What’s Your Investment

I.Q.?

Revised 2006

Your CountyYour Name

Family and Consumer Sciences

“Educating People to Help Themselves”

$ $ $ $ $

$ $ $ $ $ $ $ $ $

$ $ $ $ $ $

$ $ $ $ $ $ $

$

Prerequisites toInvestments

Prepare financial statements Set financial goals Establish a spending plan Organize financial records Establish a positive credit history Maintain adequate insurance

coverage

Financial Foundation

Goals

Emergency Fund

Budget

Financial Records

Credit Record

Life

Disability

Health

Property Liability

Financial Plan Insurance

Insured Savings, Savings Bonds, Money Market Funds, Certificates of Deposits

Life Insurance Investments Government Securities

High Quality Corporate Stocks, Bonds and Mutual Funds

Real Estate

Aggressive Growth, Junk Bonds, Stocks and Mutual

Funds

Futures Contracts Collectibl

es

Pyramid of Investment Risk

Incr

ease

d Ris

k

Emergency Fund

Financial Foundation

Goals Budget

Financial Plan

Financial Statement

s

Financial Records

Credit Record

Life Health

Insurance

Disability

Property

Liability

Every Little

Bit

Counts!

Every Little

Bit

Counts!

Pay Yourself Firstat 5% interest

Save this each week In 10 years, you will have

$ 7.00 $ 4,754

$14.00 $ 9,509

$21.00 $14,263

$28.00 $19,018

$35.00 $23,772

InterestRate 5 years 10 years 15 years 20

years

If you invest $1,000/year

($19.20/week)

5% $5,692 13,009 22,411 34,4936% $5,843 13,739 24,408 38,8237% $5,999 14,522 26,631 43,8338% $6,160 15,363 29,108 49,6389% $6,327 16,265 31,870 56,378

10% $6,500 17,233 34,955 64,21411% $6,679 18,274 38,401 73,34112% $6,864 19,392 42,257 83,986

The Rule of 72

(years to double your money)

72 = Years to double moneyInterest Rate

The Rule of 72 (interest rate needed based on

time)

72 = Interest Rate RequiredYears to double Money

Investments

Actively Manage

Understand Risk

Know Your Tax Bracket

Appropriate For Your Timeline

Protect Against Inflation

It’s Not What You Earn,

It’s What You

Keep

Rate of Return to Account for Inflation and

TaxesInflation Rate

100 - Federal, State & Local Tax Brackets

Rate of Return to Account for Inflation

and Taxes3

100 - (28+5+2.5)

RR = 4.65%

Tax Free Vs. Taxable Yield

Tax Equivalent = Yield

tax free rate (5%)

100 - (tax rate) (28%)

5 = 6.9%72

TAX DEFERRAL MAGIC

$2,000 Annual Investment @ 5%

5 $11,603.83 $11,133.26 $ 470.57 10 26,413.57 24,420.08 1,993.4915 45,314.98 40,277.04 5,037.9420 69,438.49 59,201.28 10,237.2125 100,226.90 81,786.14 18,440.7630 139,521.55 108,739.69 30,781.8635 189,672.58 140,906.98 48,765.6040 253,679.42 179,296.56 74,382.86

Years Tax Deferred TaxedInvested Investment Investment Savings

Time is a

valuable tool

EARLY INVESTOR

Depositing $1,000a year at 8%

$1,083

$6,397

$15,939

Depositing nothing morebut building at 8%

$17,267

$35,471

$78,934

$175,656

$390,895

LATE INVESTORDepositing

nothing

$0

$0

$0

Depositing $1,000a year at 8%

$1,083

$15,939

$51,939

$130,344

$306,000

Year 1

Year 5

Year 10

Year 11

Year 20

Year 30

Year 40

Year 50

INVESTING NOW versus INVESTING LATER

AT 9% INTEREST

Monthly Total End Result Beginning Amount Contribution in 20 Yrs

Now $ 50.00 $12,000 $33,394

In 10 years $150.00 $18,000 $29,027

Invest$1,000 a year

@ 6%for 20 years

=$36,790

You have earned

$16,790!!!

Investment Alternatives

Mutual Funds

Stocks and Bonds

Treasury Certificates

Real Estate

Futures

Collectibles

Investment

PortfolioSelection

s

Low Risk

$Insured Savings

$Savings Bonds

$Certificates of Deposit

$Money Market Deposit Accounts

Limited Risk

Blue chip stocks High quality bonds Government securities Conservative mutual funds

Moderate Risk

• Growth stocks

• Real estate

• Mutual funds

• Medium rated corporate, municipal and zero-

coupon bonds

• Small company stocks

High Risk

* Futures, options, and derivatives

* Aggressive growth, stocks and mutual funds

* Junk or low rated bonds

* Collectibles, precious metals

Risk Reward

Investment StrategiesInvest regularly by dollar-cost

averagingDiversify your portfolio Check your investments

regularlyStay invested during down

marketsBe patient

Since 1950, if stocks were held for:

10 years -- no risk of loss

5 years -- 5% chance of loss

1 year -- 23% chance of loss

Time makes a Difference!

MUTUAL FUNDSType Objective Investments Type of Investor

Balanced Conserve principal, One-third bonds, Older, income-some growth two-third stocks oriented

Income- Moderate growth Common Stocks Middle-aged, growth with income (blue chip) conservative

Growth High growth, Common stocks Younger, low income (speculative) aggressive

Bond Income Bonds Older, income-oriented

MUTUAL FUNDSType Objective Investments Type of Investor

Preferred Income Preferred stock Older, income-oriented

Specialized Various Gold stocks, Depends on objective,

specialized but should only be a industry stocks, small portion ofconvertible bonds, investmentsetc.

Money market Income and Money marketAnyone needing income safety of instruments and safety

principal

Investment

PortfolioSelection

s

Limited Risk Portfolio

Cash

50%

Medium

Term Bonds

30%

Blue Chip

Stocks

20%

Moderate Risk Portfolio

long term

bonds

10%

cash

10%

five year

bonds

30%

stocks

50%

High Risk Portfolio

stocks

100%

Where can you go for Financial Planning

Information?

Who would you want to be your financial

professional? Chartered Life Underwriter (CLU) Certified Financial Planner (CFP) Chartered Financial Consultant (ChFC) Accredited Financial Counselor (AFC) Attorney Financial manager Accountant Real estate broker Stock broker

Chartered Life Underwriter (CLU) Certified Financial Planner (CFP) Chartered Financial Consultant (ChFC) Accredited Financial Counselor (AFC) Attorney Financial manager Accountant Real estate broker Stock broker

CRITERIA FOR SELECTING FINANCIAL ADVISORS

Training

Professional Improvement

Registrations/licenses

Types of clients and income of clients

References

Professional designations

Length of time in business

Form of compensation

Questions to Ask Your Potential Financial

Professional1. What is your professional background, including certifications?

2. How long have you been doing financial planning?

3. How long have you been in the community?

4. Who can vouch for your professional reputation?

5. Will you provide references from three or more clients who you have counseled for at least two years?

More Questions to ask a Financial Professional…

6. Will you manage my account(s) or will it be an associate?

7. May I see examples of your plans and monitoring reports you have

drawn up for other investors?

8. Are you a member of any financial planning trade organizations?

9. If you earn commissions, from whom?

10.What level of investment risk do you generally use?

How is a Financial Professional Paid?

Fee Only Planner

Commission Only Planner

Fee and Commission Planner

Keys

to

Success

What’s Your Investment

I.Q.?

Your CountyYour Name

Family and Consumer Sciences

“Educating People to Help Themselves”