Get Money Budgeting, Saving,

1
Get MoneyBudgeting, Saving, Investing
2
RWORLD Get money

• Presented by
• Ty Johnson

3
Your Odds of Making It
Activity Person A Person B Person C
Invest X
Budget Save X X
Consume X X X
3 TWO 1
4
Budget to Save Save to Invest

• Housing 35 - Mortgage or rent, taxes, repairs,
  improvements, insurance, and utilities
• Transportation 20 - Monthly payments, gas, oil,
  repairs, insurance, parking public
  transportation
• Debt Budget 15 - Credit cards, personal loans,
  student loans other debt payments
• All other expenses 20 - Food, insurance,
  prescriptions, doctor dentist bills, clothing
  personal
• Investments Savings Budget 10 - Stocks, bonds,
  cash reserves, art, etc.

5
What is Investing?

• Investing is the proactive use of your money to
  make more money or, to say it another way, it is
  your money working for you. Investing is
  different from saving.
• Saving is a passive activity, even though it uses
  the same principle of compounding. Saving is more
  focused on safety of principal (the amount you
  start out with) and less concerned with return.

6
Why Invest Now?

• Know money before you get it
• Learn how companies economy work
• Head start gives big returns!

7
Head Start Gives Big Returns!
Assumes 1000 per year 8.5 return
8
What is the 'Rule of 72'?

• The 'Rule of 72' is a simplified way to determine
  how long an investment will take to double, given
  a fixed annual rate of interest. By dividing 72
  by the annual rate of return, investors can get a
  rough estimate of how many years it will take for
  the initial investment to duplicate itself. For
  example, the rule of 72 states that 1 invested
  at 10 would take 7.2 years ((72/10) 7.2) to
  turn into 2. In reality, a 10 investment will
  take 7.3 years to double ((1.107.3 2).When
  dealing with low rates of return, the Rule of 72
  is fairly accurate. This chart compares the
  numbers given by the rule of 72 and the actual
  number of years it takes an investment to double.
  

9
Rule of 72
Rate of Return Rule of 72 Actual of Years Difference () of Years
2 36.0 35 1.0
3 24.0 23.45 0.6
5 14.4 14.21 0.2
7 10.3 10.24 0.0
9 8.0 8.04 0.0
12 6.0 6.12 0.1
25 2.9 3.11 0.2
50 1.4 1.71 0.3
72 1.0 1.28 0.3
100 0.7 1 0.3
10
Investing Process

• Stock search method (entire market or industry)
• Narrowing 10,000 to 5 stocks
• Individual stock analysis
• Stock Selection Guide
• Additional research
• Value Line, Standard Poor's
• Annual Report (or 10K)
• Presentation, discussion and vote

11
Market Economic Cycle
Stage Full Recession Early Recovery Full Recovery Early Recession
Consumer Expectation Reviving Rising Declining Failingly Sharply
Industrial Production Bottom Out Rising Flat Falling
Interest Rates Falling Bottom Out Rising Rapidly Peaking
Yield Curve Normal Normal (Steep) Flattening Out Flat/ Inverted
12
My Portfolio
13
Asset Allocation

• Asset allocation the foundation of your
  portfolioThe foundation of the pyramid is asset
  allocation. Your asset allocation determines the
  broad risk level of your portfolio, which should
  match your risk profile.
• In general, by simply subtracting your age from
  100 we get how much stock you should own.
• Example Tasha is married with one child at age
  20, she could 100 - age 20 80 Stock model
  of Moderately Aggressive Allocation.
• Or to include spouse and per child add 2 to her
  age 100 - 24 (age 20 spouse 2 child 2
  24) 76 Stock with increase to other
  accounts.

14
Portfolio Selection

Conservative Moderately conservative Moderate Moderately aggressive Aggressive
Stocks 20 40 60 80 95
Large-cap 15 25 35 45 50
Small-cap 0 5 10 15 20
International 5 10 15 20 25
Bonds 50 50 35 15 0
Cash 30 10 5 5 5

Average annual return(1970 2006) 8.6 9.8 10.6 11.1 11.4
Best year(1970 2006) 22.8 27.0 30.9 34.4 39.9
Worst year(1970 2006) 0.1 6.6 12.9 19.1 23.8
15
Market Capitalization

• Once you've diversified across asset classes, you
  can start diversifying within asset classes.
  The size of a company is often measured by its
  market capitalizationthe company's stock price
  multiplied by the number of outstanding shares.
  On the pyramid, market cap denotes the percentage
  of large versus small companies in the stock
  portion of your portfolio. Small-cap stocks
  tend to be riskier than large-caps, but have the
  potential for more upside. A sound
  diversification plan includes both, because
  nobody knows which of these two asset classes
  will be in favor at any particular time. For
  example, in 1998, domestic large-caps
  outperformed small-caps by 31 percentage points.
  But in 2003, small-caps outperformed by 19
  percentage point

16
StyleGrowth vs. Value Investing

• Warren Buffet perfected Value Investing.
• According to this strategy, if a company's share
  price is trading below what it's really
  worth, he buys it. Buffett looks for companies
  that are well-managed, with simple,
  easy-to-understand business models, high profit
  margins and low debt levels.
• He then determines what he believes to be the
  company's growth prospects over the next five
  or 10 years. If the company's share price today
  is priced below these future expectations, it
  usually ends up as a long-term holding in
  Buffett's.

17
Sector

• Every stock is in an industry, and every
  industry is in a market sector. Holding too many
  investments in the same sector can be risky.
• As the chart below shows, the information
  technology sector saw greater single-year gains,
  but also saw heftier single-year losses from 1990
  to 2006. Sectors tend to be riskier than the
  broad market Range of annual returns, 1990-2006

18
Industry

• Jumping up to the next layer in the pyramid the
  10 sectors comprise 67 industries and 147 sub
  industries. Even when a sector's performance is
  up, not all industries within that sector will
  perform identically. In 2006, the consumer
  discretionary sector was up 17. Yet if we look
  closer at this sector we find it contained 31
  different sub industries which had a mixed
  performance. Two notable examples are the 36
  loss in educational services and the 43 gain in
  broadcasting and cable TV. Depending on what
  industry you held within the sector, your return
  could have been quite different.The lesson? For
  a balanced diet, after you diversify across
  sectors, diversify across the industries within a
  given sector.

19
Geography

• Over the past 37 years, the U.S. has a 0-37
  record as the best performing market in a single
  year. This shows that you should to look at
  investment opportunities outside the U.S. As with
  sectors and industries, your portfolio should
  include a mix of different countries. For
  example, the Morgan Stanley All Country World
  index includes 50 developed and emerging markets
  around the globe.

20
Manager

• Next comes managing your managers. It can be
  risky to have all of your actively managed mutual
  funds with the same portfolio manager. Suppose
  the portfolio manager leaves the firm?
• Or the fund company goes through a disruptive
  restructuring? How might changes like these
  affect your portfolio? Hence, it makes sense to
  diversify across managers, as well.

21
Stock Selection Guide (SSG)An Analysis
Worksheet

• Using our Selection Guide is the cornerstone of
  the BetterInvesting methodology the process has
  been successfully used by Better Investing
  investors for more than fifty-five years. After
  choosing a company to study, we reveal
• Company Strength (sales and earnings growth)
• Management Strength (profitability)
• P/E ratios (under/overvalued?)
• Upside vs. Downside Potential
• Buy, Hold and Sell Ranges

22
Steps Toward Investing

• Pay down your credit cards
• Emergency savings
• Participate in retirement plans
• Start/Join an Investment Club!!

23
What is an Investment Club?

• A group of individuals interested in learning how
  to invest in companies, make money and have fun
  doing it!

24
Clubs Invest In...

• Stocks (fraction of ownership in a corporation)
• Bonds (debt issued by companies or governments)
• Mutual Funds (collection of stocks and/or bonds,
  managed by professionals)
• Real Estate (residential, commercial)

Total Return on Investments (1926-1994)
Common Stock Total Return 10.2
High Grade Corporate Bonds 5.4
Treasury Bills 3.7
Inflation Rate 3.1
Source Starting and Operating a Profitable
Investment Club, p.4, by T. OHara, K.S. Janke,
and K. Janke
25
RWORLD Investors Club

• Conceptualized and organized in 2008 after RW
  Financial Seminar presented by Ty Johnson
• Limited Liability Company January 2010
• Over 1,000 in assets with socially responsible
  stocks and ETFs
• 100/month contribution
• Belong to National Association of Investors
  Corporation (NAIC) American Association of
  Individual Investors (AAII)

26
Investment Club Mission Statement

• The RWORLD Investment Club is a stock investment
  club organized to promote investment education
  and profit through the shared research and study
  of companies by its members.

27
RWORLD Objectives/Goals

• Education
• Stock Search
• Stock Analysis
• Profit
• Growth (growth companies 14.5 per year)
• Buy and Hold/Homework (reduces cost and taxes)
• Diversification (size and industry)
• Regular Investing (dollar cost averaging)
• Earnings Reinvestment (compounded interest)

28
Is An Investment Club Right For Me?

• Responsibilities
• Regular Meetings
• Monthly Tasks
• Monthly Contribution
• Benefits
• Less Cash to Start
• Diversify Quicker Than If Alone
• Study Group for Motivation

29

• If you have questions or want to give us
  feedback
• Ty Johnson, Managing Partner
• ty.getmoney_at_live.com
• Further your investing education for free at
• RWORLD Get Money
• www.rworldgetmoney.ning.com

30
RWORLD Forms

• Prospectus
• Application
• Building Wealth Exercise