Save w02c1Finance as w02c1Finance_LastFirst Personal Finance: Understanding the Investment Instruments Apply 22-pt font size and Dark Blue, Text 2, Darker 50% font color to the first line of the document, Personal Finance; create paragraph style called Title_Page_1 Apply 16-pt font size and Dark Blue, Text 2, Darker 50% font color to the second line of the document, Understanding the Investment Instruments Updated by: FIRSTNAME LASTNAME Add student name under Updated by; change the capitalization of student name to uppercase; insert page break after name Spell check and review the document, no author names are misspelled Copyright © 2017 Pearson Education, Inc. Apply Styles - Heading 1, to Personal Finance and Heading 2 to paragraph headings Personal Finance Modify the Heading 2 style to use Dark Red Introduction Will you have enough money to retire when you are ready to quit your job, kick back, and enjoy your life? What is considered enough? Unfortunately, many people will not be able to do so. Therefore, you need to Justify the alignment of the learn how budget your document income and expenses; to manage your money wisely; to invest your savings beginning with prudently; and to ensure Personal that you have enough money Finance to the end. for your retirement. It is never too early to plan for Set spacing to 1.15. your retirement. Because of the compounding effect, the earlier you plan, the better off you are. The best time to prepare for your retirement is NOW. Money do not grow on trees – you need to save your money FIRST before they can grow and multiply for you. You can get started by putting aside a few dollars a week into a piggy bank, and then deposit the accumulation into an individual retirement account (IRA) account at your local bank or any online investment companies such as TD Ameritrade or Scottrade. Apply 0.6" left and right indents, 6 pt spacing This research paper describes the various types of investment options that you can pick to invest in your after the paragraph, boxed 1 1/2 pt border IRA account. You need to determine what Blue, kind of risk2,level you are willing to take in return for the rate using the color Dark Text Darker of return on your investment. Generally speaking, the higher the rate of return, the higher is the risk. Do 25%, and the shading color Dark Blue, Text 2, Lighter 80% to the paragraph in the your homework – there are many valuable financial resources available on the Internet. You may visit Introduction section that begins with The best Web sites such as CNN Money, Kiplinger, The Motley Fool, and Suzy Orman. Depending on the services time to prepare for your retirement offered by these Web sites, you can opt to receive weekly e-mail savings or investment tips, or listen to weekly/monthly podcast series. Some of the investment instruments that you can consider are: Equity stocks Corporate bonds Apply diamond bullets to the Long-term government bonds six paragraphs in the Introduction section U.S. Treasury bills Mutual funds Fixed deposits In the following subsection, you will learn more about each of these instruments. Read and understand how each of these investment works, and then evaluate their pros and cons, Copyright © 2017 Pearson Education, Inc. Equity Stocks Insert the picture w02c1Bull changing the size to 3, text wrapping to Top and Bottom; apply the Rounded Diagonal Corner, White picture style The major stock market in the country is the New York Stock Exchange (NYSE), the American Stock Exchange (ASE), and the National Association of Securities Dealers Automate Quotation System (NASDAQ). The overall performance of the stock market is evaluated in various ways. For instance, the Dow Jones Industrial Average (DJIA) is a composite of 30 stocks with a daily average. If the market trends move up, it is called a bull market. On the other hand, if the market trends move down, it is called Display the three quotes by a bull market. Individual stocks and real estate are considered high-risk investments. However, Warren Buffet in the Equity traditionally,Section stocks had in fact offeredwith an average rate of return between 7 to 10% annually. But that is to two columns, a never a guarantee. Warren them Buffet has several quotes about investing in the stock market. line between “Risk comes from not knowing what you’re doing.” “I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.” “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” Source: Quotes by Warren Buffet Bonds In the Bonds section, the a If you want something a little less risky than stocks, you can consider buying bonds. Whenapply you buy list format to below: the three bond, you are lending money to the buyer. There are several types of numbered bonds and they are listed bonds listed 1. Corporate bonds – these bonds are sold by business corporations, and they traditionally pay a little more interest than the government bonds. 2. Long-term government bonds – these bonds are backed by the government; therefore, they are considered relatively safe. Copyright © 2017 Pearson Education, Inc. 3. Municipal bonds – these bonds are issued by the state, local, county, local hospitals, or colleges, instead of the federal government. One of the advantages of municipal bonds is that the interest payments is not subjected to federal income taxes. . Mutual Funds A mutual fund is a financial investment that is managed by a team of professionals, and the investors have to pay a varying managing fee/expense. Generally speaking, a mutual fund can be described as a collection of various investment vehicles that are regulated and sold to the general public Mutual funds typically offer mid-level risks to investors, and examples of mutual funds include money mutual funds and stock mutual funds. U.S. Treasury Bills Insert the picture w02c1Bear changing the size to 3", text wrapping to Top and Bottom, centered horizontally; apply the Offset Center Shadow Picture Effect, White picture style; position immediately before the line U.S. Treasury bills and government in the U.S. Treasury Bills section U.S. Treasury bills and government securities are low-risk investments. They usually mature in a year or less. They function as a zero-coupon bonds; that means they do not pay interest prior to their maturity, but they are sold at a discount of the par value so that they can create a positive yield to maturity. Because they are guaranteed by the U.S. government, this financial instrument has very low risk. Fixed Deposits A fixed deposit is a financial instrument provided by a bank and guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per account. Because of this guarantee, the rate of return from a FD is relatively low. Be aware that FDIC does not provide guarantee to credit unions. What does Warren Buffet have to say about people who put their money in the bank? Copyright © 2017 Pearson Education, Inc. “Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.” Source: Quotes by Warren Buffet Conclusion How should you invest your money? There is no right or wrong answer. How you invest depends on the risk level that you are willing to accept. The choices range from the higher rate or return but more risky equity stocks to the low, but guaranteed rate of return offered by the US government. If you want to able to sleep at night, perhaps you should stick with the very conservative fixed deposits. Besides making smart investments, don’t forget to put money aside for any unexpected emergencies and establish a healthy credit rating. Sources Move the Sources section to CNN Money. http://money.cnn.com below the Conclusion section in Kiplinger. http://www.kiplinger.com Outline view; close Outline The Motley Fool. http://www.fool.com view Suze Orman. http://www.suzeorman.com Quotes by Warren Buffet. http://www.brainyquote.com/quotes/authors/w/warren_buffett_3.html Copyright © 2017 Pearson Education, Inc.