Compound Interest and the Rule of 72

What is Compound Interest?
- The compound interest is when interest is added to the principal and the interest that has been added also itself earns interest. For example, when you have $1,000 with 10% compound interest, after first year you'll have $1,100 and the next year, the money will increase to $1,210. On the third year, it'll be $1,331.

What is "the Rule of 72"?
- The rule of 72 is mathematical method of finding out how much compound interest is gained after certain year. For example, to find out how many years would take for $1 to double with compound interest of 10% then all you have to do is 72/10 = 7.2. So it would take 7.2 years to double the money.

Opportunity Cost

What are opportunity cost?
- The definition of opportunity cost is the cost people pay in order to choose something over something else. For example, when I have certain amount of money, I have many options to spend that money. I can go buy myself food or I can just decide to give it to my little brother. If I choose to buy myself food with that money, then I won't be able to give my little brother. If I give my money to my little brother, then I won't have money to buy myself food and I'll get hungry.
Another example is when I have economic homework due tomorrow but I was asked to attend one of my friend's birthday party that day. If I decide to do my homework, then I'll get a good grade in economic class but my friend will get upset. If I decide to go to the party, I'll have fun with my friends in the party but won't be able to do my homework and fail the class.
Everyone gets to make decisions everyday of their lives. Within the decision, none of us know what the other side of the path will be or what that will bring to us which is called opportunity cost. If affects us in many different ways since the with the decision we made on certain topic, we won't know what the other option will bring that might have better cost than what you chose.

My Budget

Rent - I'm going to rent a 1 bedroom house in Long Island for $1,300 per month.
Car - $259 per month for Hyundai Genesis Coupe
Cable/Phone - Time Warner (Cable, Internet, Phone) $76 per month.
Cell Phone (Verizon) - $60 per month
Scool Loan - $70
Car Insurance - $150 per month
Gasoline - $65 per month
Electricity - $100 per month
Subway Pass - $10 per month
Health Club - $20 per month
Food-dinning in - $200 per month
Food-dinning out - $350 per month
Clothes/shoes - $300 per month
Hair/Beauty- $30 per month

My Investment Strategy

My strategy is to buy companies that I think will have opportunities to do well. Also, I'm going to look at the graph of the companies' investments including three months ago then decide if it's going to increase or decrease. If one of my company that I bought does bad, then I'm going to sell it in a right time of when it reaches the maximum amount. I bought the stock of Bank of America since I decided that the bank had opportunities to increase.

Intro. to the Stock Market

• What exactly is a stock and why do companies sell stock in the first place?
• - Stock represents the company's asserts and ownerships. Companies sell stocks in order to capitals.
• What is the difference between a public and a private company?
• - The difference between a public and a private company is that private company is owned privately and in the other hand, the public companies are shared by the public which means that the stocks are shared and the shareholders have rights for portion of company's profit.
• What is the Dow Jones Industrial Average?
• - The Dow Jones Industrial Average tracks variety of stocks to assists investors.
• What is a blue chip stock?
• - A blue chip stock is a stock that is known as safe and excellent in financial shape.
• What is the New York Stock Exchange and the NASDAQ?
• - The New York Stock Exchange is one of the biggest stock exchange in U.S. It is responsible for setting policies, supervising member activities, listing securities, overseeing the transfer of member seats, and evaluating applicants. The NASDAQ stands for National Association of Securities Dealers Automated Quotation. It is the largest electronic screen-based equity securities trading market in United States.
• What is a mutual fund and how do they operate, why can they be good?
• - Mutual fund is a tool that pools funds from the investors and invests it in stocks, bonds, and other securities. The mutual fund is operated by investment companies by selling shares to the public which is used to purchase any type of securities (stocks, bonds, money markets). They can be good because mutual fund is easy to manage them since it's monitored by professionals and it brings many benefits such as diversification in portfolio, liquidity, and more.
• What are some of the biggest companies on the stock market (in total value of stock) ?
• - Some of the biggest companies on the stock market are Hasen Natural, Apple, Comtech Telecommunication, McDonald's, ExxonMobile, and more.
• What is the PE ratio of a stock?
• - The PE ratio of a stock is the measure of price paid for a share annual net income or profit earned by the firm per share.
• What is a stock dividend?
• - Stock dividend represents the share's portion of company's profit yearly.