National Association of Black Accountants, Inc. M ney $ense Investing

Investing

What is investing? Money set aside for future income, benefit or profit to meet long term goals

Saving and Investing: The Difference Investing is earning a return on your money Saving is to put aside or reserve

Why Invest?

Best Ways to Invest Get in the habit of saving. You must set aside a portion of your income as often as possible. Get in the habit of saving. You must set aside a portion of your income as often as possible. Invest in financial markets so your money can grow at a meaningful rate. Invest in financial markets so your money can grow at a meaningful rate. Ignore short-term price fluctuations, and focus on long-term potential. Ignore short-term price fluctuations, and focus on long-term potential.

Best Ways to Invest Ask questions and become educated before making any investment. Ask questions and become educated before making any investment. Invest with your head, not with your stomach or heart. Avoid the urge to invest based on how you feel about an investment. Invest with your head, not with your stomach or heart. Avoid the urge to invest based on how you feel about an investment.

Before you Start Organize your finances Organize your finances Understand the impact of time Understand the impact of time

Time Value of Money The relationship between time, money, and rate of return(interest), and their effect on earnings growth

Time Value of Money Suppose your relative owed you $500. Would you rather have this money repaid to you right away, in one payment, or spread out over a year in four installment payments? Would it make a difference either way? You would probably be better off getting your money right away, in one payment. You could invest this money and earn interest on it or you could use this money to pay off all or part of a loan.

The time value of money refers to the fact that a dollar in hand today is worth more than a dollar promised at some future time. The time value of money refers to the fact that a dollar in hand today is worth more than a dollar promised at some future time. A dollar in hand today can be invested in an interest-bearing account that would grow in value over time. A dollar in hand today can be invested in an interest-bearing account that would grow in value over time. The trade-off between money now and money later depends on, among other things, the rate of interest you can earn by investing. The trade-off between money now and money later depends on, among other things, the rate of interest you can earn by investing. Time Value of Money

Opportunity cost: the cost of any decision includes the cost of the best forgone opportunity. Opportunity cost: the cost of any decision includes the cost of the best forgone opportunity. If you pay $50.00 for a concert ticket, your cost of attending the concert is not just the ticket price, but also the time and cost of what else you might have enjoyed doing instead of going to the concert. If you pay $50.00 for a concert ticket, your cost of attending the concert is not just the ticket price, but also the time and cost of what else you might have enjoyed doing instead of going to the concert. Applying this concept to the $500 owed to you, you see that getting the money in installments will saddle you with opportunity cost. By taking the money over time, you lose the interest on your investment or any other use for the initial $500, such as spending it on something you would have enjoyed more. Applying this concept to the $500 owed to you, you see that getting the money in installments will saddle you with opportunity cost. By taking the money over time, you lose the interest on your investment or any other use for the initial $500, such as spending it on something you would have enjoyed more. Opportunity Cost

Key Investment Principles The power of compound interest The power of compound interest Rule of 72 Rule of 72 72/2=36 72/2=36 72/6=12 72/6=12 72/8=9 72/8=9

Activity

Developing An Investment Strategy Purpose for Investment Purpose for Investment Retirement Retirement Education Education Wealth Accumulation Wealth Accumulation Supplemental Income Supplemental Income Investment Options Investment Options Financial Advisors Financial Advisors Measuring Effectiveness Measuring Effectiveness

Investing for Wealth Planning for wealth Planning for wealth Make the most of a 401(K) Make the most of a 401(K)

Investing in Your Future Asset allocation is ongoing Asset allocation is ongoing Diversification Diversification Life circumstances Life circumstances Investment goals, timeframe and tolerance Investment goals, timeframe and tolerance

Investing in Your Future Asset Allocation Asset Allocation Stocks Stocks Bonds Bonds Cash Equivalents Cash Equivalents

Investing in Your Future Long-Term Investments Long-Term Investments Mutual Funds Mutual Funds Stock Stock Bonds Bonds

Investing in Your Future Retirement Specific Investments Retirement Specific Investments 401(k) 401(k) IRA IRA Social Security Social Security

Monitoring Investments Set Attainable Goals and Objectives Set Attainable Goals and Objectives Periodically Assess Periodically Assess Be Prepared to Change Course Be Prepared to Change Course Do Not Procrastinate Do Not Procrastinate Seek Assistance Seek Assistance

Financial literacy isn’t just a matter of knowing what you have and knowing your options. It is a matter of planning for life’s milestones.

Thank You! National Association of Black Accountants, Inc. M ney $ense For more information visit

360 Degrees of Financial Literacy 360 Degrees of Financial Literacy is a national effort of the CPA profession to improve the financial understanding of Americans. It provides a comprehensive approach to financial education, focusing on the information Americans need at every life stage, from childhood to retirement. CPAs volunteer their time and expertise to educate members of their communities about financial issues. 360 Degrees of Financial Literacy is a national effort of the CPA profession to improve the financial understanding of Americans. It provides a comprehensive approach to financial education, focusing on the information Americans need at every life stage, from childhood to retirement. CPAs volunteer their time and expertise to educate members of their communities about financial issues. Visit for tools to help you make sound financial decisions. Visit for tools to help you make sound financial decisions.