Stocks Bonds Mutual Funds

MODULE 3
THE NEXT BIG THING
Lesson 3.2
Stocks, Bonds & Mutual Funds
What is investing?
Investing is purchasing a financial product or other
item of value with an expectation of favorable
returns.
What is the purpose of investing?

The purpose of investing is to save money in order
to improve financial well-being.
What is return on investment (ROI)?
ROI is the rate of revenues received for every
dollar on invested in an item or activity.
ROI rates vary with each

investment.
What are stocks?
Stock is an instrument that signifies ownership in a
corporation and represents claim on a share of a
corporation’s assets and profits.
Stocks are typically riskier and long-term

investments.
What are bonds?
Bonds are interest-bearing certificates used as a
way for government or business to raise money.
The bondholder lends money to the bond issuer

for a set amount of time and interest. When the
bonds are “sold” back to the issuer, the interest
earned is given to the bondholder.
Bonds are typically low-risk and good for short-

term investments.
What are mutual funds?
Mutual funds are open-ended investments that are
professionally managed and consist of a variety of
investment instruments including stocks, bonds,
options, commodities, and money market
securities.
Diversification provides greater safety and reduces

risk.
Mutual funds are long-term investments.

What is real estate?
Real estate is a piece of land and any buildings

or structures on it.
Real estate is a long-term investment.

What are collectibles?
Collectibles are items which have value due to its

rarity and desirability, such as antiques, coins,
cars, and art.
Collectibles are long-term investments.

What are precious metals?
Precious metals are natural metals that have

value, such as gold, silver, platinum, and
palladium.
Precious metals are long-term investments.

Do all investments offer a guaranteed positive
return on investment (ROI)?
NO! Although some investments are more likely

to have a positive return on investment.
How are risk and return related?
The greater the risk an investment may lose
money, the greater its potential to provide a
positive substantial return. The inverse is also
true.
What factors determine the degree of risk
investors take?
• Age
• Risk tolerance
• Investment goals
Investor Profiles
Very Conservative – seeks to maintain the original value of the
investments and is prepared to accept lower returns for lower risk.
Conservative – seeks relatively stable returns and accepts some risk

through a diversified portfolio.
Moderate – seeks higher medium-term returns and accepts the

possibility of negative returns over short periods.
Aggressive – seeks high long-term returns and accepts the higher

possibility of sustained negative returns over short periods.
Very Aggressive – seeks to maximize long-term returns and accepts

the possibility of greater volatility and short-term capital losses.
Types of investments
• Individual stocks
• Individual bonds
• Mutual funds
• Real estate
• Collectibles
• Precious metals
Investment Attributes
Identify the attributes (qualities) for different investments. Answer the questions for each type of investment.
Piggy Savings Individual Mutual Individual Real Collect- Precious

Bank Account Bonds Funds Stocks Estate ibles Metals
Do you need a
minimum amount of
money to start/buy
it?
Can you get initial

money back?

Does it pay interest?

Can someone steal

it?

Is it professionally
managed?

Is it easy to access
the money?

Best for Long-Term

or Short-Term
Goals?

Investment Attributes
Identify the attributes (qualities) for different investments. Answer the questions for each type of investment.
Piggy Savings Individual Mutual Individual Real Collect- Precious

Bank Account Bonds Funds Stocks Estate ibles Metals
Do you need a
minimum amount of
money to start/buy No Maybe Yes Yes Yes Yes No Yes
it?
Can you get initial

money back?

Yes Yes Yes Maybe Maybe Maybe Maybe Maybe
Does it pay interest?

No Yes Yes Maybe Maybe No No No
Can someone steal
it?
Yes No No No No No Yes Maybe

Is it professionally
managed?

No Yes Yes Yes No No No No
Is it easy to access
the money?

Yes Yes No Yes Yes Maybe Maybe Maybe
Best for Long-Term
or Short-Term
Goals? Short Short Short Long Long Long Long Long

Uma will be retiring in five years. She needs a

low-risk place to put her money that will earn
interest. Where might she invest? Why?
Bonds would be a good place for her retirement

monies. They are typically low-risk and still pay
interest.
Skip will be retiring in 38 years. He has an

emergency fund that could support him for
nine months if something were to happen.
Skip wants his money to work for him and he
is not scared of market fluctuations. Where
might he invest? Why?
Stocks and/or mutual funds would be good options.

Typically, stocks and mutual funds perform well over
time and outperform other investments.
Imogene needs to start an emergency fund.

Where might she invest? Why?
A savings account in a bank would be a good option

for her. It is a low-risk investment, easily accessible
and it earns interest.
Anne is saving for a new car. She wants to

buy the car in three years. Where might she
invest? Why?
A savings account in a bank would be a good option

for her. She would earn interest, and it is a low-risk
investment.
There are different types of investments and
all have different ROI.
The greater the risk on an investment, the

greater the possibility of high returns and also
negative returns.
The type of investment should align with your

investment profile.

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MODULE 3

THE NEXT BIG THING

What is the purpose of investing?

ROI rates vary with each

Stocks are typically riskier and long-term

The bondholder lends money to the bond issuer

Bonds are typically low-risk and good for short-

Diversification provides greater safety and reduces

Mutual funds are long-term investments.

Real estate is a piece of land and any buildings

Real estate is a long-term investment.

Collectibles are items which have value due to its

Collectibles are long-term investments.

Precious metals are natural metals that have

Precious metals are long-term investments.

NO! Although some investments are more likely

Conservative – seeks relatively stable returns and accepts some risk

Moderate – seeks higher medium-term returns and accepts the

Aggressive – seeks high long-term returns and accepts the higher

Very Aggressive – seeks to maximize long-term returns and accepts

Piggy Savings Individual Mutual Individual Real Collect- Precious

Can you get initial

Does it pay interest?

Can someone steal

Best for Long-Term

Piggy Savings Individual Mutual Individual Real Collect- Precious

Can you get initial

Does it pay interest?

Uma will be retiring in five years. She needs a

Bonds would be a good place for her retirement

Skip will be retiring in 38 years. He has an

Stocks and/or mutual funds would be good options.

Imogene needs to start an emergency fund.

A savings account in a bank would be a good option

Anne is saving for a new car. She wants to

A savings account in a bank would be a good option

The greater the risk on an investment, the

The type of investment should align with your

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