Stocks, Bonds & Mutual Funds Cost of Investing Building a Portfolio Diversification Selecting Investments Retirement Prep.

Investing 101

Index Funds

Real Returns Does return matter? Would you rather have a real (net) return of 7% or raw (gross) return of 9%? What erodes return?

Apples for Sale $2.49 each $0.10 each

Expense Ratios

Are loads good or bad? Any Questions?

Building Your Portfolio

Investment Ingredients Asset Classes

Why Mix assets…

How it Works

Diversification Source: 7-Twelve, Craig Israelsen

Diversification Source: 7-Twelve, Craig Israelsen

Choosing a Fund What we teach: Risk premiumstheoryalphabetainflation protectionS.D. distributionscorrelation coefficientscovariance ratiosreturn periods Sharpe ratioTreynor’s ratiogeometric meanarithmetic meanTrades marginslong positionsshort positionsoptionsderivatives futureshedgingindexingasset classesholding period returns innumerable valuation techniquesloadsETFsexpense ratiosREITs regulationtrading costs inflation protectionEMHCAPME(r) portfolio optimizationbehavioral biasFama-Frencharbitrage MarkowitzdiversificationSMLtrackingmonitoring rebalancing survivorship biasmarket efficiencybubblesbehavioral economicsratios TIPSliquidity risk managementliquiditybond pricingYTMP/E sector rotationindustry life cyclefiscal policymonetary policyP/B ratio……………….. What you need: Asset allocation Expense ratios

Researching Funds

Take Action Now You have $8,000 going into your retirement account every year. You earn an average of 7%, but diversification could increase it to 8.5%. What’s the difference? Year:7.00%8.50%Difference 1 $ 8, $ 8, $ $ 49, $ 51, $ 2, $ 118, $ 128, $ 10, $ 350, $ 419, $ 68, $ 808, $ 1,078, $ 269,599.48

Portfolio Maintenance & Retirement Preparation

Three Mistakes Most Investors Make Funding Retirement Postpone starting to fund retirement Make contributions that are TOO small Sell low and buy high

How much should you be putting away monthly? Retirement Age: Present Age , ,502 1, ,328 1,5021, or older: See a financial planner, now

Rebalance $100,000 Portfolio Asset Class % Investment $ Invested Small Cap 20% ABC Fund$20,000 Large Cap 20% DEF Fund $30,000 International 20% GHI Fund$15,000 Bonds 20% JKL Fund $20,000 Real Estate 20% MNO Fund $15,000 Sell $10,00 of the Large Cap and buy $5,000 each of the International and Real Estate

Rebalancing (Russell growth & Agg. Bond) Let’s assume that you have $8,000 going into your retirement account every year. You rebalance to 50% in two funds each year. Year:RebalanceStaticDifference 1 $ 10, $ $ 54, $ 53, $ $ 153, $ 151, $ 1, $ 587, $ 574, $ 13, $ 660, $ 601, $ 58,962.89

IRAs- ROTH vs. Traditional IRA- Individual Retirement Account Traditional IRA: Get a tax break for saving for retirement Pay taxes on all funds at retirement Tax deferred growth ROTH IRA: All funds are taxed now No taxation on funds in the account if you follow the rules Which is best for you?

Annuities Annuities- A series of payments A great retirement options for some…. Can be set up with nearly infinite payment options Watch for fees Single payment vs. serial funding Payment duration Spousal considerations

The good news is: we’re living longer; The bad news is: we’re living longer. The Good News & The Bad News

BOOMERANGERS

Probability of a 65-year-old living to various ages 0% 25% 50% 75% 100% Male Female At least one spouse Age Probability Source: Annuity 2010 Mortality Tables 86 91

Squaring The Curve AGE Perfect Death Health Status Squared Traditional

Why Social Security IS in trouble:

Timing of Savings Copyright© 2013 Money Education, LLC Chapter Accumulation at age 65, Ordinary Annuity LoriPeter Total Invested (10 years)$25,000$77,500 (30 years) Balance at Age 65$393,588$308,365 Earnings Rate8%

Choosing a Planner 1) Check for credentials (CFP, CFA) 2) Go to FINRA.org and/or SEC.gov (NASSA.org for individual states) 3) At your first meeting, never commit to handing over money 4) Ask about withdrawal penalties 5) Ask for a written statement as to why the investment is suitable for you 6) Understand recommendations completely- how do they your plan 7) Reverse the roles- ask yourself how the planner makes money 8) Ask about products that are more secure that have similar investment characteristics 9) Watch for warnings: Too good to be true “risk free” Sign now, or no deal 10) Be cautious with references- someone trusts everyone