Before You Invest

1. Before You Invest Joan Koonce, Ph.D., AFCSM Associate Professor and Extension Financial Management Specialist

2. Money Mistakes Quiz • Take the Investment Quiz. • You will be given money based on the number of items you get correct. • Take the Investment Quiz. • You will be given money • based on the number of • items you get correct.

3. Question • Are you disappointed in the amount of money you were given for your correct responses? • Why or why not?

4. Investment Philosophy EVERY PENNY COUNTS!!

5. The Magic of the Compounding Penny • If you saved .01 per day for 30 years, you will have $690.33 @ 10% and $1,068.18 @ 12%. • Your total investment will be $109.50 over 30 years (.30-.31 per month and $3.65 per year). • If you saved .12 per day for 30 years, you will have $8,283.98 @ 10% and $12, 818.20 @ 12%. • Your total investment will be $1,314 over 30 years ($3.60-$3.72 per month and $43.80 per year).

6. The Magic of the Compounding Penny • If you save one penny and double the amount each day for 15 days, you will have $164.00. • There was your first penny!

7. Saving or Investing? • What does it all mean? • Are they different?

8. Saving or Investing • Savings • Set money aside so that it isn’t spent • Used for short-term goals • Highly liquid • Relatively safe • Lower earnings potential • No sales charges and low or no fees

9. Saving or Investing • Investing • Used for long-term goals • Highly illiquid • Less safety • Greater earnings potential • Sales charges and fees

10. Being Prepared • Lack of preparation leads to: • Frustration. • Frustration leads to: • Inability to save consistently. • Having to sell investments to cover routine expenses.

11. Before You Begin Your Investment Program • To get more from your investment dollars, follow these steps. • Set financial goals • Manage cash flow • Examine current financial situation • Prepare for emergencies • Eliminate debt • Manage risks • Buy adequate insurance • Learn the lingo

12. Set Financial Goals • What do you want to achieve? • How much will it cost? • How long will it take?

13. Manage Cash Flow • Cash flow management deals with how you spend and save the money that you earn now and in the future. • Managing cash flow requires you to examine your: • Past. • Present. • Future.

14. Examine Current Financial Situation • Why is it important to examine your financial situation? • Involves an examination of your: • Assets. • Liabilities. • Net worth.

15. Prepare for Emergencies • Money set aside in a fairly liquid account • Should be a category in your spending plan • Emergency fund shouldconsist of 3 to 6 monthsof expenses • Example: A person with expenses of $3,000 per month will need: • $9,000-$18,000

16. Manage Risks • Protect assets against risk • Risk management strategies • Avoid risk • Retain or accept risk • Reduce risk or control loss • Transfer or share risk

17. Eliminate Debt • May not be realistic to eliminate all debt • Eliminate credit card and/or other high interest debt • Debt elimination as a savings goal

18. Buy Adequate Insurance • Insure the risk of large financial losses. • Without adequate insurance, you will have to: • Use credit. • Deplete your emergencysavings. • Liquidate your assets.

19. Learn the Lingo • Compounding • Diversification • Dollar-cost averaging • Leverage • Yield or rate of return • Investment income and capital gains • Risk tolerance and risk capacity • Time horizon • Risk/return tradeoff

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