Seeing as our Personal Finance J-Term was coming to an end, we figured today would be a good day to start recapping the main focuses and themes of the course so that we could put that information into a presentation to share with the school. Without spoiling too much, we also started brainstorming about a short video that we will play in addition to the presentation. After practicing our presentation a few times, we were introduced to a relatively new concept that we had briefly discussed in the past: Asset Allocation. Asa Forman was generous enough to come in and explain to us the basics of Asset Allocation and how necessary it is to develop a strong familiarity with it as early as possible.
Asset Allocation is essentially the idea of portfolio diversification and how you should invest your money. He explained to us the three different asset classes; Cash and cash equivalencies, fixed-income, and equities. He also told us about the two primary factors that are most important in determining where your money should be invested. These two criteria are risk tolerance and investment horizon. Each asset class comes with its own degree of risk and reward, and these two qualities are always directly proportional with any investment. It's up to the individual to decide how great of a risk they are willing to take, and that will help determine their portfolio diversity. Another factor that helps make that decision is a person's investment horizon, which means the time a person has to invest. If you are very young, it is likely that you will consider investing in much riskier options, while when you are old you will likely be more conservative with your money due to a lesser investing horizon. Without going into detail about each investment opportunity, I can personally say the presentation certainly helped me broaden my knowledge about different investing strategies and how I can best use them according to my own tailored intensions. Prior to knowing about asset allocation, my knowledge of investing was very limited to mostly stocks and bonds and hardly anything else, so this was very beneficial.
The next big event of the day was during the afternoon when we watched Enron: The smartest guys in the room, a documentary about the scandal surrounding the energy company Enron. This movie was an excellent follow-up from The Big Short in teaching us about just how fraudulent the financial world can be. It showed us the true power of money and how people will lie, cheat and steal in order to attain it, regardless of ethics and morals in certain cases. In addition to this lesson, the movie also demonstrated just how risky and intense the stock market can be. It was surreal for me to think about putting a great deal of my savings into the stock market, but due to deliberate corruption from white collar individuals, all of my money being lost in a matter of days. Overall today was very insightful and I thought it was an efficient use of the school resources especially as our time in Personal Finance class comes to an end.
Asset Allocation is essentially the idea of portfolio diversification and how you should invest your money. He explained to us the three different asset classes; Cash and cash equivalencies, fixed-income, and equities. He also told us about the two primary factors that are most important in determining where your money should be invested. These two criteria are risk tolerance and investment horizon. Each asset class comes with its own degree of risk and reward, and these two qualities are always directly proportional with any investment. It's up to the individual to decide how great of a risk they are willing to take, and that will help determine their portfolio diversity. Another factor that helps make that decision is a person's investment horizon, which means the time a person has to invest. If you are very young, it is likely that you will consider investing in much riskier options, while when you are old you will likely be more conservative with your money due to a lesser investing horizon. Without going into detail about each investment opportunity, I can personally say the presentation certainly helped me broaden my knowledge about different investing strategies and how I can best use them according to my own tailored intensions. Prior to knowing about asset allocation, my knowledge of investing was very limited to mostly stocks and bonds and hardly anything else, so this was very beneficial.
The next big event of the day was during the afternoon when we watched Enron: The smartest guys in the room, a documentary about the scandal surrounding the energy company Enron. This movie was an excellent follow-up from The Big Short in teaching us about just how fraudulent the financial world can be. It showed us the true power of money and how people will lie, cheat and steal in order to attain it, regardless of ethics and morals in certain cases. In addition to this lesson, the movie also demonstrated just how risky and intense the stock market can be. It was surreal for me to think about putting a great deal of my savings into the stock market, but due to deliberate corruption from white collar individuals, all of my money being lost in a matter of days. Overall today was very insightful and I thought it was an efficient use of the school resources especially as our time in Personal Finance class comes to an end.
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