Saving and Investing
Summary
This chapter introduces the fundamentals of investing and building wealth through savings and investment vehicles. You'll learn about the relationship between risk and return, how to assess your own risk tolerance and investment time horizon, and the power of compound interest over time. The chapter covers major investment types including stocks, bonds, mutual funds, ETFs, and index funds, explaining the differences between active and passive investing strategies. You'll explore essential portfolio management concepts like asset allocation, diversification, and rebalancing, as well as practical strategies like dollar-cost averaging. The chapter also covers different investment account types and introduces tax implications including capital gains. Understanding these concepts is critical for building long-term wealth and achieving financial independence.
Concepts Covered
This chapter covers the following 30 concepts from the learning graph:
- Certificates of Deposit
- Investment Fundamentals
- Risk and Return
- Risk Tolerance
- Investment Time Horizon
- Stock Market
- Individual Stocks
- Market Indices
- Bonds
- Fixed Income Securities
- Treasury Bonds
- Corporate Bonds
- Municipal Bonds
- Mutual Funds
- Exchange-Traded Funds
- Index Funds
- Active vs Passive Investing
- Expense Ratios
- Compound Interest
- Rule of 72
- Dollar-Cost Averaging
- Asset Allocation
- Diversification
- Portfolio Rebalancing
- Market Volatility
- Bull Market
- Bear Market
- Investment Account Types
- Taxable Investment Accounts
- Capital Gains
Prerequisites
This chapter builds on concepts from:
- Chapter 1: Foundational Financial Concepts - Time value of money, assets and liabilities, financial goal setting
- Chapter 2: Banking and Cash Management - Savings accounts and financial institutions
- Chapter 3: Budgeting and Financial Planning - Emergency funds and automatic savings
References
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How to Start Investing as a Teenager - 2024 - The Motley Fool - Comprehensive guide providing teenagers and parents with a roadmap for beginning an investment journey, emphasizing compound interest as a powerful wealth-building tool and offering five key steps from learning basics to making first purchases.
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The Best Index Funds and How to Start Investing - 2024 - NerdWallet - Educational article providing guidance on selecting index funds and beginning an investment journey with interactive navigation and tools to help users compare and understand index fund options.
TODO: Generate Chapter Content