Investing, part 2

910

GRADE

In this lesson, students will learn about investment vehicles and how to structure different types of investment portfolios.

Subject(s) Suggested timing Financial literacy objectives

BBI1O/2O Introduction to Business 70 minutes At the end of this lesson, students will: explain basic investment options; determine which investment options can best meet the needs of investors with diverse proles.

Curriculum expectations

Grades 9 and 10, Business Studies (2006) Introduction to Business (BBI1O/2O) Finance Demonstrate an understanding of effective investment practices. Gather and interpret information about investment alternatives (e.g., stocks, mutual funds, real estate, GICs, savings accounts), and compare the alternatives by considering the risk and the rate of return.

Assessment What you need

Collect: Worksheets 3 and 4 Student Student Student Student copies copies copies copies of of of of Worksheet Worksheet Worksheet Worksheet 1 2 3 4

Computer and Internet access Minds on Class: Video If you want to make money, you can buy things that increase in value over the long term. This is called investing. Watch the Funny Money video clip about Building Wealth on www.inspirenanciallearning.ca/index.php/tools-videos/videos/

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Context for learning Bill Fold is a ctional character who is constantly getting himself into nancial scrapes. Use the scenario below to provide students with a context for learning. Bill Fold takes an investor prole quiz and learns that hes a risk taker. What does that mean? Action Group: Case study Working in groups of 3 or 4, students will form an investment team, decide on a client and review possible investment choices. Use the attached worksheets to guide the discussion Worksheet 1: Investment team and client prole Choose a team name Design a company logo Create a company slogan Decide on a client Design a prole of your teams client

Worksheet 2: Investment goals Determine your clients investment goals Consider his/her investor prole Worksheet 3: Investment risk Examine the relationship between investment risk and return Learn denitions for some key nancial terms Worksheet 4: Investment products scavenger hunt Investigate investment products Consider product suitability for your teams client Consolidation/ debrief Class discussion Why would an investor want to diversify his/her portfolio? What are some of the benets/drawbacks of investing in stocks and bonds? How might a portfolio be structured for someone who has a very different investor prole than your client?

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WORKSHEET 1

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Investment team and client prole

(adapted from Taking Stock In Your Future Senior Guide)

1. Names of investment team members

2. Team discussion and decisions for company/team name, logo and slogan. a. Investment team name:

b. Investment team logo:

c. Investment team slogan:

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Investment team and client prole

(adapted from Taking Stock In Your Future Senior Guide)

3. Description of your investor/client Age: ____________________________ Gender: _______________________________ Education: _______________________ Marital status: __________________________ Job title: _________________________ Monthly income: ________________________ Spending habits: __________________ Saving pattern: _________________________ Expenses: ________________________ Amount saved to date: ___________________ Other personality factors about your client you feel are relevant:

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WORKSHEET 2

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Investment goals
Describe your clients main goal in the space below: Goal (e.g., post-secondary education, car, vacation ): Dollar value of goal: Anticipated investment/savings per month or year towards goal: When does the client plan to achieve his/her goal?: Discuss with your team, the following detailed questions: 1. What is your clients objective? What are your clients upcoming nancial needs and goals? When will s/he need the money to meet or achieve these goals? 2. How much does the client have to invest? Do you know how much money can be invested on a monthly or yearly basis? Will the client be adding to his/her portfolio each year? 3. If your client has investments already What are the clients current investments? How much are they worth? What is the clients family situation? How much money does he/she require each month to maintain his/her standard of living?

4. Consider the amount of risk your client will nd comfortable. Would your client want to take the chance to make more money even if it means he/she may lose money? Would your client prefer to make less money and keep his/her money safe?

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Investment risk
(adapted from Taking Stock In Your Future Intermediate Guide)

This graphic illustrates the investment choices available and the relationship between investment risk and return.

Speculative investments a riskier form of investments: Options, High Yield Bonds, Precious Metals or Gems, Aggressive Growth Stocks, Emerging Markets Mutual Funds, Collectibles, Antiques, Stamps, Small-Cap Stocks, Real Estate Futures

These investments may yield large gains or losses.

Moderate risk investments can grow in value, may not pay dividends: Growth Stocks, Growth Mutual Funds, Preferred and Utility Stocks, Blue Chip or Quality Growth Stocks, Preferred Shares, Common Shares

These investments may lose more over the short term but they have greater long-term potential of higher returns.

Low risk investments Strip Bonds, Bond Mutual Funds, Bankers Acceptances, Canada Savings Bonds, Government Bonds, Corporate Bonds

It is unlikely that these investments will lose money but they tend to offer a lower potential rate of return than the higher risk investment.

Cash and cash equivalents Cash, Savings Accounts, Guaranteed Investment Certicates, Money Market Funds, Treasury Bills, Insurance

These are assets that can be made accessible at any time (liquid). This is generally the safest category of investment but it produces the lowest rate of return.

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WORKSHEET 3

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Investment risk
(adapted from Taking Stock In Your Future Intermediate Guide)

Visit the following terms: a. Risk:

to learn more about investing basics. In your own words, dene

b. Liquidity:

c. Return on investment:

d. Stock market:

e. Diversication:

f. Asset allocation:

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Investment product investigation

Page 1 Visit the following terms: Mutual fund What is it? to learn more about investing basics. In your own words, dene

What is Management Expense Ratio?

What is NAV (Net Asset Value)?

Describe two common types of mutual funds.

Give one reason why an investor might want to purchase this product.

Bond What is it?

What is a Canada Savings Bond?

How does a Canada Savings Bond differ from a corporate/government bond?

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Investment product investigation

Exchange Traded Fund What is it?

How much does it cost?

Stock What is it?

How are stock prices set?

Whats the difference between a preferred stock and a common stock?

What is a dividend?

Whats a speculative stock?

Why would an investor include different types of stocks in their portfolio?

Conclusion Which investment product(s) would you include in your clients portfolio? Why?

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