Slide 1: Title Slide - Investing Basics for Retirement Savings. Making Your Money Grow

Today's lesson is all about Investing Basics for Retirement Savings: Making Your Money Grow.

This is where we learn to unlock the true potential of how to make your money grow. You may recall that inflation chips away at the purchasing power of your cash over time.

If your money just sits in a regular savings account, it's actually losing value.
Your money needs to do more than just sit still.

It needs to GROW. And the most effective way to make that happen is through INVESTING!

Slide 2: The Silent Threat: Inflation

Let's talk about something important for your future: inflation. Don't let the word scare you; it's simply the steady increase in prices over time. What it means for you is that your money today will buy less in the future. It's a silent force that erodes the value of your cash.

For example: A $10 item from 1990 would cost around $25 in 2025. That's more than double! The average annual inflation rate between those years has been about 2.8%.

This shows us why investing is crucial, not just saving cash. When your money sits as cash, it loses buying power due to inflation. When you invest, your money has the potential to grow, earning returns that can outpace this silent threat.

Slide 3: What Does It Mean to "Invest"?

So, what exactly does it mean to "invest"?
It’s actually a straightforward concept.
Investing is the act of putting your money into assets – things like stocks and bonds – with the expectation that they will increase in value for you over time.

It's about putting your money to work for you, with the goal of bringing back even more money.

Slide 4: Investing in Companies: Stocks (Equity)

Let's dive into the first major player: Stocks. When you buy a stock, you're buying a small piece of a company – we call it a "share." For example, if you buy a share of your favorite company, you become a part-owner. If that company performs well – perhaps they launch a successful new product or expand their market – the value of your share, your stock, will likely go up. This increase in value is called capital appreciation. Additionally, some profitable companies will share their earnings with owners by paying out dividends. Now, it's important to note: stocks offer the highest potential return for your money, meaning they can grow rapidly. However, because companies can have ups and downs, they also come with higher risk. If the company struggles, the stock price could decline.

Slide 5: Lending Money: Bonds (Debt)

On the other side of the coin, we have Bonds. When you buy a bond, you are essentially lending money to a government or a corporation. Imagine it like giving a formal loan. In return for your loan, they promise to pay you back the original amount you lent by a specific date, known as the maturity date, and they'll make regular interest payments to you along the way. Generally speaking, bonds are considered less risky than stocks. Governments and established corporations are typically reliable about fulfilling their debt obligations. Because of this added safety, bonds usually offer a lower potential return compared to stocks. They are more about providing stability and steady income, rather than aggressive growth.

Slide 6: Investing in a "Basket": Mutual Funds & ETFs

Now, researching and picking individual stocks or bonds can feel incredibly daunting and time-consuming. That’s where mutual funds and exchange-traded funds, commonly known as ETFs, come into play. Instead of needing to individually select and buy dozens of stocks or bonds, you can simply buy a share of a fund that already owns a diversified collection of many different stocks, bonds, or other assets. It's like purchasing a pre-assembled investment basket.

• Mutual Funds are typically bought and sold based on their net asset value at the end of the trading day.

• ETFs (Exchange-Traded Funds), on the other hand, trade just like individual stocks throughout the day on a stock exchange.

The key takeaway here is that both make investing in a wide variety of assets incredibly accessible and easy.

Slide 7: Benefits of Funds (Mutual Funds & ETFs)

The benefits of using these funds are truly significant! First and foremost, they provide Instant Diversification! These funds essentially handle the heavy lifting of spreading out your investments for you. Many funds also offer professional management, or they are designed to simply track a broad market index like the S&P 500, giving you broad market exposure. They represent a remarkably simple way to build a robust portfolio without requiring you to become a financial expert overnight. And passively managed index funds often come with very low fees, which means more of your money stays invested and continues to grow for you.

Slide 8: Target-Date Funds: Investing Made Easy

For young adults, there's a simple option called Target-Date Funds. These are a specialized type of mutual fund or ETF created specifically with retirement savers in mind. Here's how they work: you choose a fund based on your target retirement year – i.e. "2070 Fund." The brilliant part is that the fund automatically adjusts its mix of stocks and bonds over time! When you're younger and retirement is far off, the fund holds a more aggressive allocation, primarily invested in stocks for maximum growth. As your target retirement date draws nearer, it gradually becomes more conservative, shifting towards a higher allocation of bonds to protect your accumulated capital. It’s essentially like having an autopilot system for your retirement investments – truly set it and forget it, while still being smart and strategic about your long-term goals.

Slide 9: Risk and Potential Return: The Balancing Act

Let's talk about a fundamental principle in investing: the relationship between risk and potential return – the balancing act. It's a core truth that a higher potential return usually means higher risk, which implies more volatility and a greater potential for short-term losses. Conversely, lower potential return generally means lower risk, offering more stability and predictability. Think of a standard savings account: very low risk, but also very low returns. Now compare that to investing in a mutual fund investing primarily in stocks: potentially very high returns, but also a higher risk. Investing is about finding the right balance that suits your individual comfort level and goals.

Slide 10: Your Time Horizon & Risk

And this brings us to the advantage that young adults possess: your Time Horizon! As young adults saving for retirement, you likely have years until you'll actually need to access that money. This means you have a LONG-time horizon. This means you can generally afford to take on more risk – meaning you can invest more heavily stock-focused funds. If the market experiences a downturn next year, or five years from now, you have decades for it to recover and continue growing. Short-term market fluctuations become far less concerning when you have such a long runway ahead of you, allowing your investments to capture those higher potential returns over the long haul. The average S&P equality fund index since 1957 is around 10%/

Slide 11: Don't Put All Your Eggs in One Basket: Diversification)

Let's discuss one of the most critical rules in all of investing: Diversification. It’s encapsulated perfectly by the classic saying: "Don't put all your eggs in one basket!" In investing, this means strategically spreading your investments across different investments and different asset classes – like mixing both stocks and bonds. Why is this so crucial? Because if one particular industry performs poorly, it won't have a devastating impact on your entire portfolio. Diversification significantly reduces the overall risk and impact on your portfolio if any single investment performs poorly. Remember how we talked about mutual funds and ETFs? They are truly fantastic tools for achieving instant, broad diversification with minimal effort on your part.

Slide 12: Wrap-up

To summarize:

Investing is absolutely fundamental for retirement – it's the engine that helps your money outpace inflation and truly grow over time.

You now understand the differences between stocks (high growth potential, and higher risk) and bonds (lower growth but greater stability) and funds, like Mutual Funds and ETFs are effective to help your money grow.

Always remember that diversification is key to managing risk, and giving you an advantage to invest for strong long-term growth.

Follow up task: If you currently have a retirement account, like a 401(k) through an employer or a Roth IRA you've set up, I encourage you to log in and take a look at the investment options available to you. Specifically, try to find and identify target-date funds that align with your expected retirement year. Just getting familiar with these options is a huge, empowering step forward!

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