Savings and investing

1. Savings and investing Personal Finance

2. Diversification • Spreading out the risk of a portfolio over many different types of investments • Mutual Funds • Collect small amounts money from many investors • Buy small amounts of equities from many sources • Money Market

3. Risk vs. Return • Balances like a teeter-totter • Depends on the goals of the saver • Time • Income • Expenses

4. Liquidity • Measures how available the money is for the saver • Period of time it takes for saver to get the money and spend it

5. Balancing risk/return and liquidity

6. Dollar-Cost Averaging • Directing regular, small amounts of money toward the stock market • 10 % gross income each paycheck • Buy low • Sell high

7. Buying Bonds • Loaning money with a promise to pay back with interest

8. Buying Stock • Minor ownership in the company • Common • Performance dividends; voting rights • Preferred • Fixed dividends; no voting rights • Convertible • Fixed dividend; voting rights • How to Read a Stock Table • Stock Market Game • Sign-up Form

9. Stock Exchanges • Markets for the sale of stock • NYSE – New York Stock Exchange • NASDAQ – National Association of Securities Dealers Automated Quotient • OTC – over the counter • NYME – New York Mercantile Exchange • CBT – Chicago Board of Trade

10. Stock Indices • Conglomerate averages • Measure the performance of the market • General overview • DJIA – Dow Jones Industrial Average • S&P – Standard and Poors • BNOX – Bloomberg Northeastern Ohio Index

11. Performance • Bull Market • Steady rise of the market • Bear Market • Steady decline of the market

12. PIT • Place where trades are transacted • Card Game • Objective to corner the market • Same number of commodities as players • Wild cards • Bull • Bear

13. IRA • Individual Retirement Arrangement • Usually tax deferred • May be matched by company • Roth is tax sheltered • 401(k) – IRS code for tax purposes • 403(b) – created for employees of non-profits

14. Compound interest • Interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan. • CONTRIBUTING $416/MONTH AT 8% ANNUALLY • Pay in 40 YEARS = $1,472,039.32 • Pay in 10 YEARS = $847,916.14 • WAIT 10 YEARS = $628,672.36

15. Baby Steps • Dave Ramsey • http://www.daveramsey.com • Small, smart steps will get you to security • A place where your money is working for you • Not you working for your money • Be Radical • In decision making, not spending • Be Intentional • “On paper, on purpose”

16. Steps • $1000 Emergency Fund • $0 of Personal Debt • 3-6 Months of Living Expenses • 10-15% in a Retirement Account • College Funding • For children • Scholarships • Work • 20/20* Down Payment/Life of the Loan (House) • 50/50* Living/Giving

17. Investment counseling activity • Work in groups to devise an investment strategy for 6 different households. • Each have unique circumstances • Each have $50,000 to use • You have 30 minutes • 5 minutes per scenario • Remember the Baby Steps • Consider the investment strategies we just learned • Liquidity, Diversification, Risk vs. Return