Assignment5_082267 - BA250 Personal Finance Assignment 5 6...

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BA250 Personal Finance Assignment 5 6 April 10 Chapter 11 Review Questions Page 375 - 376 1. Investing is the act of purchasing an asset that generates a return, such as stocks and bonds. Speculating is similar to investing except that the return depends on supply and demand, such as baseball cards or rare coins. 2. You should pursue tax favored investment strategies to reduce the amount of money you hand over to the government. Capital gains, dividends, as well as tax deferred investments allow you to keep more money actively working for you. 3. Emergency funds keep you from pulling money back out of investments and give you protection against Murphy’s laws. By having a fund of 3-6 months expenses you can easily afford to cover emergencies as they arise. It is also important to eliminate debt before starting your investment strategy. 4. Starting an investment plan can be a bit overwhelming but if you design a budget and look for areas you are “wasting” money on such as eating out 3 times a week or buying too many pairs of shoes, you can find areas to cut back on and use the money for investing. 5. The two basic categories of investments are lending and ownership. Lending investments refer to savings accounts or bonds where you are lending your money to someone else to invest and in return they give you a little bit of interest. Ownership investments refer to real estate and stocks where you actually purchase an asset that generates income while you own it. Rental properties are a good example of income from an ownership investment. 6.
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Assignment5_082267 - BA250 Personal Finance Assignment 5 6...

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