Brett Holtby's picture

I would like to invest in an stock that will make me a millionaire. IN all reality i want to start investing in college and saving up for my own business once i get out of college.

Conner Covey's picture

I would like to invest... in hair like that!!!! But too bad I'm a dude, so that would be kind of weird if my hair was just like that. But in all seriousness, I've really thought about investments and have even been kind of interested in keeping up on growing businesses that would make a good investment for the future. I may be young, but it's always a good time to put away some money and plan a brighter future.

Investing

Activity A:

Determine the best investment choice for the following people, based on their personal needs and characteristics.

Investment Strategy

Definition

Risk

Bonds

A formal agreement between a lender (you) and the borrower (government), stating that they can use your money for a set period of time, and will pay you back with interest after the time period ends.

-Low risk

-usually higher yield than savings accounts

-potentially lower return on your investment

-Possible penalty fee for early withdrawal of funds

Stocks

Owning a share or part of a company

-High risk

-potentially higher yield over long term

Mutual Funds

Funds managed by a company that include a combination of stocks and bonds

-Risk varies depending on ratio of stocks and bonds

-Portfolio manager makes all buying and selling decisions=more affordable than on your own

 

  1. Chloe

Chloe is single and 27 years old, and she has a stable and reliable job as a teacher. With her job, she gets a great retirement plan, but now she’s interested in investing so she’ll end up with more down the road when she hopes to retire at 57. She is willing to take some risks in order to potentially have a high yield 30 years down the road.

What type of investment should Chloe make? Why?

 

  1. David

David is a 35-year-old, married father of 3 who works as a manager at a local department store. He has a pretty good emergency fund saved up, but it can be hard to really put a lot away because something always seems to come up. He would really like to make some investments that are fairly secure, so he has more of a guaranteed return when he hopes to retire at 60.

What type of investment should David make? Why?

 

Activity B: Compounding Interest

When investing your money, you are using your money to make you money. Over time, the interest you earn on the money you have in your account, will earn more interest. This is called compounding, and it can really add up!!

 

Calculate the compounding interest for the time periods listed.

Example: If you invest $10 at 4% interest, after 1 year, you will have $10.40. For the next year, to calculate the amount, multiply 10.40 by 4% (.04) and add that to $10.40 =$10.80.

  1. 8% interest, $10 initial investment

How much will you have after 1 year?__________________

2 years?______________

3 years?______________

4 years?______________

  1. 6% interest, $10 initial investment

How much after 1 year?______________________

2 years?_________________

3 years?________________

4 years?_________________

 

Activity C: The Rule of 72

 

The Rule of 72 can show you how long it will take for your initial investment to double its amount, when given a certain interest rate.

72 ÷ interest rate = years it will take to double

For example: If you’re given $200 as a graduation present and you put it into a savings account that earns 6% interest. 72 ÷6% (.06) = 12 years. So, it would take 12 years for your $200 to grow to $400, if you don’t do anything to it.

 

Calculate how long it will take to double your investment of $100, given the interest rates below.

  1. 3% __________________ years to double

 

  1. 8% ___________________years to double

 

  1. 6.5% ____________________ years to double

 

  1. 7.75% ____________________years to double