Answer to Question #290483 in Finance for Kelsey Jand

Question

Context Links: https://saylordotorg.github.io/text_personal-finance/s05-personal-financial-planning.html + https://saylordotorg.github.io/text_personal-finance/s06-basic-ideas-of-finance.html

Instruction: Implementing the personal finance terms within the provided links above, respond to the following prompt.

Extra Directions: Answer this prompt as if you were a sophomore around the age of 15-16 in high school.

Prompt: The quote by Adam Smith identifies you can make money if you have money. If you were given $100,000 dollars today how would you use this money to make additional money in the future?

Requirements: Create a list of 3 options you could take to make money from the $100,000; identify the pros and cons of each option and identify your first choice.

1. Create your list of three options.
2. Identify the pros and cons of each option.
3. Weigh each option and identify your first choice.

Answer 1

The three options are;

Gold 

Real Estate

Stock market

 Advantages of Gold

1) There is price stability

2) The simplest way of saving

3) Convenient to buy and sell

Disadvantages

1) Gold can be stolen and lead to losses

2) It takes time for it to appreciate.

Advantages of Real Estate

1) The property appreciates over time..

2) It is easy to understand how it works

3) Real Estate maintains low liquidity .

Disadvantages

1) Likelihood of Extra costs 

2) Low liquidity

3) It might have hidden property issues

Advantages of investing in Stock market.

1) There is a high probability of good returns for a short period 

2) It has a very high liquidity

3) Gaining control of the share in the market.

Disadvantages

1) It is highly volatile

2) Involvement of brokers reduce the profit margin

Of the three options, I would prefer investing in real estates due to it's ability to appreciate with time.