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The NCCEE and the Financial Planning Associations of Charlotte and Raleigh gratefully acknowledge BestPrep and The Foundation for Financial Planning for making the Financial Matters initiative available in North Carolina.

Investing Matters

Part 4 of 4In BestPrep’s Financial Matters Series


Goals of today’s presentation

Ground yourself in the basicsUnderstand riskCreate a strategyGet Started

Investments are not FDIC insured, may lose value, are not a deposit, have no bank guarantee and are not insured by any government agency.

Investing in a mutual fund involves risks, including the possible loss of principal. The prospectus contains more complete information on the investment objectives, risks, charges and expenses

of the fund, which investors should read and consider carefully before investing.

What does investing mean to you?

Money earned by investing gives you:

• Freedom to make choices• Protection of your money’s

value• Financial security


What is investing?

Putting your time or money into something with hopes of gettingsomething greaterin return

Invest to create value


Who can invest?

True or False

Only adults can invest?

True, but

Students can open a custodial investment account with their

parents.


Why should I invest?

Which answers are correct?To set money aside for financial

independence from workTo build savingsTo meet long term goalsTo beat inflation


Investing BasicsSaving vs. Investing Save for short-term goals (< 5 years)

Saving is setting money aside Saving is low risk but earns a low return

Invest for long-term goals (>5 years) Investing is putting money into something with

the hope of getting something greater in return Investing is more risky than saving, but has the

potential for higher returns


Investments types

Cash

Bonds

Stocks


Cash Accounts

Accounts you can access quicklyBank accounts (checking & savings)CDs (Certificates of deposit)Money market accounts


Bonds You lend money to the government or

a companyExamples may include schools or

municipalities


StocksYou own shares of the company• Many investors buy companies they know


How much risk should I take?

Ask yourself…What is your goal for

money you’ve invested?Can you sleep at night

knowing the money you’ve invested may decrease?

Are you a risk taker?Do you like to know

your money is remaining stable?


Investment Risk

MUNICIPALBONDS

LARGE-CAPSTOCKS

INTERNATIONAL

STOCKS

CASH EQUIVALENTS

GOVERNMENTBONDS

CORPORATEBONDS

MID-CAPSTOCKS

SMALL-CAPSTOCKS


Lower risk, lower potential return Higher risk, higher potential return


Managing Risk - Diversification

SnowBlowers

LawnMowers Winter Spring Summer

Fall

Inflation Risk

Private Four-Year College Tuition1

1979-80$9,501

1989-90$14,997

1999-00$20,047

2008-09$24,649

Movie Ticket2

1980 $2.69

1990 $4.22

2000 $5.39

2009 $7.50

1 Source: The College Board, Trends in College Pricing2 Source: National Association of Theatre Owners


How much and when should I invest?

Any amount counts

Just get started

Time is on your side. Take advantage of compounding.

“Time and tide wait for no man.” Mark Twain


Time is on Your Side Compounding

The more time you have the more you can benefit from compound growth

Tim begins Sally waits until investing at age 15. she is age 25.

Both invest $500 per year. Who will have more?


Time is on Your Side Compounding

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

15 25 35 45 55 65

Tim

Sally

Tim earned$145,168

Sally earned $77,381

Hypothetical Example:At age 15, Tim begins investing $500 per year. Sally waits

until age 25 to invest the same amount. Both earn 6%* annualized

return.

Age* 6% is not a guaranteed rate of return.


Consider Your EmotionsEmotion is NOT a Strategy


Strategy for Investing Mutual Funds

Pool ofProfessional

Management

Diversified PortfolioInvestment Objective

Stocks and/or Bonds, etc.

Capital

Gains

Divid

ends

Share in underlying Investment Results (Gains or Losses)

Strategy for InvestingDollar Cost Averaging

Hypothetical Example:

Year _$$_Price/share# of Shares1929 $100 $10 101930 $100 $4 251931 $100 $2 501932 $100 $1 1001933 $100 $2 501934 $100 $4 _25 $600 260

Total value of all the shares after year 6 = $1040

Results in 21.84% average annual return


Strategy for InvestingDollar Cost Averaging Works if you are willing to continue during

bad markets. You need to keep investing when share prices are declining.

Dollar cost averaging does not guarantee a profit and does not prevent against a loss.

Lessens the emotional roller coaster of investing.


What can I do now?

Identify goals Create a strategy Get started Diversify, diversify, diversify Use resources/Get advice


Resources for You!

Keep one finger on the pulse of the market:• www.investopedia.com• www.mfea.com• http://finance.yahoo.com/• www.morningstar.com• http://money.cnn.com/data/dow30

Look into an investment account for long-term goals• www.sharebuilder.com• www.schwabmoneywise.com


Thank You!

©2007 BestPrep

NCCEE gratefully acknowledges the Foundation for Financial Planning for providing financial support to fund this project. We also are indebted to the BestPrep for sharing materials with NCCEE and to the Financial Planning Associations of Raleigh and Charlotte for their help in recruiting volunteers for this program.

real skills real experiences real life the nccee and the financial planning associations of...

Documents

return investing

money youve

investing basics

years investing

cash accounts

low risk

financial independence

risk taker