INTRODUCTION TO INVESTING

INTRODUCTION TO INVESTING

INTRODUCTION TO INVESTING
In this workbook, we will discuss ways in which you can 
increase your wealth by creating a step by step investment plan.
Why do People Invest Money?
• To save for a major purchase—house, college, automobile
• For retirement
• To put idle money to work
• For enjoyment—now and later

Let’s start with a basic question—why do people invest money? There 
are many reasons, but here are a few common ones. If you are planning 
to make a major investment in a few years—a new home, an automobile 
or college for you or your child, you might consider an investment that 
will generate income for that purchase.
You may also invest to save for retirement. And even if you are nowhere 
near retirement age, starting a retirement plan early pays off—even if 
you invest modestly.
Some people have extra cash—from a pay raise, an inheritance, or the 
sale of a home—that can be invested profitably. Judgment is required, 
however. You must have the confidence to know how much money is 
necessary to live on, and what portion of your income can be safely 
tucked away with minimum risk. While putting aside money in a savings 
account is something everyone can do to invest in their future, it is important
for people to thoroughly understand other investment opportunities and 
the basics of money management. Be sure to review the other workbooks 
in our series, if necessary, on the basics of budgeting and saving money.
If you are at the point where you are able to save some of your paycheck 
each month, you will find the world of investing to be personally satisfying
—both now, while you are doing it, and later when you can reap the benefits.

SHOULD YOU INVEST MONEY?
• Consider Your Overall Financial Position
• Do you have Extra Cash?
• How Do You Feel About Risk?

How do you know if you should invest money? One clue is to look at 
how you are managing your overall financial position. If you are having 
trouble meeting your expenses, you should defer investing money until 
you have your finances in order.
On the other hand, if you are generating extra cash each month, and you 
find that your checking account continues to grow, then it’s time to move 
some of that money to an investment that will generate a return.
Before you do so, you should do some soul searching about risk. 
Examine the three investment possibilities on this slide. How would you 
characterize each one?
Investment A is very conservative—a low rate of return is earned each 
year, but the risk is low, based on the consistency of the earnings. This 
investment won’t set the world on fire, but the person who owns it should 
be able to sleep at night.
Investment B shows some variation in earnings—in fact sometimes it 
loses money, but in a narrow range.
Investment C appears to be the most risky—the variation in earnings is 
dramatic—would you be comfortable with this investment performance?

INTRODUCTION TO INVESTING