8 Most Common Investment Products
Learning Outcomes:
- Learn how various factors or events can affect stock prices.
- Provide an understanding of the risks of buying stocks.
- Explain what bonds are and how they are rated.
- Identify what a bond market is.
- Describe what Exchange-Traded Funds (ETFs) are and how to research them.
- Learn how to buy and sell ETFs.
- Describe what mutual fund are and how to research them.
- Learn how to buy and sell mutual funds.
Stocks
Watch the video:
The Standard & Poor’s 500 Stock Index (S&P 500) is an “inclusive index made up of 500 stock prices including 400 industrials, 40 utilities, 20 transportation, and 40 financial issues. The index is constructed using market weights (stock price multiplied by shares outstanding) to provide a broad indicator of stock price movements” (2003, p. 357).
In this activity, students will:
- Work in groups to review scenarios that may affect an imaginary company’s stock price.
- Brainstorm on why they think the stock price rose or fell.
- Reflect on the risks and rewards of stock investing.
Download Activity:
- Playing an Investment Game (Teacher Guide)
- Playing an Investment Game (Worksheet)
The key takeaways in this activity are:
- When new shares of a stock are issued and sold, savings turn into investments.
- The stock market can be a riskier method of investment than investing through banks.
Bonds
Watch the video:
The following video and practice questions will explain what the bond market is and how bonds are rated:
- Watch the video*:
* Note that the credit rating information in the video is not current. Starbucks is no longer A-.
- Answer these practice questions.
The key takeaways in the video and practice questions are:
- By issuing bonds, a company can raise capital and make big investments.
- Companies repay debt to borrowers over a long timeline as investments provide a return payback.
- The demand for borrowing increases when the government decides to borrow large amounts of money.
- Bonds are rated by agencies such as the S&P 500.
Exchange-Traded Funds (ETFs)
Watch the video:
Check out the following resources:
Mutual Funds
Watch these videos:
Answer these practice questions:
- What are the key differences between mutual funds and ETFs?
- Which kind of investment would you choose, based on your knowledge of both?
Key Takeaways:
- Putting money in investments like stocks, bonds, mutual funds, and commodities can mean greater returns over the long term, but it also means higher risks.
- Stocks are shares of ownership and are traded in organized markets called stock exchanges.
- The stock market can be a riskier method of investment than investing through banks.
- By issuing bonds, a company can raise capital and make big investments.
- Bonds are rated by agencies such as the S&P 500.
- ETFs rely on diversified stocks bracketed into common themes.
- The price of ETFs fluctuates throughout the day along with the stock market, where ETF trading occurs.
- A mutual fund is a financial-service company that pools its investors’ funds to buy a selection of securities—marketable securities, stocks, bonds, or a combination of securities—that meet its stated investment goals.
Please Provide Feedback
What is one tip that you learned from this chapter?
References
Standard & Poor’s 500 stock index (S&P 500). (2003). In D. L. Scott, Wall Street words (3rd ed.). Houghton Mifflin.
