Personal Finance

1. Personal Finance
By: Gerry O. Gatawa
Saint Louis University

2. Life Event Stages
• Age 21- 25
Life Stage: Building Career
Typical Activities and Spending:
Gimmicks
Personal effects spending
Post-graduate education
Start-up own/side business

3. Life Event Stages
• Age 26-35
Life Stage: Building Family
Typical Activities and Spending:
Marriage
Buy house/car
Child births
Primary/Elementary/ High School education
of children

4. Life Event Stages
• Age 36-60
Life Stage: Growing Family
Typical Activities and Spending:
Home improvement
HS/ College education of children
Major family vacation
Retirement planning

5. Life Event Stages
• Age 61+
Life Stage: Retirement Planning and Execution
Typical Activities and Spending:
Retirement planning
Collect pension
Travel
Philanthropy
Estate planning

6. Lessons from Successful Investors
• Warren Buffet
A Famous American investor know as “the Oracle of Omaha” for his market foresight and
oracular pronouncements on value investing. He is the Chairman of Berkshire Hathaway
(BRK.A) a holding company for a diverse set of businesses, which he developed from an
unprofitable textile manufacturing operation. His wealth fluctuates with the performance of
the market, but for the past decade he has been consistently ranked as one of the world’s
richest men.
Lessons from Warren Buffet:
 Reinvest your profits
 Be willing to be different
 Never suck your thumb—unnecessary sitting and thinking
 Spell out the deal before you start
 Watch small expenses
 Limit what you borrow
 Be persistent
 Know when to quit
 Assess the risk
 Know what success really means

7. Lessons from Successful Investors
• BOB FARRELL
Bob Farrell is a Wall Street veteran who draws on some 50 years of experience in crafting his investing
rules.
Lessons from Bob Farrell:
 Markets tend to return to the mean over time
 Excesses in one direction will lead to an opposite excess in the other direction
 There are no new eras—excesses are never permanent
 Exponentially rapidly rising or falling markets usually go further than you think, but they
do not correct by going sideways
 The public buys the most at the top and the least at the bottom
 Fear and greed are stronger than long-term resolve
 Markets are strongest when they are broad and weakest when they narrow to a handful of
blue chip names.
 Bear markets have three stages—sharp down, reflexive rebound, and a drawn out
fundamental downtrend
 When all the experts and forecasts agree—something else is going to happen
 Bull markets are more fun than bear markets

8. Lessons from Successful Investors
• PETER LYNCH
An accomplished Wall Street stock investor, is often said to be one of the best stock-pickers
in the world. At present, he is a research consultant at Fidelity Investments.
Lessons from Bob Farrell:
 Only buy what you understand
 Always do your homework
 Invest for the long run

9. The Intelligent Investor
Know the business
Know who runs the business
Invest for profit
Have confidence

10. List of Investment Rules
• To be consistently profitable
• To be disciplined
• To focus on opportunities
• To catch market breakouts and take all my signals
• To have control over my investments
• To have a high level of self-esteem when I trade
• To have more confidence in myself after taking a loss or experiencing a drawdown in my
account
• To have a better understanding of my emotions when I trade
• To develop an approach that I can trust and apply effortlessly
• To define my losses and not dwell on them
• To trade from the perspective that trading is a process and not merely a series of
independent trades
• To establish limited risk and limitless profit potential
• To become a better investor by constantly learning more about myself
• To operate completely in the here and now