Focus

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Focus
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Planning For Your
Financial Future
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You Can Retire Rich !

• You will have 7,076,019
• Thanks to the extraordinary power of compounding
  interest

• If you invest
• 500.00 quarterly
• (166.66 a month)
• Thats just 2,000 per year
• For 35 years, in a Roth IRA
• Starting at age 25
• With a 20 return rate
• At only 60 years old
• with only a 70,000 investment

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You Can Become a MILLIONAIRE!
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Compounding Interest, How Does it Work?

• It is a simple concept that means the longer
  more you invest, the higher the potential rewards
  on your money
• Compounding is the process that allows interest
  to earn interest upon itself

• For example, if you made 30,000/yr
• Invested 20 of your income in a self-directed
  401k, over 35 yrs
• And your salary increased 4 per year
• You would have
• 26,331,958

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Thats Compounding Power!
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How to Become A Millionaireat Age 65
Starting Age
Annual Rate of Return
8 10 12
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Investing Money

• Investing money is putting money into some form
  of security such as
• Mutual funds
• Stocks
• Bonds

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Why Invest?

• You can invest
• for retirement
• for your childs education
• for a new home
• When you invest in a stock, bond, or mutual fund,
  you do so because you think its value will
  appreciate over time.

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We Will Discuss !

• Mutual funds
• the best vehicle for investing in
• Roth or traditional IRAs
• 401ks 403bs
• Annuities
• Regular investments

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What Is An InvestmentVehicle ?

• Today, we are going to focus on mutual funds
• For safety of returns

• An investment vehicle is simply one of many ways
  you can invest to fulfill your financial goals
• Roth IRAs
• 401ks
• Mutual funds
• IRAs
• Annuities
• These are all Investment Vehicles

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What are Mutual Funds?

• A mutual fund is a company through which
  investors, like you, pool their money together
  with a common, long-term goal
• These investments are used by a fund manager that
  buys stocks, bonds, and money market instruments
• You then own shares in the fund and share in its
  profits.

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Projected Safety of the Stock Market

• Average return 11.3 over the last 65 years
• Long time frame

1930 1937 1947 1957
1967 1977 1990 1995 2000
2001
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How Do Mutual Funds Make You Money?

• Mutual funds invest your money into stocks,
  bonds, other securities that earn dividends or
  interest, then they sell these investments at
  higher prices than originally paid.

• Capital gains any profit made from selling
  investments at an increased price.
• Dividend income the amount derived from the
  income earned on security holdings.
• These are paid out to you, or you can re-invest
  them to maximize your earnings.

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How Do You Know What to Pay Per Unit for a Fund?

• Net asset value (NAV)
• The NAV of a fund is the dollar value of one
  unit.
• It is calculated by dividing the current market
  value of the fund, by the number of units already
  sold.
• The NAV will change due to the rise or fall of
  the market value of the funds assets.
• Most funds report their NAV daily.
• This figure is quoted the next day in the
  business section of the newspaper.
• Look under mutual funds, column heading , NAV
  per share.

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Advantages of Mutual Fund Investing

• Professional management
• Diversification
• Convenience
• Record keeping
• Automatic investment plans
• Liquidity
• Meaning that investors can get their money out at
  any time.

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How to ave Daily to Invest Quarterly
How to ave Daily to Invest Quarterly

• Your car
• Forego un-needed insurance
• Fuel efficiency
• Your Home
• Energy costs
• General costs

• Your Spending
• Entertainment
• Household items
• More saving ideas
• Your Finances
• Your Utilities
• Your Travels

• Your Car
• Forego un-needed insurance
• Fuel efficiency
• Your Home
• Energy costs
• General costs

• Your Spending
• Entertainment
• Household items
• More saving ideas
• Your Finances
• Your Utilities
• Your Travels

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How to Choose Mutual Funds

• Define your financial goals
• What are your goals?
• When do you need the money?
• Understand your tolerance for risk
• Market risk Interest risk
• Financial risk Liquidity risk
• Business risk Event risk
• Inflation risk International risk
• Find funds to match your goals
• Growth
• Income
• Safety

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Load and No-load Funds

• Load funds
• Mutual funds that charge a sales commission
  either at the time of the purchase or when you
  sell the units back.
• No-load mutual funds
• funds that charge no sales commission
• they are generally offered by banks and
  individual mutual fund companies
• Remember saying no to load funds and yes to
  no-load funds saves you money.

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Types of Mutual Funds

• Growth funds
• Aggressive growth funds
• Global funds
• Asset allocation funds
• Growth-and-income funds
• International funds

• Money market funds
• Index funds
• Sector funds
• Socially responsible funds
• International funds
• Balanced funds

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A Closer Look at a Few Types of Mutual Funds

• Aggressive growth funds- invest in companies
  whose earnings are growing at least 30 each
  year.
• Growth funds- invest in companies whose earnings
  are growing at least 15 each year.
• Growth-and-income funds- seek growth and income
  through stocks that pay dividends.
• Balanced funds- invest in both stocks and bonds.
• Global funds- invest in domestic and foreign
  stocks.
• International funds- invest in foreign stocks only

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Setting up a Mutual Fund Account

• Fill out an application with a broker or
  financial advisor
• Fund companies
• Contact them directly
• Contact them online
• Fund supermarket
• Schwab
• Fidelity

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How Do You Invest?

• The simplest way is by Dollar-cost averaging.
• A long-term approach, ideally suited to
  individuals with a steady income who are able to
  invest a fixed amount regularly over a period of
  time.
• This is what the 401k and 403b plans are based
  on.
• Dollar-cost averaging- involves investing equal
  dollar amounts into your IRA, 401k,or mutual
  fund.
• This can be done
• annually
• semi-annually
• quarterly
• monthly
• Remember time is on your side.

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What If I Want To Invest In My Own Fund?

• Base your investments on well managed funds that
  have 10 years annualized average compounding of
  at least 20.
• We have included a handout that shows a list of
  such funds.
• It also includes additional information on were
  to go to find out more on investing to achieve
  financial independence.

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Evaluating Your Mutual Fund

• Review performance of your fund
• 1 year, 3 year, 5 year vs Standards (SP 500)
• Objective of the fund has not changed
• Fund manager does not change

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Too Many Choices!

• Lets make it simple.
• Just as a mutual fund is an investment vehicle
  there are other investment vehicles that use
  mutual funds.

• They are
• IRAs--individual retirement account
• Roth IRAs-- individual retirement account, that
  produces tax- free income
• 401k 403b--personal pension plans offered by
  your employer. They take pre-taxed money out of
  your pay check, most companies even match a
  portion of your investment--essentially giving
  you free money.
• Annuities-- investment product that provides a
  series of life time payments
• All of these investment vehicles offer some form
  of tax break.

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Roth IRAs

• You can contribute up to 3,000 per year
• Joint-filers may each contribute 3,000 per year
• Contributions grow tax-free
• Contributions to a Roth IRA are not tax
  deductible
• At age 59 ½ all withdrawals are tax-free

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Comparison of Traditional and Roth IRAs
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IRA Annual Contributions
YEAR LIMIT
Individuals over age 50 may contribute an extra
500 for year 2002 2007 and 1,000 for year 2008
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Moving Your IRA

• Direct Transfer
• From the old custodian to the new custodian
• Rollover
• Current custodian closes your account and sends
  you the money
• You have 60 days to deposit the money in a new
  IRA account

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401ks

• How Does a 401k Plan Work?
• Employees may elect to have a percentage of
  their salary withheld and allocated to their
  retirement savings.This money is then invested as
  the employee directs.
• Employee contributions are limited to 11,000
  for 2002.
• Both employee and employer contributions are
  limited to 40,000.

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Benefits of a 401k Plan

• Reduced income taxes
• Company matched provisions
• Instant savings
• Tax-deferred contributions and earnings

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• When it comes to saving and investing for your
  financial independence, the worse thing you can
  do is nothing at all. Remember, time is on your
  side so start investing now!