Investing 101

Interactive Video

[A young woman sitting on a chair working on a laptop that has stickers on the back with sayings, such as, “tech innovation” and “Maker Party.”]

[On screen text]: Which statement is the closest to the reason why you want to consider investing money?

Option 1: I need more money to pay for expenses.

Option 2: I want to make money to buy something this year.

Option 3: I want my money to work for me and grow.

Option 4: I want to build my financial future.]

Narrator: Take a moment to reflect: Which statement is the closest to the reason you want to consider investing money?

Feedback for choosing option 1: “Investing involves risk. The better choice for now is to work on saving money first to have more money available.

Feedback for choosing option 2: Investing involves risk. Short-term goals are better achieved with savings strategies.

Feedback for choosing options 3 or 4: Investing is a great choice to grow your money and build your financial future.

[Picture of a large tree with money growing on it instead of leaves.]

“Someone’s sitting in the shade today because someone planted a tree a long time ago.” — a quote by Warren Buffett.

[Animation: a jar with a few coins in it and a small seedling slowly changes into a jar overflowing with coins with a plant that is much taller than the jar and full of leaves.]

Investing is a bit like planting a tree—it takes time to see the tree grow large and healthy. 

Investing needs the right mindset. [Animation of a person with gears spinning in their mind. Text appears, “Investing needs the right mindset.”]

You have to be patient, because money doesn’t grow overnight. Compound interest takes time. Being disciplined is important too. You need to resist the urge to take out the money too soon. Your money needs time to work for you. You also have to be willing to take risks and know that your money may go up and down in value. 

[An arrow connecting the word “investing” to the word “prepared.”]

[Animation: money fills a jar labeled “savings.” Then a jar labeled “monthly expenses.” Finally, money half-fills a jar labeled, “Investment.”

Investing also means you’re prepared. Before you start investing, you want to ensure you have a savings cushion so you don’t have to disrupt your investments. You’re ready to invest when you have some extra money you can afford to risk. 

[A man raising his arms with a questioning look on his face with a thought bubble: “I’m ready to invest, but how?”]

So, if you’re ready to invest, how do you know what to invest in? You can start by getting familiar with the different ways you can invest money.

[A pyramid divided into three sections: “high-risk" in the top section, “moderate-risk” in the middle section, “low- risk” in the bottom section.”]

[On screen text]: Select each part of the risk pyramid.

Investments come in many types, ranging from safe to risky. Explore each investment category to determine what might be the best personal fit for you.

Section 1: Low-risk Overview:

• Earn less
• Won’t lose money

Types:

• High-interest earning savings accounts
• Bonds
• Certificate of deposit (CDs)
• Treasury bills]

In the safe category, investments generally earn less, but are guaranteed not to lose money. Some low-risk investments include high-interest earning savings accounts, bonds, certificates of deposit (also known as CDs), and treasury bills.

Section 2: Moderate-Risk Overview:

• potential for profit
• more risk

Types:

• mutual funds
• blue-chip stocks

• real estate]

If you’re willing to take a bit more risk, moderate-risk investments include mutual funds, blue-chip stocks, and real estate. These have a bit more potential for profit, but also a bit more risk

Section 3: High-Risk Overview:

• potential for larger profit
• possibility of losing value

Types:

• small-cap stocks
• emerging market stocks
• cryptocurrencies]

At the other end of the spectrum, investments have potential for larger profit but also the possibility of losing value. These investments include small-cap stocks, emerging market stocks, and cryptocurrencies. Risk is the heaviest in this category because the companies and technologies involved are less proven, leaving more to chance.

[On screen text]: Read each scenario by selecting the person. Match each person with the best investment risk strategy for them. 

Look at these scenarios. Match each person with the best investment risk strategy for them.

Scott’s Scenario: Scott started contributing to his company’s 401(k) when he was 22. He wants to invest in some new technology firms focused on artificial intelligence.

Investment Risk Options:

Option 1: low-risk

Option 2: medium-risk

Option 3: high-risk

Lucinda’s Scenario: Lucinda is recently divorced and has worked hard to adjust to living on one income. Every penny counts for her. She needs to play catch up to save for retirement if she wants to stop working in seven years.

Investment Risk Options:

Option 1: low-risk

Option 2: medium-risk

Option 3: high-risk

Gerard’s Scenario: Gerard tells his financial advisor that he wants to invest in mutual funds because there is a good mix of investment types.

Investment Risk Options:

Option 1: low-risk

Option 2: medium-risk

Option 3: high-risk

Feedback/Answers:

• Low risk: Lucinda’s best strategy is low risk investing because she has less time to take risk before her retirement goal.
• Moderate risk: Gerard’s focus on mutual funds is a great moderate risk strategy. Mutual funds can offer a mix of different risk level options.
• High risk: Scott’s high risk strategy is taking a chance on new technologies. The risk is higher but the reward could be great too.]

[A young woman sitting on a chair working on a laptop that has stickers on the back that say things like, “tech innovation” and “Maker Party.”]

Once you have an idea of your risk tolerance, then you can think about diversifying your investments. 

[Animation: Eggs being distributed into 3 different baskets.]

A good rule is never put all your eggs in one basket. Instead, spread your money across different types of investments with different levels of risk. The goal of diversifying investments is to protect you; if one investment goes down in value, there are other investments that can help offset any losses.

[On screen text]: Diversifying investments protects you.

[A man sitting at his computer typing the word, ”investing” into a search engine.]

Before you start, learn as much as you can about investing.

Benjamin Franklin said it best: “An investment in knowledge pays the best interest.”

[A man pointing at his watch with a thought bubble: “The time is now.”]

It’s important to start investing as soon as you can, but it’s also never too late.

[A clock (time) = cash (money).]

More time generally equals more money. 

For example, if you invest $100 a month for retirement starting at age 25 instead of 35, you’ll have nearly twice as much money by age 65. 

[A line graph with the label “age” on the x-axis and “money” on the y-axis. The first line on the graph shows return on investment for starting to invest at age 35, yielding close to $100,000. The second line on the graph shows return on investment for starting to invest at age 25. The return on investment is close to $200,000.]