Download Chapter 9 Sources of Capital

SECTION 2
Investing
Essential Question:
 Identify each of the different financial plans,
and evaluate which one would be most
beneficial to you at this stage of your life,
Explain the difference between Financial
Investment and Real Investment and explain
which is better for the economy.
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SECTION 2
Investing
Types of financial plans and purpose:
 spending and saving plan—to create a personal
budget. This requires you to evaluate your
spending habits with an eye to limiting them in
order to save money.
 investment plan—to put money to work. Once you
have established a savings account, you can use
these funds to invest in stocks, bonds, or other
investments.
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SECTION 2
Investing
Types of financial plans and purpose
(cont.) :
 retirement plan—to save and invest money for
retirement. Once familiar with various investments
(risk vs. return) determine age of retirement and
predict the COL to know how much money you
will need to make via investment.
 Estate (or living trust)- plan for how to distribute
wealth towards the end of life or after death.
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SECTION 2
Investing
Difference between financial
investment and real investment:
 financial investment—exchanging property
ownership and payments to make a profit
 real investment—using money to create
new capital goods
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SECTION 2
Investing
Real investment vs. Financial
investment
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 Financial investment reflects an exchange of
existing money from one person to another,
but does not support the creation of new
wealth
 Real investment creates new wealth and is
more helpful to our economy for its potential
to spread that wealth and create wealth
making abilities for others.
SECTION 2
Investing
Real investment vs. Financial
investment (Example
 Financial investment- Purchasing a stock
from another and then re-selling it to
someone else once the value rises
 Real investment- purchasing land and
developing a farm that will produce crops,
employ people, and create a re-occurring
profit for the owner of the land/farm.
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