1. Investing and Risk Management Planning Mini Unit 4.5
Financial Markets
Investing and Risk Management Planning Mini Unit
4.5

2. Learning Objectives
Students will understand that bad financial history can result in a bad FICO score, making access to credit extremely difficult or expensive
Students will understand the risk profiles of prominent financial instruments used by individuals in order to save and grow principal for retirement. These financial instruments include stocks, bonds, mutual funds, real estate, and other derivatives. Each one of these instruments has its own risk profile which is reflected in the asset’s price or distributions (dividends or coupons)
Students will understand the tendencies that people have that may result in poor choices. These include selling into a loss, buying assets that are too familiar, and lack of diversification
Students will understand that a mature budget must account for mitigating potentially catastrophic risk, such as health, death, accidents, or unexpected liabilities

3. Read and Reflect Now
Read the article about Ryan Broyles and discuss how his savings and spending habits.
What is Broyles’ spending and investment thesis? Do you think he is too conservative, too reckless? Identify two specific pieces of evidence from his budget that support your claim...
What kinds of financial risks is Broyles reducing in his life with his budgetary strategy?

4. Prior Knowledge Check-in
Which of the following asset classes do you think are the “riskiest”?
Which of these asset classes do you know the least about?
What do you want to learn most about in regards to any one of these asset classes, retirement, or investing?

5. How did we get here? Watch PBS Frontline :29 - 18:00
How has retirement changed over the last fifty years?
Why is the responsibility for retirement overwhelmingly the responsibility of the worker and not their company or place of work?

6. Retirement Vehicles Round Table
· Each of you has a packet with retirement savings types.
o Who has the responsibility of saving and investing in this retirement mechanism?
o How risky is this type of retirement program?
o What are the benefits or risks to the individual planning on retiring?
o How does this retirement program work?
Your group will read the packet for your assigned retirement account and then teach it out to the class at the end of the period. This will be handed in for grading at the end of the period. (:20/1:00)
Don’t plan on it...

7. · Each of you has a packet with retirement savings types.
o Who has the responsibility of saving and investing in this retirement mechanism?
o How risky is this type of retirement program?
o What are the benefits or risks to the individual planning on retiring?
o How does this retirement program work?
Your group will read the packet for your assigned retirement account and then teach it out to the class at the end of the period. This will be handed in for grading at the end of the period. (:20/1:00)

8. What is a mutual fund?
Active Management v. Passive Management
Fees

9. What is a pension?

10. What is a 403b?

11. What is a 401k?

12. Today: How to be a millionaire….when you’re 65!

13. Logistics Next class is in the library
You have a quiz on Wednesday next week
If you have missed a class in this mini-unit, you must come to ACLAB

14. The Lessons of Diversification
See PBS “The Retirement Gamble” 15: :00
A disciplined retirement portfolio is:
Diversified across asset classes
Long-term in outlook
Low fees

15. Part III: Crash Course Investment
Key Terms and Concepts will
appear on Friday’s quiz
“Safe Haven” Investments
What are the major asset classes?

16. Safest: Precious Metals
Gold and Silver are seen as safe-havens for investors. They are often inversely correlated to the stock market.
When investors panic, they leave stocks and buy gold

17. Not all bonds are safe investments...
Safe: The Bond Market
Bonds allow governments and corporations to gain access to credit
Governments finance infrastructure, war, other expenses
Corporations use capital to expand
Not all bonds are safe investments...

18. The Bond Market II
Investor puts forth principal and then receives a “coupon” at a predetermined regular schedule (usually quarterly). This coupon is what the debtor pays the creditor to be lent money.
Usually seen as a safe haven investment
You get principal back at maturity, or the date when the issuer has to pay you back

19. Somewhat Safe: Mutual Funds Basics
Expense ratios: are a percentage of the principal invested in a mutual fund that a fund manager is paid.
Large Cap: Large cap stocks are equities in the world’s largest corporations. They are often seen as less risky because these are established firms.
Mid-Cap: mid cap stocks are equities in growing, but recognizable firms. They have a moderate amount of risk (Example: Under Armor)
Small cap: stocks are equities in small emerging companies valued at less than one or two billion dollars. These companies are the riskiest investments in stock markets (Example: Shake Shack)

20. ETFs: A Mutual Fund Alternative?
ETFs (electronically traded funds) are new a new asset class that function much like a stock (you can trade throughout the day) but are an aggregate of many stocks together
Index ETFs hold stocks and follow the performance of major stock indexes like the NASDAQ, the Dow Jones Industrial Average, or the S&P 500

21. ETFs: A Mutual Fund Alternative?
ETFs are a better alternative to mutual funds some say:
They have low fees >1%
They can be traded quickly like a stock
You can “buy a sector”
But they have some downfalls:
They are not actively managed, meaning there is no fund manager like a mutual fund
IBB
BioTech
GDX
GoldMiners
QQQ
NASDAQ 100
DIA
Dow Jones Industrial Average
SPY
S&P 500
IWM
Russell 2000 Small Cap Index

22. Less Safe: Individual Company Stocks Dividend Stocks
The Power of Compounding
Click Here for visual
Mutual funds, ETFs, and individual company stocks can all offer dividend (or yield). These are good long term investments thanks to the power of compounding.
Dividends also protect you from losses in the value of the equity

23. Project Introduction:
Research is on you!
Identify the amount you need for retirement!
Identify risk tolerance for each stage of your life
Identify liabilities and assets and how the balance between the two change over time in your life
Retirement Investment Thesis:
What asset classes are you going to have at each stage and why have you chosen this allocation

24. Calculate how much you need to retire...
What is your age target?
How much do you need to retire?
What kind of lifestyle do you want to live?
What are you going to need to save per year?

25. Exit Slip
What is still confusing to you or unknown about investing, retirement, or finance?