An Introduction to InvestingMike DavisGAAM, Inc.480-366-5983mdavis@gilbert-aam.comOffices in Arizona, Tennessee andVirgini...
AN INTRODUCTION TO INVESTINGToday We Will Talk About… The need to build wealth Investment tools How to manage riskFee B...
AN INTRODUCTION TO INVESTINGWhy Invest?Accumulate wealth for:   Retirement income   Education costs   Major purchases l...
AN INTRODUCTION TO INVESTINGThe Changing Look of Retirement Sources of Retirement Income                            Earnin...
AN INTRODUCTION TO INVESTINGEducation Costs are Rising                     Anticipated College Costs    Source: Standard &...
AN INTRODUCTION TO INVESTINGWealth-Building Tools Types of investments Choices Strategies                               5
AN INTRODUCTION TO INVESTINGSetting Investment Goals List your goals and time frames How much money will you need? Gaug...
AN INTRODUCTION TO INVESTINGTypes of Investments Stocks Bonds Cash securities                               7
AN INTRODUCTION TO INVESTINGStocks Higher risk/higher return potential Own part of a company Tradeoff between risk and ...
AN INTRODUCTION TO INVESTINGBonds Mainly for income Interest payments by bond issuer Issuer promises to repay principal...
AN INTRODUCTION TO INVESTINGCash Protect principal Treasury bills Certificates of deposit (CDs) Money market accountsG...
AN INTRODUCTION TO INVESTINGHow Investments Stack Up                                   Stocks                             ...
AN INTRODUCTION TO INVESTINGThe Inflation Factor               30-Year Historical Market Performance                      ...
AN INTRODUCTION TO INVESTINGMutual Funds Pool investors’ dollars Invest in a mix of securities (for example, stocks,  bo...
AN INTRODUCTION TO INVESTINGSpecial Investment VehiclesTax-saving incentives helpyou accumulate funds for: Retirement Ed...
AN INTRODUCTION TO INVESTINGStrategies for Managing Risk Asset allocation Diversification* “Buy-and-hold” Dollar-cost ...
AN INTRODUCTION TO INVESTINGWhat Does “Asset Allocation” Look Like?                                                Stocks ...
AN INTRODUCTION TO INVESTINGPut Time On Your Side             What Missing the Best Days Could Mean for You               ...
AN INTRODUCTION TO INVESTING  Dollar Cost Averaging              An Example: Dollar Cost Averaging With $50 a MonthM onth ...
AN INTRODUCTION TO INVESTINGTo Summarize… Identify your specific  investment goals Align your portfolio with  these goal...
AN INTRODUCTION TO INVESTINGQuestions?Contact:Mike Davismdavis@gilbert-aam.com480-366-5983Fee Based Asset Management & Sec...
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An Introduction To Investing

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A very basic introduction to the concept of building wealth.

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Transcript of "An Introduction To Investing"

  1. 1. An Introduction to InvestingMike DavisGAAM, Inc.480-366-5983mdavis@gilbert-aam.comOffices in Arizona, Tennessee andVirginia Member FINRA/SIPC
  2. 2. AN INTRODUCTION TO INVESTINGToday We Will Talk About… The need to build wealth Investment tools How to manage riskFee Based Asset Management & Securities Offered Through LPL FinancialMember FINRA/SIPC 1
  3. 3. AN INTRODUCTION TO INVESTINGWhy Invest?Accumulate wealth for: Retirement income Education costs Major purchases like a home Health care for you and your family 2
  4. 4. AN INTRODUCTION TO INVESTINGThe Changing Look of Retirement Sources of Retirement Income Earnings 29.6% Social Security 36.5% Asset Income 12.7% Private and Other Government 2.7% Pensions 18.5%Source: Standard & Poor’s. Data is from Fast Facts & Figures About Social Security, published by the Social SecurityAdministration, September 2010. (CS000123) 3
  5. 5. AN INTRODUCTION TO INVESTINGEducation Costs are Rising Anticipated College Costs Source: Standard & Poor’s. Projections are based on 2010-2011 total costs of $36,993 for a four-year private college and $16,140 for a four-year public college (in-state rate), as reported by the College Board. (CS000113) 4
  6. 6. AN INTRODUCTION TO INVESTINGWealth-Building Tools Types of investments Choices Strategies 5
  7. 7. AN INTRODUCTION TO INVESTINGSetting Investment Goals List your goals and time frames How much money will you need? Gauge your tolerance for investment risk Make sure you have emergency funds 6
  8. 8. AN INTRODUCTION TO INVESTINGTypes of Investments Stocks Bonds Cash securities 7
  9. 9. AN INTRODUCTION TO INVESTINGStocks Higher risk/higher return potential Own part of a company Tradeoff between risk and returnStock investing involves risk, including loss of principal. 8
  10. 10. AN INTRODUCTION TO INVESTINGBonds Mainly for income Interest payments by bond issuer Issuer promises to repay principal Variety of risks Lower risks and returns than stocksBonds are subject to market and interest rate risk if sold prior to maturity. Bond valueswill decline as interest rates rise and are subject to availability and change in price. 9
  11. 11. AN INTRODUCTION TO INVESTINGCash Protect principal Treasury bills Certificates of deposit (CDs) Money market accountsGovernment bonds and Treasury bills are guaranteed by the U.S. government as to thetimely payment of principal and interest, and, if held to maturity, offer a fixed rate of returnand fixed principal value. CDs are FDIC insured and offer a fixed rate of return if held untilmaturity. 10
  12. 12. AN INTRODUCTION TO INVESTINGHow Investments Stack Up Stocks Bonds Cash Equivalents 11
  13. 13. AN INTRODUCTION TO INVESTINGThe Inflation Factor 30-Year Historical Market Performance Annualized Return Inflation-Adjusted Return Stocks 10.72% 7.33% Bonds 8.92% 5.59% Cash 5.29% 2.07% Sources: Standard & Poor’s; the Federal Reserve; Barclays Capital; Bureau of Labor Statistics. For the 30-year period ended December 31, 2010. Stocks are represented by the S&P 500 index, an unmanaged index of stocks generally considered representative of the U.S. stock market. Bonds are represented by the returns of the Barclays U.S. Aggregate Bond Index. Cash is represented by a composite of yields on 3-month Treasury bills and the Barclays 3-Month Treasury Bills Index. Inflation is represented by the change in the Consumer Price Index. Investors cannot invest directly in any index. Past performance is not indicative of future results. 12
  14. 14. AN INTRODUCTION TO INVESTINGMutual Funds Pool investors’ dollars Invest in a mix of securities (for example, stocks, bonds, cash or a combination of them) Pursue a stated objective (for example, “growth”) Managed by professionals Provide diversification to help control riskInvesting in mutual funds involves risk, including possible loss of principal. Investments in specialized industrysectors have additional risks, which are outlined in the prospectus. 13
  15. 15. AN INTRODUCTION TO INVESTINGSpecial Investment VehiclesTax-saving incentives helpyou accumulate funds for: Retirement Education 14
  16. 16. AN INTRODUCTION TO INVESTINGStrategies for Managing Risk Asset allocation Diversification* “Buy-and-hold” Dollar-cost averaging** There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio.* Diversification does not ensure against market risk.** Dollar-cost averaging involves continuous investments in securities regardless of price fluctuations. An investor should consider their ability to continue purchasing through periods of low price levels. Dollar-cost averaging does not ensure a profit or protect against a loss in declining markets. 15
  17. 17. AN INTRODUCTION TO INVESTINGWhat Does “Asset Allocation” Look Like? Stocks Bonds CashFor illustrative purposes only. Your situation may vary. Asset allocation does not ensure a profit or protectagainst a loss. A more aggressive portfolio may carry greater risk. 16
  18. 18. AN INTRODUCTION TO INVESTINGPut Time On Your Side What Missing the Best Days Could Mean for You (Initial $10,000 investment) Source: Standard & Poor’s. For the 20-year period ended December 31, 2010. Stocks are represented by the S&P 500, an unmanaged index that is generally considered representative of the U.S. stock market. Past performance is not a guarantee of future results. The S&P 500 is an unmanaged index that may not be invested into directly. (CS000076) 17
  19. 19. AN INTRODUCTION TO INVESTING Dollar Cost Averaging An Example: Dollar Cost Averaging With $50 a MonthM onth Jan Feb M ar Apr M ay Jun Jul Aug Sep Oct Nov DecShare Price $15 $13 $12 $14 $13 $12 $13 $14 $15 $16 $17 $16Shares Bought 3.3 3.8 4.2 3.6 3.8 4.2 3.8 3.6 3.3 3.1 2.9 3.1 Total Shares Purchased: 42.7 Average Price per Share: $14.17 Average Cost per Share: $14.05 Systematic investment strategies such as dollar cost averaging doesn’t assure a profit or protect against losses in declining markets. Investors should consider the risks involved in purchasing shares during declining markets. For illustrative purposes only. This example is not indicative of any particular investment. Investing in mutual funds involves risk, including possible loss of principal. Investments in specialized industry sectors have additional risks, which are outlined in the prospectus. 18
  20. 20. AN INTRODUCTION TO INVESTINGTo Summarize… Identify your specific investment goals Align your portfolio with these goals Balance risk against potential return Consult a professional for advice 19
  21. 21. AN INTRODUCTION TO INVESTINGQuestions?Contact:Mike Davismdavis@gilbert-aam.com480-366-5983Fee Based Asset Management & Securities Offered Through LPL FinancialMember FINRA/SIPCRP-07746-1211 20

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