“Investing Matters”

Ground yourself in the basicsUnderstand riskCreate a strategyHow to get started

Presentation given by ______________Securities available through ______________Investments are not FDIC insured, may lose value, are not a deposit, have no bank guarantee and are not insured by any government agency.

Goals of today’s presentation

What does investing mean to you?

Money earned by investing gives you: Freedom to make choices Protection of your money’s value Peace of mind

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 have their parent/guardian open a custodial

account for them.

Why invest?

Which answers are correct? To set money aside for financial

independence from work To fill your piggy bank To grow your money To 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 quickly Bank accounts (checking & savings) CDs (Certificates of deposit) Money market accounts

Bonds

You lend money to the government or a company Examples may include schools or

municipalities

Stocks

You own shares of the company Many investors buy companies they

know

How much risk should I take? Find out what your risk

tolerance is:

What are the goals for the money that is being invested?

What is your timeframe? How much money do you

have? Can you sleep at night

knowing you can lose money or would you like for your investment to remain stable?

Investment Risk

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

CASH EQUIVALENTS

GOVERNMENTBONDS

MUNICIPALBONDS

CORPORATEBONDS

MID-CAPSTOCKS

LARGE-CAPSTOCKS

SMALL-CAPSTOCKS

INTERNATIONALSTOCKS

Managing Risk- Diversification

Winter Spring Summer Fall

Snow

Blowers

Lawn

Mowers

Inflation Risk

Private Four-Year College Tuition1

1987-88 $10,455

1992-93 $15,027

1997-98 $19,360

2002-03 $24,867

2007-08 $32,307

Movie Ticket2

1975$2.00

1980$2.75

1985$3.55

1990$5.00

1995 $6.00

2000$7.00

2006$8.50

1 Source: The College Board, Trends in College Pricing

2 Source: Motion Picture Association of America

How much and when should I invest?

Any amount counts.

Just get started.

Time is on your side. Take advantage of compounding growth.

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

Time is on Your Side Compounding Growth

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. What is the

difference?

Time is on Your Side Compounding Growth

$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

At age 15, Tim begins investing $500 per year. Sally waits until age 25 to invest the same amount. Both earn 6% annualized return.

Age6% is not a guaranteed rate of return.

Rule of 72 and Rate of ReturnThe “Rule of 72” is a simplified way to determine how long an investment will take to double, given an annual rate of return.

“It is the greatest mathematical discovery of all time.” Albert Einstein

Remember that risk and return go hand-in-hand. Higher returns usually mean greater risk. Lower returns generally promise greater safety.

Consider Your EmotionsEmotion is NOT a Strategy

Strategy for InvestingMutual Funds

Pool ofProfessiona

l

Management

Diversified PortfolioInv. Objective

Stocks &/or Bonds, etc.

Capital

Gains

Divid

ends

Share in underlying Investment Results (Gains or Losses)

Strategy for InvestingDollar Cost Averaging

Year $$ Price/share # of Shares

29 $100 $10 10

30 $100 $4 25

31 $100 $2 50

32 $100 $1 100

33 $100 $250

34 $100 $425

$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 goalsCreate a strategyGet startedDiversify, diversify, diversifyUse 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

Remember…

The choices we make with our

money can change the world.

Thank you

BestPrep gratefully acknowledges the Foundation for Financial Planning for providing financial support to fund this project. We also are indebted to the “Investing Matters” committee for their help in creating and piloting this presentation.

Committee membersRon Chu, Ameriprise FinancialJohn Comer, Comer ConsultingCathy Ehrlich, Lake Junior High SchoolAndy Fishman, Affiance Financial, LLCJohn HelgersonJenna Holm, Accredited Investors Inc.Shawn Jacobson, Legacy FinancialBob Kaitz, BestPrepSteve Lear, Affiance Financial, LLCKara Mueller, St. Louis Park High SchoolJoan Rossi, Rossi Financial ManagementJanet Stanzak, Financial Empowerment LLCBonnie Vagasky, BestPrep