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

3. Investing 101

4. Index Funds

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

6. Apples for Sale $2.49 each $0.10 each

7. Expense Ratios

8. Are loads good or bad? Any Questions?

9. Building Your Portfolio

10. Investment Ingredients Asset Classes

11. Why Mix assets…

15. How it Works

20. Diversification Source: 7-Twelve, Craig Israelsen

21. Diversification Source: 7-Twelve, Craig Israelsen

22. 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

23. Researching Funds http://personal.fidelity.com/research/funds/?bar=p

24. 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 $ 8,560.00 $ 8,680.00 $ 120.00 5 $ 49,226.33 $ 51,432.24 $ 2,205.91 10 $ 118,268.79 $ 128,768.66 $ 10,499.87 20 $ 350,921.41 $ 419,912.47 $ 68,991.06 30 $ 808,584.33 $ 1,078,183.81 $ 269,599.48

25. Portfolio Maintenance & Retirement Preparation

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

27. How much should you be putting away monthly? Retirement Age: 60 65 70 75 Present Age 25636 471 347 254 30855 636 471 347 35 1,138 855 636 471 40 1,502 1,138 855 636 45 2,328 1,5021,138 855 50 or older: See a financial planner, now

28. 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

29. 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 $ 10,198.80 $ 0.00 5 $ 54,484.98 $ 53,946.59 $ 538.39 10 $ 153,104.96 $ 151,493.14 $ 1,611.82 20 $ 587,954.44 $ 574,645.54 $ 13,308.91 24 $ 660,133.69 $ 601,170.79 $ 58,962.89

30. 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?

31. 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

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

34. BOOMERANGERS

35. Probability of a 65-year-old living to various ages 0% 25% 50% 75% 100% 65707580859095100105 Male Female At least one spouse Age 788186858891 9396 Probability Source: Annuity 2010 Mortality Tables 86 91

36. Squaring The Curve 0 2 4 6 8 10 0 2030405060708090100 AGE Perfect Death Health Status Squared Traditional

38. Why Social Security IS in trouble:

39. Timing of Savings Copyright© 2013 Money Education, LLC Chapter 11 39 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%

40. 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