We “Watch-ovia” Your Money By: Frank Bruno Matthew Cohen Kevin Connelly Matthew DiCroce

Family Background Family of four – Father works for Wachovia as bank executive – Mother works as professor at Law School – Two children, ages 12 & 10 – 401(K) plans with 5 & 8% matching – Wachovia stock options – Minimal Savings – $2,000 mortgage payment

Financial Overview Maximize 401(K) savings – Lowers taxable income and provides additional savings through company matching program 529 Plan for both children Various Moderate Risk Mutual and Retirement Funds Pay down mortgage

Second Home Due to minimal savings and high first mortgage rate. Invest in Tax beneficial plans – 401(K) To buy house, you would need approximately 20% down payment.

Household Income Household pre-tax earnings = $200,000 Less ($28,000) 401K contributions = $172,000

Mortgage Interest Deductions Interest payment components of mortgages are tax deductible. To find the interest portion, we set up an amortization table and find the interest components for this year, then deduct them from our pre-tax income.

Mortgage Interest Deductions Starting Pre-tax income = $172,000 Less ($22,108) Interest = $149,892

Taxes 28% Federal Tax Bracket, 3% State, Plus local and property taxes. All rounded to 35%. Pre-Tax Income $149,892 Less Income Tax Expense ($56,462.50) NET INCOME = $97,430

Mortgage Payment Payments contributing to principle are NOT tax deductible. Net Income = $97,480 Less Mortgage Payment (non interest) ($1893) INCOME LEFT = $95,537

Other Expenses Health Insurance = $1,200 Car Payments = $9,600 Car Insurance = $4,000 Gas = $3,600 Food = $10,000 Clothes = $6,000 Utilities = $6,000 INCOME LEFT = $55,137

Misc. Expenses We estimated that the family will spend around $20,000 in other everyday costs. (Holidays, Birthdays, Vacations, Medicines, Summer Camps, Kid Expenses, Etc.) INCOME LEFT = $35,137

College Plan Family will invest in a 529 College Plan to cover 60% of 2 college educations. Cost: $15,360 / yr INCOME LEFT: $19,777

Savings Of the left over income, we will allocate about 30% for savings. Funds Available for Investment: $13,777

Allocation Mutual Funds: $6,300 Stocks: $3,000 Bonds: $4,477

Mutual Fund Investment $6,300 Dollar Allotment for Mutual Funds Vanguard as Fund Manager – Reliable – Proven Performer – Quality Customer Service

Types of Funds No-Load Index Funds – Minimal maintenance fees – Provide broad market exposure for low income investors – Reduce risk – $3,000 Minimal Investment 2 funds per year Indexes Covered – Large Cap Stocks, Emerging Markets, Growth Stocks, Real Estate, Bond Markets

First Year Vanguard Large Cap Index Fund – $20.44 share – 5.06% after tax return since inception in 2004 – Holdings: Exxon Mobil and J&J Vanguard Long Term Treasury Fund – $11.67 share – 5.88% annual return last 10 years – Holdings: year bonds

Second Year Vanguard Small Cap Index Fund – $24.91 – Holdings: Reliant Energy and DeVita Inc. – 9.13% after tax annual return past 10 years Vanguard Emerging Market Index Fund – $14.67 – Holdings: China Mobil and Samsung – 5.28% annual after tax return 17.44% most recent year

Third Year Vanguard Money Market Fund – $1.00 fixed cost – Holdings: short term money market products – 3.74% 10 year annual return REIT Index Fund – $17.88 – Holdings: Real estate and capital growth stocks – 14.97% after tax annual returns

Bond Investments After other expenses and investments – $4,477 for bond investments What bonds to invest? – Low risk – Long-term return – Treasury bonds – Municipal bonds

Bond Investments BondPrice Coupon RateYTM %Rating T-Bond option 1$1, %11.35%AAA T-Bond option 2$1, %7.772%AAA Montgomery County G.O. BDS muni-bond$1, %3.595%AAA PA State muni-bond$ %4.346%AAA

Equity Investments After other expenses and investments – $3,000 for equity investments Stock options at Wachovia – Can exercise 1,000 shares at $60 – Currently valued at $50.26 as of 4/26/05

What to Invest in? Minimal Savings Need to save for college and retirement Type of Equities to consider – Low to Moderate Risk – Different Sectors – Strong earnings

Consider This Market Cap Beta P/E Ratio Dividend payout or stock split

Careful Consideration Stock NameStock SymbolBetaP/E RatioMarket CapDividend Paid General Electric Co.GE B0.88 ING Group NV ADSING B0.99 Apple Computer IncAAPL B0 Microsoft CorpMSFT B0.32

Stocks Stock NameStock SymbolSharesStock PriceBetaPortfolio WeightPortfolio Beta General Electric Co.GE20$ ING Group NV ADSING26$ Apple Computer IncAAPL25$ Microsoft CorpMSFT26$

Family Equity Portfolio Overall Beta of Portfolio – Diversification- 4 Sectors – Technology – Conglomerate – Life Insurance – Computer Software