Investment and Financial Services: What Every Financial Educator Should Know

AN INTRODUCTION TO INVESTING 1 Today We Will Talk About…  The need to build wealth  Investment tools  How to manage risk Not for distribution to the general public. For educational training only.

AN INTRODUCTION TO INVESTING 2 Why Invest? Accumulate wealth for:  Retirement income  Education costs  Major purchases like a home  Health care for you and your family

AN INTRODUCTION TO INVESTING 3 The Changing Look of Retirement Source: Standard & Poor’s. Data is from Fast Facts & Figures About Social Security, published by the Social Security Administration, September (CS000123) Other 2.7% Private and Government Pensions 18.5% Social Security 36.5% Earnings 29.6% Asset Income 12.7% Sources of Retirement Income

AN INTRODUCTION TO INVESTING 4 Education Costs are Rising Anticipated College Costs Source: Standard & Poor’s. Projections are based on total costs of $36,993 for a four-year private college and $16,140 for a four-year public college (in-state rate), as reported by the College Board. (CS000113)

AN INTRODUCTION TO INVESTING 5 Your Audience Should Understand  Types of investments  Choices  Strategies

AN INTRODUCTION TO INVESTING 6 Help in Setting Their Investment Goals  List your goals and time frames  How much money will you need?  Gauge your tolerance for investment risk  Make sure you have emergency funds

AN INTRODUCTION TO INVESTING 7 Help to Understand Types of Investments  Stocks  Bonds  Cash securities

AN INTRODUCTION TO INVESTING 8 Stocks  Higher risk/higher return potential  Own part of a company  Tradeoff between risk and return Stock investing involves risk, including loss of principal.

AN INTRODUCTION TO INVESTING 9 Bonds  Mainly for income  Interest payments by bond issuer  Issuer promises to repay principal  Variety of risks  Lower risks and returns than stocks Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and are subject to availability and change in price.

AN INTRODUCTION TO INVESTING 10 Cash  Protect principal  Treasury bills  Certificates of deposit (CDs)  Money market accounts Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest, and, if held to maturity, offer a fixed rate of return and fixed principal value. CDs are FDIC insured and offer a fixed rate of return if held until maturity.

AN INTRODUCTION TO INVESTING 11 Low High Stocks Bonds Cash Equivalents High Low Risk Potential Return Potential How Investments Stack Up

AN INTRODUCTION TO INVESTING 12 The Inflation Factor Sources: Standard & Poor’s; the Federal Reserve; Barclays Capital; Bureau of Labor Statistics. For the 30-year period ended December 31, Stocks are represented by the S&P 500 index, an unmanaged index of stocks generally considered representative of the U.S. stock market. Bonds are represented by the returns of the Barclays U.S. Aggregate Bond Index. Cash is represented by a composite of yields on 3-month Treasury bills and the Barclays 3-Month Treasury Bills Index. Inflation is represented by the change in the Consumer Price Index. Investors cannot invest directly in any index. Past performance is not indicative of future results. 30-Year Historical Market Performance Annualized ReturnInflation-Adjusted Return Stocks10.72%7.33% Bonds8.92%5.59% Cash5.29%2.07%

AN INTRODUCTION TO INVESTING 13 Mutual Funds  Pool investors’ dollars  Invest in a mix of securities (for example, stocks, bonds, cash or a combination of them)  Pursue a stated objective (for example, “growth”)  Managed by professionals  Provide diversification to help control risk Investing in mutual funds involves risk, including possible loss of principal. Investments in specialized industry sectors have additional risks, which are outlined in the prospectus.

AN INTRODUCTION TO INVESTING 14 Special Investment Vehicles Tax-saving incentives help you accumulate funds for:  Retirement  Education

AN INTRODUCTION TO INVESTING 15 Strategies for Managing Risk  Asset allocation  Diversification*  “Buy-and-hold”  Dollar-cost averaging** There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. * Diversification does not ensure against market risk. ** Dollar-cost averaging involves continuous investments in securities regardless of price fluctuations. An investor should consider their ability to continue purchasing through periods of low price levels. Dollar-cost averaging does not ensure a profit or protect against a loss in declining markets.

AN INTRODUCTION TO INVESTING 16 What Does “Asset Allocation” Look Like? StocksBondsCash For illustrative purposes only. Your situation may vary. Asset allocation does not ensure a profit or protect against a loss. A more aggressive portfolio may carry greater risk.

AN INTRODUCTION TO INVESTING 17 Put Time On Your Side What Missing the Best Days Could Mean for You (Initial $10,000 investment) Source: Standard & Poor’s. For the 20-year period ended December 31, Stocks are represented by the S&P 500, an unmanaged index that is generally considered representative of the U.S. stock market. Past performance is not a guarantee of future results. The S&P 500 is an unmanaged index that may not be invested into directly. (CS000076)

AN INTRODUCTION TO INVESTING 18 Dollar Cost Averaging An Example: Dollar Cost Averaging With $50 a Month Total Shares Purchased: 42.7 Average Price per Share: $14.17 Average Cost per Share: $14.05 Systematic investment strategies such as dollar cost averaging doesn’t assure a profit or protect against losses in declining markets. Investors should consider the risks involved in purchasing shares during declining markets. For illustrative purposes only. This example is not indicative of any particular investment. Investing in mutual funds involves risk, including possible loss of principal. Investments in specialized industry sectors have additional risks, which are outlined in the prospectus.

AN INTRODUCTION TO INVESTING 19 To Summarize…  Identify your specific investment goals  Align your portfolio with these goals  Balance risk against potential return

AN INTRODUCTION TO INVESTING 20 Questions and Answers For Training purposes only, Not to be used with the General Public.