Welcome Fundamentals  of  Investing Presenter Presentation Date COPYRIGHT Wachovia CONFIDENTIAL © 7/2003 Wachovia Securiti...
The Education of an Investor Business Journal Economic Outlook
Agenda <ul><li>•  Why invest? </li></ul><ul><li>•  What kinds of investments are there? </li></ul><ul><li>•  How can I use...
Why Invest? Education House Business Retirement
Basic Questions <ul><li>When is it going  </li></ul><ul><li>to happen? </li></ul><ul><li>WHERE IS THE </li></ul><ul><li>MO...
Investment Alternatives <ul><li>Closed-End Bond Funds  Mutual Funds </li></ul><ul><li>Common & Preferred Stock  Over-the-C...
Categories of Assets <ul><li>•  Real Estate </li></ul><ul><li>•  Cash </li></ul><ul><li>•  Bonds </li></ul><ul><li>•  Stoc...
Categories of Assets <ul><li>•  Cash </li></ul><ul><ul><li>–  Certificates of deposit </li></ul></ul><ul><ul><li>–  Money ...
The Combined Effects of  Inflation & Taxes  (2003) <ul><li>Initial Investment........................................$10,0...
The Combined Effects of  Inflation & Taxes  (2003)   <ul><li>Initial Investment.....................................……. $1...
<ul><li>Initial Investment............................................ $10,000 </li></ul><ul><li>Invest in 6-month CDs for...
Categories of Assets <ul><li>•   Bonds </li></ul><ul><ul><ul><ul><li>–  U.S. Government bonds </li></ul></ul></ul></ul><ul...
Interest Rates and Your Bonds <ul><li>Bonds sell at a  Premium </li></ul><ul><li>Bonds sell at a  Discount </li></ul>% Int...
Categories of Assets <ul><li>•  Stocks </li></ul><ul><ul><ul><ul><li>– “ Blue chip” or   large company stocks </li></ul></...
What Is Total Return? <ul><li>Capital  </li></ul><ul><li>Appreciation </li></ul><ul><li>Dividend </li></ul><ul><li>Income ...
Categories of Assets <ul><li>•  Cash </li></ul><ul><li>•  Bonds </li></ul><ul><li>•  Stocks </li></ul>
Investment Performance After 77 Years value at year-end of $1 invested at year-end 1925   End Value   $10  $17  $60  $1,77...
Inflation and Taxes Year-end 1925-2002 <ul><li>Year-end 20021 value of $1.00  </li></ul><ul><li>invested at the end of 192...
Asset Class Winners & Losers Ten Years, 1993 - 2002   number of years with the   best   worst Asset Class returns  2nd  3r...
Dangers of Market Timing Hypothetical Value of $1 Invested from Year-End 1982 - 2002 S&P 500 Treasury Bills $10.94 $3.00 $...
Asset Class Volatility <ul><li>How consistent are the average annual returns? </li></ul>Asset X Asset Y 10% Annual Return ...
Diversification and Its Effect on Risk Negative Correlation
Determinants of Portfolio Performance <ul><li>Market Timing   1.8% </li></ul>Asset Allocation  Policy   91.5% Security Sel...
Tax-Deferred Compounding <ul><li>Age at first investment: 30 40 </li></ul><ul><li>Years contributing: 10 25 </li></ul><ul>...
Dollar-Cost Averaging <ul><li>$300 1 $20 15 </li></ul><ul><li>300 2 10 30 </li></ul><ul><li>300 3 15 20 </li></ul><ul><li>...
Mutual Funds <ul><li>•  A diversified portfolio of securities </li></ul><ul><li>•  Professional money management </li></ul...
Mutual Fund Styles Depending on when you’ll need the money <ul><li>Aggressive </li></ul><ul><li>Growth </li></ul>Growth Gr...
Annuities <ul><li>Investor </li></ul>Premium $ Insurance Company Beneficiary Insurance Company Payout 1999 2005 2011 2017 ...
Taxable Equivalent Yield  (2002-03) <ul><li>5.48 5.71 6.15 6.51 </li></ul><ul><li>6.85 7.14 7.69 8.14 </li></ul><ul><li>8....
Laddering Diversify Your Bonds by Maturity <ul><li>4 to 5 years $10,000 </li></ul><ul><li>3 to 4 years  $10,000 </li></ul>...
Sample Portfolio Allocations <ul><li>Decisions have to be made </li></ul><ul><li>for the  individual </li></ul>This hypoth...
Personal  Financial  Architect ®
Personal Financial Architect Questionnaire
 
 
 
 
An Education Never Really Ends Business Journal Economic Outlook
One-on-One  Financial  Session
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Fund2004

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This seminar\'s original version became part of the template for Prudential Securities coordinated marketing programs. Participating brokers saw an increase in business that was three times the firm average.

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  • 1: Welcome . . . [IDEALLY, SOMEONE ELSE INTRODUCES YOU. INTRODUCING YOURSELF, KEEP IT SHORT.] Hi. Welcome to “Fundamentals of Investing.” I tried to introduce myself to all of you when you came in, but in case I missed anyone, my name is _______ and I&apos;m a ________ in the ________ office of Wachovia Securities. [BRIEFLY SUMMARIZE YOUR EXPERIENCE: YEARS IN THE FINANCIAL INDUSTRY, YEARS WITH THE FIRM, YEARS IN YOUR COMMUNITY, ETC.] Just so I know who I’m talking to, how many of you are just getting started as investors? [RAISE YOUR HAND TO ENCOURAGE AUDIENCE RESPONSE. IF ANYONE RAISES A HAND, OFFER YOUR CONGRATULATIONS.] How many of you have been investing for less than five years? Between five and ten years? More than ten years? Thanks. I wanted to know what the range of experience was like. At least some of you are already familiar with some of the information that I have for you [today/this evening] . However, I think that you will find it valuable to see all of this information put together in this way. Rather than giving you lots of useful but isolated pieces of information, I want to teach you how to create a useful context for yourself, that you can use to make sense of what you continue to learn about investments.
  • Transcript of "Fund2004"

    1. 1. Welcome Fundamentals of Investing Presenter Presentation Date COPYRIGHT Wachovia CONFIDENTIAL © 7/2003 Wachovia Securities, LLC, member NYSE and SIPC. The Prudential service marks are owned by The Prudential Insurance Company of America and are used herein under license. A067471
    2. 2. The Education of an Investor Business Journal Economic Outlook
    3. 3. Agenda <ul><li>• Why invest? </li></ul><ul><li>• What kinds of investments are there? </li></ul><ul><li>• How can I use them? </li></ul><ul><li>• How can I choose among them? </li></ul>
    4. 4. Why Invest? Education House Business Retirement
    5. 5. Basic Questions <ul><li>When is it going </li></ul><ul><li>to happen? </li></ul><ul><li>WHERE IS THE </li></ul><ul><li>MONEY GOING TO </li></ul><ul><li>COME FROM? </li></ul>How much is it going to cost?
    6. 6. Investment Alternatives <ul><li>Closed-End Bond Funds Mutual Funds </li></ul><ul><li>Common & Preferred Stock Over-the-Counter Securities </li></ul><ul><li>Corporate & Convertible Bonds Options </li></ul><ul><li>Corporate Bond Funds Retirement Plans </li></ul><ul><li>Government & Agency Bonds Tax-Advantaged Instruments </li></ul><ul><li>Money Market Instruments Unit Investment Trusts </li></ul><ul><li>Municipal Bonds Zero Coupon Bonds </li></ul><ul><li>Wachovia Securities is not a legal or a tax advisor. </li></ul>
    7. 7. Categories of Assets <ul><li>• Real Estate </li></ul><ul><li>• Cash </li></ul><ul><li>• Bonds </li></ul><ul><li>• Stocks </li></ul>
    8. 8. Categories of Assets <ul><li>• Cash </li></ul><ul><ul><li>– Certificates of deposit </li></ul></ul><ul><ul><li>– Money market funds* </li></ul></ul><ul><ul><li>– Treasury bills** </li></ul></ul>• Real Estate • Bonds • Stocks *An investment in any money market fund is neither insured nor guaranteed by the FDIC or any government agency. Although the fund seeks to preserve the value of your investment at $1.00/share, it is possible to lose money by investing in the fund. **Guaranteed by the full faith and credit of the U.S. Government for the timely payment of interest and principal if held to maturity.
    9. 9. The Combined Effects of Inflation & Taxes (2003) <ul><li>Initial Investment........................................$10,000 </li></ul><ul><li>Invest in 6-month CDs for 2003: 1st week of 1/03, offering 1.60% 1st week of 7/03, offering 1.20%................. + 140 </li></ul><ul><li> 10,140 </li></ul>This hypothetical example is provided for informational purposes only. It is not intended to represent any specific investment nor is it indicative of future results.
    10. 10. The Combined Effects of Inflation & Taxes (2003) <ul><li>Initial Investment.....................................……. $10,000 </li></ul><ul><li>Invest in 6-month CDs for 2003: 1st week of 1/03, offering 1.60% 1st week of 7/03, offering 1.20%...............….. + 140 </li></ul><ul><li> 10,140 </li></ul><ul><li>Less Federal income taxes (highest bracket, 35%)..............................…… - 49 </li></ul><ul><li> 10,091 </li></ul><ul><li>Wachovia Securities is not a legal or tax advisor. </li></ul>
    11. 11. <ul><li>Initial Investment............................................ $10,000 </li></ul><ul><li>Invest in 6-month CDs for 2003: 1st week of 1/03, offering 1.60% 1st week of 7/03, offering 1.20%................… + 140 </li></ul><ul><li> 10,140 </li></ul><ul><li>Less Federal income taxes (highest bracket, 35%)..................................… - 49 </li></ul><ul><li> 10,091 </li></ul><ul><li>Adjust for inflation (CPI): 2.28%....…...….….… - 230 </li></ul><ul><li> $ 9,861 </li></ul><ul><li>In real terms, this investment lost 1.4%. </li></ul>The Combined Effects of Inflation & Taxes (2003) Certificates of Deposit offer a fixed rate of return and are insured up to $100,000 by the FDIC.
    12. 12. Categories of Assets <ul><li>• Bonds </li></ul><ul><ul><ul><ul><li>– U.S. Government bonds </li></ul></ul></ul></ul><ul><ul><ul><ul><li>– Corporate bonds </li></ul></ul></ul></ul><ul><ul><ul><ul><li>– Municipal bonds </li></ul></ul></ul></ul><ul><li>• Real Estate </li></ul><ul><li>• Cash </li></ul><ul><ul><li>– Certificates of deposit </li></ul></ul><ul><ul><li>– Money market funds </li></ul></ul><ul><ul><li>– Treasury bills </li></ul></ul>• Stocks
    13. 13. Interest Rates and Your Bonds <ul><li>Bonds sell at a Premium </li></ul><ul><li>Bonds sell at a Discount </li></ul>% Interest Rates $ Bond Prices % Interest Rates $ Bond Prices
    14. 14. Categories of Assets <ul><li>• Stocks </li></ul><ul><ul><ul><ul><li>– “ Blue chip” or large company stocks </li></ul></ul></ul></ul><ul><ul><ul><ul><li>– Smaller company stocks </li></ul></ul></ul></ul><ul><ul><ul><ul><li>– International stocks </li></ul></ul></ul></ul><ul><ul><ul><ul><li>– Growth Stocks </li></ul></ul></ul></ul><ul><ul><ul><ul><li>– Value stocks </li></ul></ul></ul></ul><ul><ul><ul><ul><li>– Preferred stocks </li></ul></ul></ul></ul><ul><li>• Real Estate </li></ul><ul><li>• Cash </li></ul><ul><ul><li>Certificates of deposit </li></ul></ul><ul><ul><li>Money market funds </li></ul></ul><ul><ul><li>Treasury bills </li></ul></ul><ul><li>• Bonds </li></ul><ul><ul><li>U.S. Government bonds </li></ul></ul><ul><ul><li>Corporate bonds </li></ul></ul><ul><ul><li>Municipal bonds </li></ul></ul>Neither this information nor any opinion expressed shall be construed to constitute an offer to sell or a solicitation to buy any securities mentioned.
    15. 15. What Is Total Return? <ul><li>Capital </li></ul><ul><li>Appreciation </li></ul><ul><li>Dividend </li></ul><ul><li>Income </li></ul><ul><li>Total </li></ul><ul><li>Return </li></ul>STOCK = = 10% = = 4% = 14% $5 $50 $2 $50 $55 $50 $2 STOCK Jane Miller $2.00 Two Dollars and 00/100 Janet Smith April 1, 1997 Pay to the Order of Dividend Payment This hypothetical example is provided for informational purposes only. It is not intended to represent any specific investment, and is not indicative of future performance.
    16. 16. Categories of Assets <ul><li>• Cash </li></ul><ul><li>• Bonds </li></ul><ul><li>• Stocks </li></ul>
    17. 17. Investment Performance After 77 Years value at year-end of $1 invested at year-end 1925 End Value $10 $17 $60 $1,775 $6,816 Avg. Return 3.1% 3.8% 5.3% 10.2% 12.1% <ul><li>Inflation is measured by the Consumer Price Index (CPI). </li></ul><ul><li>Cash equivalent returns are for one-month Treasury bills. Treasuries are guaranteed by the Government as to the timely payment of principal and interest when held to maturity; equities are not. Cash equivalents are the most conservative of all asset classes. </li></ul><ul><li>Long-term government bond returns are measured using a constant one-bond portfolio with a maturity of about 20 years. </li></ul><ul><li>Large company stock returns are based on the S&P Composite, a market-weighted, unmanaged index of 500 stocks (currently) in a variety of industries. Stocks are generally more volatile than bonds. </li></ul><ul><li>Small company stock returns for 1926-80 are based on stocks in the 5th quintile of the NYSE. Thereafter, returns are based on the DFA Small Company Fund. Small company stocks are generally more volatile than large company stocks. </li></ul>Hypothetical value of $1 invested at year-end 1925. Assumes reinvestment of income and no transaction costs or taxes. The indices are presented to provide an under-standing of the historical long-term performance of stocks and are not presented to illustrate the performance of any security. You cannot directly invest in an index. Source: Ibbotson Associates
    18. 18. Inflation and Taxes Year-end 1925-2002 <ul><li>Year-end 20021 value of $1.00 </li></ul><ul><li>invested at the end of 1925 </li></ul><ul><li>(highest tax bracket) </li></ul>Long-Term Govt. Bonds Treasury Bills S&P 500 Stocks $0.52 $2.03 $2.50 $30.35 Municipal* Bonds *Our benchmark for municipal bond returns is an average of returns on all municipal bonds rated Baa or better in each year of the period. Source: Ibbotson Associates, 2003. This hypothetical example is provided for informational purposes only. It is not intended to represent any specific investment, and is not indicative of future performance.
    19. 19. Asset Class Winners & Losers Ten Years, 1993 - 2002 number of years with the best worst Asset Class returns 2nd 3rd 4th returns 30-day T-bills 0 4 0 4 2 Long-Term Govt. Bonds 2 0 5 0 3 Large Stocks 4 0 1 4 1 Small Stocks 2 4 3 0 1 International Stocks 2 2 1 2 3 Source: Ibbotson Associates, 2003
    20. 20. Dangers of Market Timing Hypothetical Value of $1 Invested from Year-End 1982 - 2002 S&P 500 Treasury Bills $10.94 $3.00 $2.79 S&P 500 minus 16 best months Source: Ibbotson Associates
    21. 21. Asset Class Volatility <ul><li>How consistent are the average annual returns? </li></ul>Asset X Asset Y 10% Annual Return Time Annual Return Time 10%
    22. 22. Diversification and Its Effect on Risk Negative Correlation
    23. 23. Determinants of Portfolio Performance <ul><li>Market Timing 1.8% </li></ul>Asset Allocation Policy 91.5% Security Selection 4.6 % Cross Product Results 2.1 % This hypothetical example is provided for informational purposes only. It is not intended to represent any specific investment and is not indicative of future performance. Source: Bryson, Singer, and Beebower, Financial Analysts Journal , May-June 1991, “Determinants of Portfolio Performance: An Update.” Note: Cross Product Results are attributed to interactions of the three variables: asset allocation, market timing and security selection.
    24. 24. Tax-Deferred Compounding <ul><li>Age at first investment: 30 40 </li></ul><ul><li>Years contributing: 10 25 </li></ul><ul><li>Total investment: $20,000 $50,000 </li></ul><ul><li>Assets accumulated at </li></ul><ul><li>retirement (age 65): $214,301 $159,909 </li></ul><ul><li>Assumed return: 8% </li></ul>Investor A Investor B This hypothetical example is provided for informational purposes only. It is not intended to represent any specific investment and it is not indicative of future performance. Age $214,301 $159,909 30 40 50 60 65
    25. 25. Dollar-Cost Averaging <ul><li>$300 1 $20 15 </li></ul><ul><li>300 2 10 30 </li></ul><ul><li>300 3 15 20 </li></ul><ul><li>300 4 20 15 </li></ul><ul><li>$1200 80 </li></ul>Net Amount Invested Quarter Purchase Price Shares Acquired Total: Average price per share: ([$20 + $10 + $15 + $20] /4) Your average cost per share: ($1200/80 shares) This hypothetical example is provided for informational purposes only. It is not intended to represent any specific investment and it is not indicative of future performance. $16.25 $15.00 Dollar cost averaging does not assure a profit or protect against loss in declining markets. Because such a strategy involves periodic investment, you should consider your financial ability and willingness to continue purchases through periods of low price levels.
    26. 26. Mutual Funds <ul><li>• A diversified portfolio of securities </li></ul><ul><li>• Professional money management </li></ul><ul><li>• Particular investment objective </li></ul>Growth Income Balanced Money Market Aggressive Growth Growth & Income
    27. 27. Mutual Fund Styles Depending on when you’ll need the money <ul><li>Aggressive </li></ul><ul><li>Growth </li></ul>Growth Growth & Income Balanced Income Money Market Horizon Higher Risk (Long-Term) Lower Risk (Short-Term) Please call for a free prospectus on any mutual fund offered through Wachovia Securities, containing complete information, including all charges and expenses. Read the prospectus carefully before you invest or send money.
    28. 28. Annuities <ul><li>Investor </li></ul>Premium $ Insurance Company Beneficiary Insurance Company Payout 1999 2005 2011 2017 2023 Tax Deferred Accumulation Period $
    29. 29. Taxable Equivalent Yield (2002-03) <ul><li>5.48 5.71 6.15 6.51 </li></ul><ul><li>6.85 7.14 7.69 8.14 </li></ul><ul><li>8.22 8.57 9.23 9.77 </li></ul>27% 30% 35% 38.6% 4% 5% 6% Taxable Equivalent Yield by Tax Bracket Federal Tax-Free Yield = = = This chart is for illustrative purposes only and does not imply past or future performances of any investment.
    30. 30. Laddering Diversify Your Bonds by Maturity <ul><li>4 to 5 years $10,000 </li></ul><ul><li>3 to 4 years $10,000 </li></ul><ul><li>2 to 3 years $10,000 </li></ul><ul><li>1 to 2 years $10,000 </li></ul><ul><li>0 to 1 years $10,000 </li></ul>
    31. 31. Sample Portfolio Allocations <ul><li>Decisions have to be made </li></ul><ul><li>for the individual </li></ul>This hypothetical example is provided for informational purposes only. It is not intended to represent any specific investment and is not indicative of future performance. Bonds Bonds Bonds Stocks Stocks Stocks Cash Equivalents Cash Equivalents Cash Equivalents
    32. 32. Personal Financial Architect ®
    33. 33. Personal Financial Architect Questionnaire
    34. 38. An Education Never Really Ends Business Journal Economic Outlook
    35. 39. One-on-One Financial Session

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