Objective: The primary objective of this lesson is to equip learners with a foundational understanding of investing skills, enabling them to analyze investment opportunities, understand financial markets, and make informed decisions that align with their financial goals. By the end of this lesson, participants will be able to apply core investing principles to develop a diversified investment portfolio and understand the risks and returns associated with different types of investments.
Comprehensive Content Overview: Investing is the act of allocating resources, usually money, with the expectation of generating an income or profit. It encompasses various financial instruments, including stocks, bonds, mutual funds, real estate, and more. To be proficient in investing, one must understand the following core building blocks:
– The Time Value of Money (TVM) – Risk and Return – Asset Allocation and Diversification – Investment Vehicles and Account Types – Market Analysis – Portfolio Rebalancing
In-depth Explanations with Actionable Insights:
1. The Time Value of Money (TVM): TVM is the concept that money available today is worth more than the same amount in the future due to its potential earning capacity. To apply this concept, use the formula for Future Value (FV):
FV = PV * (1 + r)^n Where: PV = Present Value r = annual interest rate (decimal) n = number of periods
Example: If you have $1,000 today and can earn an annual interest rate of 5%, in 5 years, your investment will grow to:
FV = ...
