Transcript DIVISION OF FIRMS - National Association of Black Accountants
National Association of Black Accountants, Inc.
M ney $ense
Investing
Investing
What is investing?
Money set aside for future income, benefit or profit to meet long term goals
Saving and Investing: The Difference Investing
is earning a return on your money
Saving
is to put aside or reserve
Why Invest?
Best Ways to Invest
Get in the habit of saving. You must set aside a portion of your income as often as possible.
Invest in financial markets so your money can grow at a meaningful rate.
Ignore short-term price fluctuations, and focus on long-term potential.
Best Ways to Invest
Ask questions and become educated before making any investment.
Invest with your head, not with your stomach or heart. Avoid the urge to invest based on how you feel about an investment.
Before you Start
Organize your finances Understand the impact of time
Time Value of Money
The relationship between time, money, and rate of return(interest), and their effect on earnings growth
Time Value of Money
Suppose your relative owed you $500. Would you rather have this money repaid to you right away, in one payment, or spread out over a year in four installment payments? Would it make a difference either way? You would probably be better off getting your money right away, in one payment. You could invest this money and earn interest on it or you could use this money to pay off all or part of a loan.
Time Value of Money
The time value of money refers to the fact that a dollar in hand today is worth more than a dollar promised at some future time. A dollar in hand today can be invested in an interest-bearing account that would grow in value over time. The trade-off between money now and money later depends on, among other things, the rate of interest you can earn by investing.
Opportunity Cost
Opportunity cost: the cost of any decision includes the cost of the best forgone opportunity.
If you pay $50.00 for a concert ticket, your cost of attending the concert is not just the ticket price, but also the time and cost of what else you might have enjoyed doing instead of going to the concert.
Applying this concept to the $500 owed to you, you see that getting the money in installments will saddle you with opportunity cost. By taking the money over time, you lose the interest on your investment or any other use for the initial $500, such as spending it on something you would have enjoyed more.
Key Investment Principles
The power of compound interest Rule of 72 72/2=36 72/6=12 72/8=9
Activity
Developing An Investment Strategy
Purpose for Investment
Retirement Education Wealth Accumulation Supplemental Income
Investment Options
Financial Advisors
Measuring Effectiveness
Investing for Wealth
Planning for wealth Make the most of a 401(K)
Investing in Your Future
Asset allocation is ongoing Diversification Life circumstances Investment goals, timeframe and tolerance
Investing in Your Future
Asset Allocation Stocks Bonds Cash Equivalents
Investing in Your Future
Long-Term Investments Mutual Funds Stock Bonds
Investing in Your Future
Retirement Specific Investments 401(k) IRA Social Security
Monitoring Investments
Set Attainable Goals and Objectives Periodically Assess Be Prepared to Change Course Do Not Procrastinate Seek Assistance
Financial literacy isn’t just a matter of knowing what you have and knowing your options. It is a matter of planning for life’s milestones.
Thank You!
National Association of Black Accountants, Inc.
M ney $ense For more information visit www.nabainc.org
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