Personal Financial Plan - Part IV Essay Example | Topics and Well Written Essays - 250 words

Personal Financial Plan - Part IV - Essay Example Acting in an ethical manner is important when dealing with investments. An example of an unethical and illegal act in the investment world is insider trading. Insider trading occurs when a person receives privileged information and uses that information to gain an advantage in the stock market (Teweles, Bradley, Teweles, 1992). Investing has risk and rewards. Investments that have higher risk also have higher reward. Risk adverse investors avoid risk and are satisfied with a small return on investment. Opportunity cost refers to the opportunity forgone when choosing a decision. For example a person that works as a hot dog vendor has the opportunity cost of the amount of money he could make working for the private industry. Savings and investments are impacted by the time value of money. The time value of money is a concept that quantifies the depreciation of money over time. Money loses value over time due to inflation. The present value of $1000 at a 4% rate after ten years is