Investing and Saving

Making it work for you

Personal Finance Workshops

A. Budgeting and Debt

Reduction

B. Saving and Investing

C. Personal Financial

Management

D. Stewardship

E. Charitable Giving

Our mission today

• Rent vs own

• Growing my money

• Types of funds

• Where to go for help

The wise man saves for the future but the foolish man spends whatever he gets.” Proverbs 21:20

Define terms

• Savings

• Investments

• Trading

Savings, Investments, TradingWhat’s the difference?

Interest – Rent Capital Gains – Buy/Own

X

X X

X

Usually guaranteed interest and time period

Risk and volatility

This graphic is conceptual only

Risk Tolerance

Picture Source: http://images.google.ca/imgres?imgurl=http://confluence.engin.umich.edu/download/attachments/3958/

Volatility vs. Risk

• What is YOUR comfort with risk?

• Select investments you will feel comfortable with

• Stops “pulling out” of existing investments

• Properly plan based on your individual comfort and needs

• Allows you to sleep at night

Income Tax Treatment

What is my:

– effective tax rate?

– marginal tax rate?

Are all investments taxed the same?

– Interest

– Capital gains

– Capital losses

Income tax advantaged strategies

• RSP – Spousal RSP– New home buyer – RRIF

• RESP

• TFSA

Interest

• What is Compound interest?

• Rule of 72– 72 divided by interest

rate earned

Rule of 72Assume age 21 and you save $1,000 per year

Age Interest at 6%

21 $ 1,00033 $ 2,00045 $ 4,00057 $ 8,00069 $16,000

Age Interest at 9%

21 $ 1,00029 $ 2,00037 $ 4,00045 $ 8,00053 $16,00061 $32,00069 $64,000

Investment FundsCompare investment funds vs interest payments

1970 1990

Rat

e of

ret

urn

GIC 5 yr interest

Avg rate 7-8%

TSE 300 Index

Avg rate 10-12%

This graphic is conceptual only

Compare to present: GIC avg 4-5%, TSX avg 10-12%

What is an investment fund?

• Define

• History

• Prospectus

Dollar Cost Averaging

Option 1: $1,000 @ $10 per unit = 100 units

Option 2: invest $100 per month over a 10 month period

This graphic is conceptual only

Do not put all your eggs in one basket = Diversification

Diversification vs Diffusion

This graphic is conceptual only

Types of products and funds

Interest – GICs– Annuities– Bonds

Funds– Income– Balanced– Equity

Fund Managers

• Top down

• Bottom up

Mutual Funds / Segregated Funds

• Provided by

• Guarantees

• Your estate

• Creditor protection

• Beneficiary

• Costs…..

Costs

• Loads– Front end– Back end / DSC– No load

• Management Fees

Remember

1. Stay Invested – Don’t panic

2. The Power of Compounding/Rule of 72

3. Dollar Cost Averaging – Invest regularly and Do not time the market

““The way of a fool is right in his own eyes, The way of a fool is right in his own eyes, but a wise man is he who listens to but a wise man is he who listens to counsel” ”

Proverbs 12:15Proverbs 12:15

Want to go deeper?

To review or start your plan

– consider FaithLife Financial

Go Green - www.faithlifefinancial.ca

– download financial tools

– view seminars

– calculators

– great financial articles