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invest in yourself

invest in yourself. A WOMEN’S WEALTH WORKSHOP. WI-FI NETWORK: FUTUREADVISOR GUEST PASSWORD:. WELCOME AND AGENDA. Welcome Women & Investing by Megan Graf Presentation: 60 Minutes to Change your Future by Robert Shaye Q & A Break-out Sessions with the FutureAdvisor Team.

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invest in yourself

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  1. invest in yourself A WOMEN’S WEALTH WORKSHOP WI-FI NETWORK: FUTUREADVISOR GUEST PASSWORD:

  2. WELCOME AND AGENDA • Welcome • Women & Investing by Megan Graf • Presentation: 60 Minutes to Change your Future • by Robert Shaye • Q & A • Break-out Sessions with the FutureAdvisor Team

  3. WOMEN IN THE MEDIA http://www.investmentnews.com/article/20140623/BLOG05/140629978 http://www.thinkadvisor.com/2014/07/28/women-money-and-the-confidence-gap

  4. WOMEN AS INVESTORS Men trade 45 percent more than women, and trading reduces men’s net returns by 2.65 percentage points a year as opposed to 1.72 percentage points for women. Women trade less frequently and hold less volatile portfolios. Thus, women beat men by an average of about one percentage point annually on a risk-adjusted basis. http://gsm.ucdavis.edu/blog-feature/gender-differences-investing A study published this month, for example, claims that hedge funds run by women returned 9.8% in 2013 (to the end of November), versus a paltry 6.13% for the HFRX, which tracks hedge funds generally. “Do men doubt themselves sometimes? Of course. But they don’t let their doubts stop them as often as women do.” The Confidence Gap, The Atlantic

  5. THE VISION – INVEST IN YOURSELF RE-DEFINE PERCEPTIONS • Clarify what makes a good investor “THE MOST POWERFUL WOMAN ON WALL STREET” EDUCATE • “We see that women, who were taught about investing by someone, tend to be more confident in investing. Financial literacy makes a huge difference and has positive rippling effects for future generations.” • https://www.wellsfargo.com/press/2013/20130919_womenachieveaffluence • Simplify jargon and complex topics • Answer questions PROVIDE ACTIONABLE NEXT STEPS • Outline options and resources

  6. invest in yourself 60 MINUTES TO CHANGE YOUR FUTURE BY ROBERT SHAYE

  7. WOULD YOU RATHER…. Start with a penny and have your balance double every day for one month? Have 3.5 million dollars up front? or The value of the balance doubling after 30 days is: $5,368,709!

  8. HOUSEKEEPING Who I am Where my approach/advice comes from Although I have a passion for these topics, the views expressed are not intended to serve as a forecast, a guarantee of future results, investment recommendations or an offer to buy or sell securities. This should not be interpreted as tax advice and please consult your personal tax advisors if you have any questions. Who I’m not (Disclaimer) Housekeeping @FutureAdvisor #InvestInYourself

  9. TOPICS • Behavioral Finance • Understanding your current situation • Credit Scores • Retirement, the time value of money, & 401k / 403b • Investing 101 • Savings accounts & fees • Love & Money • Home ownership, mortgages, refinancing, & renting • Tax strategy • Life insurance / Health Insurance • Tactical next steps

  10. IF NOTHING ELSE, REMEMBER THIS! • Save 20% of your salary • Pay Yourself First! • Live below your means • Invest in low-cost index funds • “Be Average” – it’s a good thing • Don’t react emotionally • Stay with your strategy for the long haul - “Don’t Dance”

  11. HAPPINESS & WEALTH Happiness Wealth

  12. WHY WE NEED AN AUTOMATIC PLAN • People are not rational with financial decisions (susceptible to framing, prospect theory, anchoring, choice architecture, & the default option) • Study: the more often you check your portfolio the worse you do • We don’t like losing! (Prospect Theory) (DMR) • Commitment devices! • Google’s anchoring experiment (3% increase)

  13. WHY WE NEED AN AUTOMATIC PLAN (CONTINUED) • “Save More Tomorrow” (12% vs 4%) • Allocation Decisions & 1/n: Scenario 1: Fund A: Stocks Fund B: Bonds 54% allocation to stocks Scenario 2: Fund A: Stocks Fund B: ½ Bonds ½ Stocks 73% allocation to stocks Scenario 3: Fund A: ½ Bonds ½ Stocks Fund B: Bonds 35% allocation to stocks

  14. PRIOR TO THE WORKSHOP • 20 mins - capture your “Net Worth” (all assets & debts) • Use Mint.com; connect banking & investment accounts, student/car loans • Include property (homes & cars) • Homes: zillow.com • Cars: edmunds.com • 10 mins - understand your credit score • Signup for CreditKarma • Pull a free credit report from annualcreditreport.com; Experian in Jan, TransUnion in Apr, Equifax in Aug • 15 mins – analyze your current investments and get free advice: www.FutureAdvisor.com • (optional) 30 mins - create a spending plan (aka budget) • Can be in Mintor even Excel • Savings must be a part of your plan

  15. UNDERSTANDING YOUR CURRENT SITUATION • Check Mint often • Spend < make • Save xx% of your income • “Pay yourself first” – schedule savings • Debts • Credit Cards & student loans • BT offers • Understand your current allocation & fees

  16. “I’LL WORRY ABOUT RETIREMENT LATER…” • Time Value of Money is HUGE • The “Rule of 72” • $$ saved from 25-35 > $$ saved 35 on • Everyone should have a (ROTH) IRA & 401k! • Are you on-track? • ~75% of ending salary per year • 1x by 35, 3x by 45, 5x by 55 See handout 

  17. RETIREMENT ACCOUNTS • IRA • 2014 Limit: $5,500 • No matching • Hold at any institution • Thousands of investment options • Only contribute cash • Income limits • Different for Roth vsTrad • Jan 1 – Apr 15 (of following year) open period • 401(k) / 403(b) • 2014 Limit: $17,500 • May get matching • Hold at company’s chosen firm • Limited choices • Only contribute from payroll • No income limits • May get a Roth option • Jan 1 – Dec 31 open period

  18. UNCLE SAM WILL ALWAYS GET PAID • Roth • After-tax contributions (pay tax now) • Earnings grow tax-free • Roth IRA’s have no RMD’s • Roth IRA income limit: < $114k • “Backdoor Roth” option • Traditional • Pre-tax contributions (get a tax break now) • $120k salary, contribute max amount of $17,500 • Taxable income now $102,500 • 28% x $17,500 = $4,900 • Taxed on the way out • Traditional IRA’s have RMD’s • Really depends on tax bracket now vs. retirement • Beliefs on long-term tax brackets / code / law • Solution: have some in each

  19. INVESTMENT TYPES • Cash • Bonds • Debt instrument • Corporate, government, municipal • Value fluctuates based on demand and interest rates • Stocks • Underlying ownership in a publicly-traded company • Value fluctuates based on demand in the marketplace • All research shows stock picking does not work! • Mutual Funds • A pooled basket of cash, bonds, and/or stock • Can be actively managed or track an index (called index funds) • Exchange-Traded Funds (ETFs) • Also a pooled basket of cash, bonds, and/or stock • More tax-efficient than mutual funds • Typically cheaper • Trade & settle quicker than mutual funds Mutual Fund Cash Stock Bond Exchange Traded Fund (ETF)

  20. INVESTING 101 Mutual Fund Cash Stock Bond Investment Types Exchange Traded Fund (ETF) Account Types 401(k) (Can be Roth or Traditional) Roth IRA Taxable Account (Individual, Joint, Trusts) Traditional IRA Checking Goals Expenses and Emergency Savings Expenses prior to retirement: house, college, wedding Expenses in retirement

  21. INVESTING 101 Mutual Fund Cash Stock Bond Investment Types Exchange Traded Fund (ETF) Account Types Roth IRA 401(k) Taxable Account Checking Traditional IRA Goals Expenses and Emergency Savings Expenses prior to retirement: house, college, wedding Expenses in retirement

  22. INVESTING 101 Mutual Fund Cash Stock Bond Investment Types Exchange Traded Fund (ETF) Account Types Roth IRA 401(k) Taxable Account Checking Traditional IRA Goals Expenses and Emergency Savings Expenses prior to retirement: house, college, wedding Expenses in retirement

  23. INVESTING 101 & ACTIVE VS. PASSIVE • Write down your financial principles / guidelines • 20-25% for “fun” if you must • Active vs. Passive Investing: research shows ~80-90% of active funds underperform their benchmark • 8,000  2,000  500  125 • 20% most actively traded accounts performed much worse -men worse than women • Past fund performance has very little predictive power to future performance! • In fact, expense ratios are the best predictor

  24. EXPENSE RATIOS (THE ENEMY) • Industry average (0.80%  2.50%) • Low cost options (0.06%  0.50%) • Get angry…it’s your money! • Use the calculator • Who wins the prize? • Why rollover an old 401k “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” –Upton Sinclair

  25. ASSET ALLOCATION AND REBALANCING • Rebalancing: meeting long-term policy target weights • Use it as a disciplined way of buying low and selling high • “..shunning the loved & embracing the unloved. Most people do the opposite.” (Swensen) • Example: 1990-2012 portfolio: +0.5% difference in return, -2% difference in volatility • With proper allocation, you should reduce risk (volatility) and outperform the S&P 500 MY TARGET ALLOCATION

  26. PRECEDENCE OF SAVING Invest In Yourself Too! What about alternatives?

  27. Home ownership & mortgages • Up to a $300/month because of credit score • Real estate is a key component • Consider NOT holding your mortgage with the same bank as your investments • Typically 20% down, qualify for a home 3x your annual gross income • Closing costs, points • Refinancing • Being a landlord can be tough!

  28. RENT • Rent : Income < 30% (rule of 36) • Impact in high-rent markets (SF / NYC) • Have rental package ready • Credit pull • Ask for a copy of credit report • Security deposit & interest • 0.3% currently in SF • Zillow’s “zestimate”

  29. REDUCE YOUR TAXES • Look for ways to reduce your taxes • Traditional 401k / IRA • Mortgage interest (& property management fees) • Education expenses • Consider capital gains (realize gains if you ever find yourself in the 10 or 15% tax bracket. 0% long term gains) • IRA conversions • Donate to charity with appreciated stock • Hire a professional – taxes are “grey” – ask questions!

  30. STUDENT LOANS VS. SAVING Paying down student loans vs. saving for retirement • Max matching contributions • Consider interest rates: • Loan rate: • <2%  Invest • 2% - 10%  Calculate • >10%  Pay Down • Both are urgent! • Save some to build the habit • Consider tax deduction • Windows are closed for good! • Grandma’s inheritance

  31. OTHER RANDOM ADVICE • Never go without health insurance! • “Exotic” or “alternative” asset classes • Careful with your contracts • Always look for discounts • Cell phone bills (15%-20%) • AAA, movies, restaurants, museums, parks • Driving habits • Avoid buying a new car • Remember: smart investingis not very exciting, but it isvery rewarding! (Be average!) • Fatwallet Cash Back • Company stock plans

  32. TACTICAL NEXT STEPS • Automate your savings (pay yourself first)“Hack human biases” • Open a (ROTH) IRA • Enroll in your company’s 401k • Stick to low-cost index funds • Help a friend (ER) or 19 yrold cousin • Don’t let inaction win!

  33. YOUR TURN! A chance to apply what you just learned: Meet Hannah: Hannah is 28 years old and lives in San Francisco. Hannah makes $85k / year and is anticipating a $5k raise in Jan 2015. She is engaged and is getting married in 10 months, and hopes to have kids in the next 2-3 years. She has $45k in student loan debt at 6% and $4k in credit card debt at 14%. She is currently contributing to her Roth IRA but it is sitting in cash and she doesn’t know how to invest it. She thinks her company may offer matching 401k contributions but she isn’t quite sure how to set up contributions. What advice could you give Hannah? How should she proceed?

  34. MY PERSONAL FAVORITE FINANCE RESOURCES ONLINE • Fatwallet Finance Forums • Bogleheads • Blogs: Mr. Money Mustache, Oblivious Investor, CoffeeHouse Investor READINGS/BOOKS • Planet Money - NPR • http://www.forbes.com/sites/quora/2013/05/01/personal-finance-for-young-professionals/ • http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Amount-of-Roth-IRA-Contributions-That-You-Can-Make-for-2014 • The Missing Link – Personal Financial Management (geared towards college students and young adults) • Random Walk Down Wall Street

  35. QUESTIONS? • Save 20% of your salary • Pay Yourself First! • Live below your means • Invest in low-cost index funds • “Be Average” – it’s a good thing • Don’t react emotionally • Stay with your strategy for the long haul - “Don’t Dance” • From Registration • Does it matter whether I invest with Charles Schwab, Vanguard, etc.? • How to invest wisely. Ok to invest in pre-IPO or post-IPO stocks? • Are bonds worth investing in these days? • Most 401k funds have fees associated with it, which eat into your investment. What is a good way to avoid this or be mindful of this?

  36. WORKSHOP • Investment Strategies + Recapping the Basics • Bo Lu – Co-Founder and CEO • Sean – Client Services Specialist • Patrick – Financial Advisor • Credit Scores +Precedence of Saving • Robert – Head of Customer Education • Brian – Director of Activation • Product Demo + Service • Ephrat – Director of Algorithms • Jeannie – Operations Analyst • Megan – Enrollment Lead • General Q&A • Lisa – Software Engineer • Will – Financial Advisor • Mitch – Financial Advisor

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