10. Investing

💡What Is Investing?

Investing means putting your money into something (like stocks or real estate) with the goal of making it grow over time. It usually offers higher returns than saving—but also comes with more risk.

⚖Risk vs. Return

• Risk – The chance of losing money

• Return – The money you earn from an investment

• Generally, higher risk = higher potential return, and lower risk = lower return

📈Types of Investments

• Stocks – Buying shares of ownership in a company
  

  • Can go up or down in value

  • May pay dividends (a portion of company profits)

• Bonds – You lend money to the government or a business, and they agree to pay it back with interest
  

  • Lower risk than stocks, but also lower return

• Mutual Funds – A mix of investments (stocks, bonds, etc.) managed by professionals
  

  • Helps spread out risk (diversification)

• Real Estate – Investing in property or land
  

  • Can earn money through rent or selling later at a higher price

🛡Diversification

• Spreading your money across different types of investments

• Reduces risk because all your money isn’t in one place

💵Compound Interest

• Interest earned on your original investment plus the interest it already earned

• The earlier you start investing, the more time compound interest has to grow your money

🏦Retirement Accounts

• 401(k) – Offered by employers; money is taken from your paycheck and invested

• IRA (Individual Retirement Account) – Personal retirement savings you can open on your own