Unit 2: Wealth Creation Tools

To create wealth, several financial and investment tools are worth considering. Bonds provide investors with a fixed income, while stocks offer the possibility of capital gains and dividends in exchange for ownership in a company. Options, on the other hand, are financial instruments that allow investors to buy or sell an underlying asset at a predetermined price and time without any obligation. It is important for investors to understand the features and hazards associated with each asset class, in order to make informed decisions and maximize their potential for wealth creation.

Wealth Creation Outline

In this unit, we will discuss the basics of bonds, stocks, and options, as well as how they can be used to build a diversified portfolio:

• US Treasury Marketable Securities are financial securities issued by the US government to finance its operations and manage the national debt. These instruments include Treasury bills (T-bills), Treasury notes (T-notes), and Treasury bonds (T-bonds), each with varying maturities ranging from a few days to 30 years. They are considered to be among the safest investments in the world due to the US government’s creditworthiness, and are widely used by investors as a low-risk component of their investment portfolios.

• Stocks also known as equities, represent ownership in a company and are one of the most common types of financial securities traded in the stock market. By purchasing stocks, investors can become part owners of the company and potentially earn returns through capital appreciation and/or dividends. Stocks are typically considered to be higher-risk investments due to their price volatility, but they also offer the potential for higher returns compared to lower-risk assets such as bonds or cash.

• Options are derivative securities that give investors the right, but not the obligation, to buy or sell an underlying asset at a predetermined price and time. They can be used for a variety of purposes, such as hedging against price fluctuations, generating income through option premiums, or speculating on market movements. Options can be classified as either call options or put options, and can be further categorized based on factors such as their expiration date, strike price, and underlying asset.