Investment basics wayne lippman
Wayne Lippman has forty years of involvement in broad daylight bookkeeping incorporating a quarter century Price Waterhouse, where he served as an expense accomplice in the San Francisco and Oakland workplaces. He was already Managing Tax Partner of the Walnut Creek office of Price Waterhouse.
Wayne spends significant time in individual assessment getting ready for corporate officials and corporate duty anticipating firmly held organizations. He has huge involvement in investment opportunity arranging, exploration and trial credits and multi-state tax assessment. His industry experience incorporates the tax assessment of assembling, dispersion, development, high innovation, retail, benefit commercial enterprises, land organizations and endeavor reserves. Wayne is dynamic in expert associations and is a past administrator of the Taxation Committee of the California Society of Certified Public Accountants, East Bay Chapter. Wayne Lippman got a Bachelor of Arts degree in Economics from the University of California, Berkeley and a Master of Science degree in Taxation from Golden Gate University.
2. Welcome
Please ask questions or ask for
clarification as we go along.
I may defer some Q that require a
detailed answer to the end
2
3. 3
Things To Do Before Investing
Pay off credit card debt!
No investment pays as much as
credit card companies charge
Build an emergency fund
Consider your goals
Timeline
How soon will you need the $?
4. 4
Consider your Goals
Vehicle purchase/replacement
Down payment on a home
Child’s education
To build wealth
For retirement
What are your financial goals?
How much $ will you need?
5. 5
Determine your Risk Tolerance
How much risk can you stand?
If you have trouble sleeping at
night because you are worried
about your investments then pick
a more conservative mix
For experienced investors:
How did you react to 2008-2009
losses?
Risk tolerance scale-worksheet
6. Relationship Between Risk and Return
Risk HighLow
Expected
Return
High
Low
Cash
Equivalents
Bonds
Int’l Bonds
Real Estate
Stocks
Int’l Stocks
7. 7
Before you Invest
Is your budget balanced?
Do you save every month?
Do you pay credit cards in full
every month?
Do you carry adequate insurance
to protect against major
catastrophes?
8. Potential Risks
Being too conservative (Savings
accounts, CDs, etc.)
Keeps principal safe but…
Inflation reduces purchasing
power
Inflation averages about 3.1%
Risk not reaching your goal(s)
8
9. Risks
Being too aggressive (too much
in stocks)
Higher potential for growth but…
More market volatility
No guarantee or insurance
Potential to lose some or all of the
principal
9
10.
11. 11
Managing Risks
Consider your goal
Emergency fund- be conservative
Retirement- be more aggressive
Match your goals with your risk
tolerance
Can you handle the market
volatility?
12. 12
Managing the risks continued
Consider your time frame
Short Term – months to 3 years
Stick with safe savings options
Mid Term – 3 to 10 years
Take some risk to grow your $ &
beat inflation
Long Term – 10 or more years
Take more risk to grow your $ &
beat inflation
13. 13
Saving Terminology
Cash Equivalents
Usually low risk
Savings, CDs, cash on hand
Also called liquid assets
Use for short term goals or if you
have you have low risk tolerance
14. 14
Investing Terminology
Stock – ownership in a company
Bond – loan money to issuer
Mutual fund – A diversified
portfolio of stocks and/or bonds
Opposite of putting all your eggs
in one basket
16. 16
Retirement Funds
401(k) retirement plan offered by
employer
$ grows tax deferred
Some employers will match (~3%)
Need to invest > just the match
IRA: individual retirement account
Invest on your own
$ grows tax deferred
17. Retirement Funds
Roth IRA
Pay taxes now
No taxes when you withdraw
= no taxes on the growth!
Traditional IRA
Upfront tax deduction
Pay taxes at withdrawal
17
18. Retirement Funds
Retirement accounts are NOT
an investment
How the government treats that
money for tax purposes
Where you put that money is up to
you
18
19. IRA Criteria
Must have an earned income
If married, non-earning spouse
can use a spousal IRA
$5,500 annual limit
You can contribute less
Age 50+: $6,500
19
20. 401(k), Roth, or traditional IRA?
Invest in 401(k) up to full match
Instant 100% rate of return!!
Possible downsides
employer picks the funds
May charge heavy fees
If no employer match, consider
an IRA
20
21. 401(k), Roth, or traditional IRA?
Use a traditional IRA if
Your employer doesn’t match
or you’ve already invested up
to the match
You expect to be in a lower
tax bracket at retirement
Take the tax break now
21
22. 401k, Roth, or traditional IRA?
Use a Roth IRA if
You expect taxes to rise
You expect to be in a higher
tax bracket at retirement
Offers tax diversification
If most of your retirement
income will be taxable… invest
in a Roth
22
23. Establish Your Long-Term
Investment Strategy
Strategy 1: Buy and hold
anticipates long-term economic
growth.
Stock market has offered a
positive return over every 15 year
period
Past returns no guarantee, but long-
term buying and holding is a great
strategy
23
24. Long-Term Investment
Strategy 2
• Dollar-cost averaging buys at
“below-average” costs
– Invest same amount every month
–Avoid following the crowd
– Jumping in when the market is high
– Pulling out when it drops
– Set up automatic deposit
24
25. Long-Term Investment
Strategy 3 & 4
• Portfolio diversification
reduces volatility
• Money is like manure. Left in
a pile, it stinks. If you spread
it around, it'll grow some stuff.
– Dave Ramsey
• Asset allocation keeps you in
the right investment categories
at the right time
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26. Determinants of Portfolio Performance
Asset
Allocation
91.5%
Other
2.1%
Market
Timing
1.8%
Security
Selection
4.6%
Source: “Determinants of Portfolio Performance II, An Update” by Gary Brinston, Brian D. Singer and Gilbert L. Beebower,
Financial Analysts Journal May-June 1991.
27. 27
Investing Made Easy
Set up Automatic Investing
Payroll deduction or
Automatic transfer from checking
to:
Individual Retirement Account
Mutual fund
Other investment
28. Mutual Funds
Advantages
Professional management
Reduce risk through diversification
Own small part of lots of different investments
Monitoring investments is easy
Disadvantages
Funds charge fees
Be aware
follow market performance (down & up)
No guaranteed rate of return 28
29. Successful Investing
Educate yourself
Determine your risk tolerance
Decide on asset allocation
Stick to your plan
Monitor investment performance
If you need help, consult a
professional advisor
(N.B. most are salespeople)
Avoid fraud!
29
30. More Successful Strategies
Ask questions about…
Expenses
Historical performance: 3, 5, 10 yrs.
Investment goal (e.g., capital
appreciation)
“Rule of Three” comparison
Compare at least 3 investments
“Core and Explore” approach
For more adventurous
30
31. Low-Maintenance Strategies
Target maturity date mutual
funds for retirement
Index funds
Automatic deposits
Annual financial check-up
31
32. Ideas on where to invest
Fidelity (800) 343-3548
Vanguard (877) 662-7447
T. Rowe Price (855) 389-9464
Charles Schwab (866) 855-9102
Russell (800) 426-7969
*This is not a comprehensive list
or an endorsement
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36. Where to Find FPW
http://usu.edu/fpw/
http://fpwusu.blogspot.com/
https://www.facebook.com/Finan
cialPlanningforWomen
Second Wednesday of the
month TSC room 336 11:30-
12:30
Family Life Center 493 North
700 East. 7:00 to 8:30 36
37. 37
Financial Planning for Women
www.usu.edu/fpw
April 10th: Social Security with
SSA expert Mickie Douglas
11:30 only; no evening program
May 8th: Great Mutual Funds for
your IRA
June 12th: Get your house in order
before you buy
July 10th: Investing for College