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Understanding Investment Opportunities: Risk and Return Dynamics

This guide explores the fundamental dynamics of investment opportunities, highlighting the relationship between risk and potential returns. Higher risk often provides the chance for greater returns but comes with increased potential for losses. Conversely, lower-risk investments yield lower returns. It covers essential investment types, including stocks, bonds, and mutual funds, as well as low-risk options like money market funds and Treasury Bills. Learn how to navigate the complexities of investing to make informed decisions that suit your financial goals.

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Understanding Investment Opportunities: Risk and Return Dynamics

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  1. INVESTMENT OPPORTUNITIES

  2. Risk and Return • Higher riskusually means a chance at a higher return. Also means that you could lose more money. • Lower risk usually means lower return.

  3. Corporate Investing • Stocks • Bond—A debt investment. Essentially, it’s like LOANING money to a corporation or government. They “borrow” your money for a fixed amount of time at a fixed interest rate. LOW RISK

  4. Money Market Funds • Savings accounts that yield a percentage of return based on interest rates and investments made by the money market manager. • Low risk, low interest, low yield • Example: Treasury Bills (T-Bills) Mature in 1 year or less. usually issued in denominations of $1,000, $5,000, $10,000, $25,000, $50,000, $100,000 and $1 million. Other positives are that T-bills (and all Treasuries) are considered to be the safest investments in the world because the U.S. government backs them

  5. Mutual Fundshttp://www.investopedia.com/video/play/introduction-mutual-funds#axzz1juFS30o6 • Pool of funds from different investors. • May invest in stocks, bonds, money market, etc. in an effort to increase capital gains. • Annual maintenance fees • Some have a load—sales fee paid for investing (typically 5 or 6%) • Purchase through brokerage firms

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