Investing for the 21st Century

BREAKAWAY FUNDING October 28, 2014 . Copyright © 2014 . All Rights Reserved
Zoe Sexton
Private Wealth Management, The Putney Group
Contact: zoe@putneyfinancial.com
(415) 460-1990 x210
Zoe Sexton
Private Wealth Management
The Putney Financial Group
1099 E Street
San Rafael, CA 94901
www.putneyfinancial.com

Investment Basics
A Guide to Your Investment Options

Presentation Expectations
• Understand basic categories and investment types
• Inflation - the silent killer
• The power of compounding - when to start investing
• Relationship between risk and reward
• The strategy of dollar cost averaging
• Asset allocation
• Diversification and managing risk
• The function of a financial advisor

Investment Fundamentals
What Is Investing?
Speculating?
Investing--A carefully planned and
prepared approach to managing and
accumulating money.
Saving?

Investment Fundamentals--
The Effect of Inflation
Purchasing Power of $200,000 at 3% Annual Inflation
$108,759
$59,142

The Effect of Compounding
Growth of Annual $5,000 Investments • $5,000 invested
annually at the end
of each year
• 6% annual growth
rate
• All earnings
reinvested
This is a hypothetical example
and is not intended to reflect
the actual performance of any
specific investment.
Investment fees and
expenses, and taxes are not
reflected. If they were, the
results would have been
lower.
$395,291

Sooner Is Better
 Don’t put off investing
 The sooner you start, the longer your investments have to grow
 Playing “catch-up” later can be difficult and expensive
$3,000 annual
investment at 6%
annual growth,
assuming
reinvestment of all
earnings and no tax
$679,500
This is a hypothetical example and is not intended to reflect the actual performance of any investment. Investment
fees and expenses, and taxes are not reflected. If they were, the results would have been lower.
$254,400
$120,000

Identifying Goals and Time Horizons
Type of goals:
 Retirement
 Education
 Special purchase
 Financial security
 Philanthropy
 Legacy
Short-term goals vs. long-term
goals affect your liquidity needs

Risk Tolerance
 Ability of investment
plan to absorb loss
 Personal tolerance for
risk
 Aggressive
 Moderate
 Conservative

Relationship Between Risk & Return
Risk
PotentialReturn
Options & futures
Corporate bonds
Government bonds
CDs
Treasury bills
Common stock
Preferred stock

Investment Options--Cash
 Low risk, short-term, relatively liquid
PotentialReturn
Cash alternatives
Risk
Disadvantages
 Relatively low returns
 Inflation risk
Advantages
 Predictable earnings
 Highly liquid
 Little risk to principal

Investment Options--Cash
Advantages
 Predictable earnings
 Highly liquid
 Little risk to principal
Disadvantages
 Relatively low returns
 Inflation risk

Investment Options--Bonds
PotentialReturn
Cash alternatives
Risk
Bonds
Types of bonds include:
 U.S. government securities
 Agency/GSE bonds
 Municipal bonds
 Corporate bonds

Investment Options--Bonds
Advantages
 Steady and predictable
stream of income
 Income typically higher
than cash alternatives
 Relatively lower-risk
(compared to options
such as stock)
 Low correlation to stock
market
Disadvantages
 Risk of default
 Value of bond will
fluctuate with interest
rates
 Lower risk means
lower potential returns
(than stock, for
example)

Investment Options--Stocks
PotentialReturn
Cash alternatives
Risk
Bonds
Stocks
 Common vs. preferred
 Categories:
 Small cap
 Midcap
 Large cap
 Micro cap
 Stock terminology:
 Growth stock
 Value stock
 Income stock
 Blue chip stock
 American Depositary
Receipts (ADRs)

Investment Options--Stocks
Advantages
 Historically, have
provided highest long-
term total returns
 Ownership rights
 Can provide income
through dividends as
well as capital
appreciation
 Easy to buy and sell
Disadvantages
 Poor company
performance affects
dividends / value of
shares
 Subject to market
volatility
 Greater risk to principal
 May not be appropriate
for short term

Investment Options--Mutual Funds
 Your money is pooled
with that of other
investors
 Fund invests dollars
according to stated
investment strategy
 You own a portion of the
securities held by the
fund (instant
diversification)

Investment Options - Mutual Funds
Bond funds
PotentialReturn
Money market funds
Risk
Stock funds
Balanced
funds
International funds

Investment Options—Mutual Funds
Advantages
 Diversification
 Professional
management
 Small investment
amounts
 Liquidity
Disadvantages
 Value of shares can
fluctuate daily
 Portion of fund dollars
may be tied up in cash
for liquidity needs
 Potential tax inefficiency
 Mutual fund fees and
expenses

Investment Options --
Exchange-Traded Funds (ETFs)
 Most ETFs are based
on an index
 Passive management
may lower fund costs
 Can be traded
throughout the day,
bought on margin, and
shorted, like stocks
 May provide tax
efficiencies

Other Investment Options
 Real estate
 Stock options
 Futures and
commodities
 Collectibles

Investment Methods--Dollar Cost Averaging
 Invest same dollar amount at
regular intervals over time
 You buy more shares when
price is low, fewer shares
when price is high
 Average cost of shares will
be lower than average
market price per share
during your investment time
period
This is a hypothetical example and does not reflect the performance of any specific investment.
Dollar cost averaging can’t guarantee you a profit or protect you against a loss if the market is declining.
Jan Feb Mar Apr May
$0
$10
$5
$20
$25
$35
$15
$30
10 shares
30 shares
15 shares
20 shares
12 shares
Five Hypothetical Investments
Average market price per share
($30 + $10 + $20 + $15 + $25) ÷ 5 = $20
Investor’s average cost per share
$1,500 invested ÷ 87 shares bought =
$17.24

Asset Allocation—Why?
Factors:
 Diversification
 Risk tolerance
 Time frames
 Personal financial
situation
 Liquidity needs

Asset Allocation --
Sample Allocation Model
These asset allocation suggestions should be used as a guide only and are not intended as financial advice. They should not be
relied upon. Past performance is not a guarantee of future results.
A conservative asset
allocation model will
tend to focus on
preserving principal
Stocks
25%
Bonds
50%
Cash
Alternatives
25%
Conservative

Asset Allocation --
A moderate asset
tend to balance
predictable income
with potential
growthStocks
50%
Bonds
40%
Cash
Alternatives
10%
Moderate

Asset Allocation --
An aggressive asset
tend to focus
primarily on
potential growth
Stocks
75%
Bonds
15%
Cash
Alternatives
10%
Aggressive

Questions to ask a Financial Professional
Are you a fiduciary?
How are you compensated?
What credentials/licenses do you have?
How much experience does your firm have?
How frequently will we communicate?
How many new clients do you take on each year?

Role of a Financial Professional
Determine your investment goals, timelines,
and risk tolerance
Evaluate markets and investments
Create an asset allocation model
Select specific investments
Manage, monitor, and modify your portfolio

Conclusion
I would welcome the opportunity to meet individually with each of
you to address any specific concerns or questions that you may
have.
Zoe Sexton
Putney Financial Group
1099 E Street
San Rafael, CA 94901
415-460-1990 Ext 210
zoe@putneyfinancial.com

Disclaimer
 IMPORTANT DISCLOSURES The information presented here is not specific to any
individual's personal circumstances. It has been designed for informational purposes
only and does not constitute an offer to sell or a solicitation of an offer to buy any
security that may be referenced. We cannot assure the accuracy or completeness of
these materials. The information in these materials may change at any time and
without notice.

Zoe Sexton - Questions

Investing for the 21st Century

Recommended

Recommended

More Related Content

What's hot

What's hot (19)

Viewers also liked

Viewers also liked (11)

Similar to Investing for the 21st Century

Similar to Investing for the 21st Century (20)

Recently uploaded

Recently uploaded (20)

Investing for the 21st Century