How to Get Started with Investing

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How to Get Started with Investing

• Steve Skrocki, Business Manager
• February 20, 2001

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Agenda
The opinions and recommendations expressed by the
presenter do not necessarily represent the views
of the Penn Manor School District administration
or board of directors. This presentation provides
an overview of basic investing.

• Overview
• Needs and Goals
• Asset Allocation
• Retirement and College Planning
• Information Resources
• Discussion

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Determining Your Financial Needs and Goals

• Deciding whether to pay outstanding debts or
  invest your
• Debt reverse investing
• Not all debt bad (tax deductions)
• Pay off credit card balances
• Margin (borrowing money from broker) is dangerous

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Determining Your Financial Needs and Goals

• Setting Goals and Developing a Plan
• Make goals specific
• Retire a millionaire
• College
• Buy a car
• Develop plan to meet goals
• Work backward to determine how much you need to
  invest
• Pay yourself first
• Be patient
• Start NOW!!!!!!!

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Determining Your Financial Needs and Goals

• Tips for Saving Money
• Set up separate account (dont mix)
• Spend less.its not what you make, its what you
  spend!
• Use automatic deductions for savings
• Avoid financing with credit cards

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Determining Your Financial Needs and Goals

• Ten Tips for Saving Money
• Save all found money
• After you pay a debt, save the same amount
• Do your research
• Use a piggy bank
• Set up a money-saver buddy system
• Investment club
• Discussion group

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Saving vs. Investing

• Saving
• Short term needs
• Safety
• Low returns
• Investing
• Long-term capital growth
• Risk
• Returns superior to savings accounts

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Determining Your Financial Needs and Goals

• The Power of Compounding
• Rule of 72
• Invest from age 21-66 (45 years)
• 2,000/year, 90,000 total
• 8 10 12
• 834,000 1,581,000 3,042,000

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Common Investment Options

• Risk
• Stocks (13)
• Corporate Bonds (8)
• Treasury Securities (6)
• Municipal Bonds (5)
• CDs (5)
• Money Market Funds (5)
• Savings Accounts (2)
• Safety

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Asset AllocationAggressive Portfolio

• Instructions
• This is an embedded graph.
• To edit this graph simply double-click anywhere
  on the graph.
• When youre done editing the graph, click outside
  of the graph to return to PowerPoint.

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Asset AllocationConservative Portfolio

• Instructions
• This is an embedded graph.
• To edit this graph simply double-click anywhere
  on the graph.
• When youre done editing the graph, click outside
  of the graph to return to PowerPoint.

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Investing in Equities

• Indirect Ownership
• Retirement Funds
• Insurance Companies
• Direct Ownership
• Traditional Broker
• Discount Broker
• Mutual Funds
• DRIPs

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Mutual Funds

• Research done for you
• Inherent fees
• Match your investment philosophy
• Equity funds not all stocks
• Excellent vehicle for beginners
• Index funds
• Vanguard, Fidelity, Janus

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DRIPs

• Low initial cost
• Direct stock purchase
• Dollar cost average
• Fees could be issue
• Individual does own research
• Pay yourself first philosophy
• Reinvest dividends (taxable)

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Retirement

• Employer sponsored plans
• Traditional IRAs
• Roth IRAs
• 403 b plans

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Roth IRAs

• Deductions taxable
• 2,000 per year
• Capital gains not taxable
• Withdrawals penalty-free if taken for higher
  education expenses
• Withdrawal penalty-free if held 5 years and for
  1st-time home
• April 15 deadline for prior year contributions

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403 (b) Plans

• Contributions pre-tax on federal income tax basis
• Maximum of 10,500 generally
• Rules for withdrawal
• Taxable upon withdrawal

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Investing for College

• Costs
• Education IRAs
• Tuition Account Program
• UGMAs

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Investing for College

• Starting Public Private Fancy
• Year School School School
• 2000 41,300 105,000 148,000
• 2004 52,000 132,000 187,000
• 2008 66,000 167,000 236,000
• 2012 83,000 211,000 298,000

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Education IRAs

• 500 year per child maximum
• Qualified higher education expenses
• Can be used for second child
• Child under 18 is named beneficiary
• Tax-free growth
• Contributions not tax deductible
• Adult control until age 30
• Relatives can contribute

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Tuition Account Program

• Pre-pay college tuition at todays rates
• Growth deferred on federal level
• www.patap.org

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UGMAs

• Uniform Gift to Minors Accounts
• Invest in childs name with adult as custodian
  until age 18
• Tax advantages
• Financial aid disadvantages
• No limit to investment type or amount
• What happens at 18?

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Publications

• Individual Investor
• Money
• Smart Money
• Barrons
• Investors Business Daily
• Business Week
• Wall Street Journal
• Value Line

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Web Research

• www.dripcentral.com
• www.netstockdirect.com
• www.sharebuilder.com
• DRIP and direct stock purchases
• www.yahoo.com
• General financial research

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Web Research

• www.fidelity.com
• www.vanguard.com
• www.janus.com
• www.strongfunds.com
• Mutual fund sites with excellent general
  investing information

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Web Research

• http//www.kidsbank.com/calculators/index.html
• Financial Calculator
• http//www.salliemae.com/calculators/costs.html
• College Calculator
• http//www.agedwards.com/bma/index.shtml
• Stock-picking game

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Web Research

• http//www.sandbox.net/finalbell/pub-doc/home.html
  
• Stock market simulation
• http//www.smg2000.org/
• Stock market game
• http//www.salomonsmithbarney.com/yin/
• Setting investment goals

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Discussion

• Questions