initial Investment 100 100
Current Income 2 (interest) 2 (dividend)
Capital Gain 0 3
Total Return 2 5
Rate of Return 2 5
5
Rule of 72
  • The Number 72
  • Interest Rate
  • Years to Double

6
Average Annual Rates of Return, 925-2000
(Ibbotson Associates,2001)
7
Risk
  • Inflation
  • Business Failure
  • Changes in the Economy
  • Interest Rate Changes

8
Risk/Rate of Return
Relationship
9
Diversification
  • Savings/Certificates of Deposit
  • Bonds
  • Variety of Securities
  • Small Stocks
  • Large Stocks
  • Mutual funds

10
Personal Assessment
  • Time Line
  • Risk Tolerance
  • Personal Financial Goals

11
Working with Financial Professionals
  • Know yourself
  • Know what professional you may need
  • Know your professional
  • Ask the right questions
  • Keep lines of communication open

12
Basics of Saving and Investing
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