Standard 5 : Financial Investing



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General Information

Number: SS.912.FL.5
Title: Financial Investing
Type: Standard
Subject: Social Studies
Grade: 912
Strand: Financial Literacy

Related Benchmarks

This cluster includes the following benchmarks
Code Description
SS.912.FL.5.1: Compare the ways that federal, state, and local tax rates vary on different types of investments. Describe the taxes effect on the after-tax rate of return of an investment.
Clarifications:
Given tax rates and inflation rates, calculate the real, after-tax rates of return for groups of stocks and bonds.
SS.912.FL.5.2: Explain how the expenses of buying, selling, and holding financial assets decrease the rate of return from an investment.
Clarifications:
Identify and compare the administrative costs of several mutual funds and estimate the differences in the total amount accumulated after 10 years for each mutual fund, assuming identical market performance.
SS.912.FL.5.3: Discuss that buyers and sellers in financial markets determine prices of financial assets and therefore influence the rates of return on those assets.
Clarifications:
Predict what will happen to the price and rate of return on a bond if buyers believe that the bond has increased in risk.
SS.912.FL.5.4: Explain that an investment with greater risk than another investment will commonly have a lower market price, and therefore a higher rate of return, than the other investment.
Clarifications:
Explain why the expected rate of return on a “blue chip” stock is likely to be lower than that of an Internet start-up company.
SS.912.FL.5.5: Explain that shorter-term investments will likely have lower rates of return than longer-term investments.
Clarifications:
Explain how markets will determine the rates of return for two bonds if one is a long-term bond and the other a short-term bond, assuming each bond pays the same rate of interest.
SS.912.FL.5.6: Describe how diversifying investments in different types of financial assets can lower investment risk.
Clarifications:
Compare the risk faced by two investors, both of whom own two businesses on a beach. One investor owns a suntan lotion business and a rain umbrella business.
The other investor owns two suntan lotion businesses. Explain why a financial advisor might encourage a client to include stocks, bonds, and real estate assets in his or her portfolio.
SS.912.FL.5.7: Describe how financial markets adjust to new financial news and that prices in those markets reflect what is known about those financial assets.
Clarifications:
Explain how prices of financial investments can adjust when given specific news about a company’s or industry’s future profitability.
SS.912.FL.5.8: Discuss ways that the prices of financial assets are affected by interest rates and explain that the prices of financial assets are also affected by changes in domestic and international economic conditions, monetary policy, and fiscal policy.
Clarifications:
Give an example of a change in interest rates affecting the current value of a financial asset that pays returns in the future. Explain why the current value increases when interest rates fall. Explain how a change in economic growth might change the value of a stock held by an investor.
SS.912.FL.5.9: Examine why investors should be aware of tendencies that people have that may result in poor choices, which may include avoiding selling assets at a loss because they weigh losses more than they weigh gains and investing in financial assets with which they are familiar, such as their own employer’s stock or domestic rather than international stocks.
Clarifications:
Explain why investors may sell stocks that have gained in value, but hold ones that have lost value. Explain why this may not make sense.
Identify an example of why an investor may have a bias toward familiar investments and why this may or may not be a rational decision.
SS.912.FL.5.10: Explain that people vary in their willingness to take risks because the willingness to take risks depends on factors such as personality, income, and family situation.
Clarifications:
Explain how the portfolio of a retiree might differ from that of a young, single person.
SS.912.FL.5.11: Describe why an economic role for a government may exist if individuals do not have complete information about the nature of alternative investments or access to competitive financial markets.
Clarifications:
Explain why it is important for individuals to have accurate information about a company’s sales and profits when investing in that company.
SS.912.FL.5.12: Compare the Securities and Exchange Commission (SEC), the Federal Reserve, and other government agencies that regulate financial markets.
Clarifications:
Conduct research to learn about the SEC or the Federal Reserve and identify their roles in regulating financial markets.


Related Access Points

This cluster includes the following access points.

Independent

Access Point Number Access Point Title
SS.912.FL.5.In.a: Compare the ways that state and local tax rates vary on different types of investments.
SS.912.FL.5.In.b: Discuss how the expenses of buying and selling of financial assets decrease the rate of return from an investment.
SS.912.FL.5.In.c: Discuss that buyers and sellers have influence on the rates of return on financial assets.
SS.912.FL.5.In.d: Discuss that an investment with greater risk will commonly have a lower market price, and therefore a higher rate of return.
SS.912.FL.5.In.e: Discuss that shorter-term investments will likely have lower rates of return than longer-term investments.
SS.912.FL.5.In.f: Discuss how diversifying investments in different types of financial assets can lower investment risk.
SS.912.FL.5.In.g: Discuss how financial markets adjust prices to current financial news.
SS.912.FL.5.In.h: Discuss ways that the prices of financial assets are affected by interest rates and other economic conditions.
SS.912.FL.5.In.i: Discuss why people may make poor choices when investing.
SS.912.FL.5.In.j: Discuss that people vary in their willingness to take risks due to factors such as personality, income and family situation.
SS.912.FL.5.In.k: Discuss economic roles of the government.
SS.912.FL.5.In.l: Discuss the roles of government agencies that regulate financial markets.

Supported

Access Point Number Access Point Title
SS.912.FL.5.Su.a: Identify taxes on investments.
SS.912.FL.5.Su.b: Identify how the expenses of buying financial assets decrease the rate of return from an investment.
SS.912.FL.5.Su.c: Identify how buyers and sellers have influence on the rates of return on financial assets.
SS.912.FL.5.Su.d: Identify that an investment with greater risk will commonly have a lower market price, and therefore a higher rate of return.
SS.912.FL.5.Su.e: Identify the difference between short- and long-term investments.
SS.912.FL.5.Su.f: Identify why it is important to diversify investments.
SS.912.FL.5.Su.g: Identify that financial markets adjust prices to financial news.
SS.912.FL.5.Su.h: Identify economic conditions that affect prices of financial assets.
SS.912.FL.5.Su.i: Identify poor choices people make when investing.
SS.912.FL.5.Su.j: Identify risks that people may take due to factors such as personality, income and family situation.
SS.912.FL.5.Su.k: Identify economic roles that the government plays.
SS.912.FL.5.Su.l: Identify an agency that regulates financial markets.

Participatory

Access Point Number Access Point Title
SS.912.FL.5.Pa.a: Recognize there are different taxes on investments.
SS.912.FL.5.Pa.b: Recognize that there are expenses associated to buying financial assets.
SS.912.FL.5.Pa.c: Recognize that buyers and sellers have influence on the rates of return on financial assets.
SS.912.FL.5.Pa.d: Recognize that an investment with greater risk can lead to a higher rate of return.
SS.912.FL.5.Pa.e: Recognize that there is a difference between short- and long-term investments.
SS.912.FL.5.Pa.f: Recognize diversified investments.
SS.912.FL.5.Pa.g: Recognize that financial markets are affected by the news.
SS.912.FL.5.Pa.h: Recognize economic conditions.
SS.912.FL.5.Pa.i: Recognize people make poor choices when investing.
SS.912.FL.5.Pa.j: Recognize why people may take risks.
SS.912.FL.5.Pa.k: Recognize that the government plays a role in the economy.
SS.912.FL.5.Pa.l: Recognize that there are agencies that regulate financial markets.