The Consumer Game

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Investing

Challenge:

To develop an investment plan for accomplishing a long term savings goal.

Getting Organized:


STEP 1 Why invest? Read page 15 through 20 " Overview of Savings ," and list five reasons people invest placing the most crucial reason first and the rest in descending order of importance.

STEP 2 Time value of money. Investment gurus always say, get started saving as soon as possible. The younger the better. Check out this demonstration to see what a difference an early start can make. Read the complete lesson: pages 45-47 " "How Long Will It Take To Double your Money" ". Make these responses to the activities presented in this lesson on a separate piece of paper:

    1. In ten years how much was the difference in accumulated value on the $1000 deposit between 5% and 8% interest rate?
    2. In twenty years how much was the difference in accumulated value on the $1000 deposit between 5% and 15% interest rate?
    1. Which investment would you infer will give the investor a greater return-
      1. Monthly deposits of $25 for 30 years in an account that earns 15%?
      2. Monthly deposits of $100 for 30 years in an account that earns 5%?
       
    2. Given the information in the graphs what advice do you have for young investors who have a small amount of money each month budgeted for investing?
    • Worksheeton page 53: Rule of 72 - Answer questions 1 through 5.

Gathering Information:

Before you decide how to invest your money there are some basic investment concepts you should know. The next few steps will demonstrate the following:
  1. the types and purposes of financial markets,
  2. how securities are bought and sold, and
  3. factors that affect the price of investment.

STEP 3 What types of investment are there? Read the complete lesson on pages 18 and 19 " Financial Markets ". Make these responses to the activities presented in this lesson on a separate piece of paper:

 

STEP 4 How are securities bought and sold? Read the complete lesson " How Securities are Bought and Sold ". Respond to these questions based on the lesson:

    • Describe the process a buyer undergoes to purchase stock.
    • Who besides the buyer benefits from the sale of stocks?

 

STEP 5 What makes a security's price go up or down? Read the complete lesson " Factors that Affect Price ". Make these responses to the activities presented in this lesson:

    1. Describe the relationship between risk and return.
    2. Which of the four investments listed on "Varying Returns on Different Investments" should be foremost in a person's portfolio that would prefer to avoid risk?
    3. Which of the four investments listed on "Varying Returns on Different Investments" should be foremost in a person's portfolio that is willing to accept risk in order to earn higher returns?

 

Creating the Final Answer:

By now you have learned the basic investment concepts. In Step 1 you considered the reasons why someone would invest. One very important reason is to save for a child's college education. Receive directions for creating the final answer .

 

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