Types of Investments

Stocks / Mutual Funds / Index Funds Stocks Represent ownership of a company You buy them when… you think a company will increase its revenue and profits (growth stock) you think that a stock is undervalued at the moment (value stock) Mutual funds A basket of stocks in one package, chosen by a professional money manager. Index funds Mutual funds that invests only in the stocks that make up an index (Dow Jones, S&P500, NASDAQ, Wilshire 5000, etc.)

Stocks / Mutual Funds / Index Funds Volatile and Risky over the short term Predictable and Profitable over the long term

Investment Accounts 1. Accounts without tax advantages 2. Accounts with tax advantages Retirement accounts 401(k) Traditional IRA Roth IRA

Asset Allocation

$10,000 invested every year ( ) ($150,000 over 15 years)

$368,421 $10,000 invested every year ( ) ($150,000 over 15 years)

$368,421 $331,541 $10,000 invested every year ( ) ($150,000 over 15 years) difference: $36,880

Index Funds Are Great! Index funds will usually beat most actively-managed mutual funds, up to 80-90% of them. Index funds have lower expenses, so less of your returns are eaten up. Index funds have low turnover rates. Index funds don’t rely on a superstar fund manager. Index funds have a long track record.

Target funds have a particular year as their goal – for instance, the year you plan on retiring. Target funds start off investing aggressively, then become more conservative over time. Target Mutual Funds Are Great! Target 2050 Fund Stocks Bonds Cash

Buying Mutual Funds What to buy? There are over 8,000 mutual funds! Which ones should you get? My personal suggestion: Buy index funds or targeted funds Where to buy? There are hundreds of mutual fund companies! Which ones should you use? * My personal suggestion: Buy from one of these three great companies:

How to Invest DON’T: Invest before you’ve paid off your credit card debt Buy/sell individual stocks unless you really know what you’re doing Panic when the market drops DO: Start early and invest for a long time Use your company’s retirement plan, especially if they give you free money! Make your investing regular and automatic Build a diverse portfolio - don’t put all your eggs in one basket Consider buying index funds and/or target funds Consider buying from Vanguard, Fidelity, or T. Rowe Price Buy only those mutual funds that have long, successful track records