FIN 101 Week 11 Notes
FIN 101 Week 11 Notes FIN 101
Popular in Personal Finance for Fiscal Wellness
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This 3 page Class Notes was uploaded by Nichole Notetaker on Sunday March 27, 2016. The Class Notes belongs to FIN 101 at Ball State University taught by Daniel Haffner Boylan in Fall 2016. Since its upload, it has received 10 views. For similar materials see Personal Finance for Fiscal Wellness in Business at Ball State University.
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Date Created: 03/27/16
3/23/16 General Investing Good ● The average debt of Americans has decreased since statistics were first taken ○ This is because banks don’t allow us to take on as much risk (credit card debt) as we’d like Bad ● It takes, on average, about 6 months to get a new job if you are fired, and most people only have enough savings to get them through 1 month Ugly ● 61% of people live paycheck to paycheck Investing ● Put money into assets whose values go up ● Invest in anything that will increase in price ● The 1st known economic bubble to burst was tulips in the Netherlands ● Good investment: limited supply and high demand ● Bad investment: high supply and low demand ● In economic, equilibrium is always reached ● People want to be compensated for the time value of money and have risk reward Test Question Q: When is it best to start investing? Answer: as young as you can The Future ● Save and invest for your future ● A good company is not always a good investment ○ Walmart, in business terms, is a great company, but they are a terrible investment because people hate them Liquidity ● How quickly money can be converted into cash ● Getting capital: start small, build and grow Savings ● Getting started ○ Pay yourself first ○ Make savings an expense Investing ● Have an investment objective ○ Desired profit ○ Amount invested ○ Amount willing to lose ○ How long it will be until you need the money ○ Tolerance for risk ○ Who picks the stocks *match your investments to your lifestyle* Investing Objectives ● Current income ○ This is a good objective for retired people to have ● Growth ○ This is a good objective for young people just starting out ○ Scottrade will usually help students open an investing account for as little as $500 Ready, Fire, Aim ● You shouldn’t try to wait until you know everything about investing, because that’s impossible ● You should just pick something to invest in and make changes as needed The Dangers of Not Investing ● You lose to inflation if you keep your money in cash form ● You might outlive your money ● You might not be able to leave a legacy (inheritance, donation to charity, etc.) ● You should practice with a fake portfolio ○ Invest in what you understand ○ Riskier investments should get you larger returns Ways to Invest ● Common stock: investing gives you partial ownership of the company ○ Traded on exchanges ○ Stocks are assets Test Question Q: Single company stock investments are safer than investments in a stock mutual fund. Answer: FALSE Bonds ● A loan where you are the lender ● Inversely related to interest rates ● Provide current income ● A bond is a liability; it is required by law to be paid back Preferred Stock ● Only given to special people (you choose who) Convertible Bonds ● Convert bonds into stocks Mutual Funds ● A group of people hire a manager to invest for them Exchange Traded Fund (ETF) ● A group of people use a computer to invest for them Real Estate ● Houses ● Rental properties ● Developed land ● Real Estate Investment Trust (REIT): like a mutual fund, but with real estate ● The downside is that it is difficult to estimate risk and return ● “Flipping” a house ○ Buy and fix the house cheap ○ Sell it at market price ○ A house is generally a good investment ■ Can be a bad investment if there are too many expenses *General Rule: The more money is borrowed, the riskier it is*
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