INVESTMENTS

INVESTMENTSINVESTMENTS

DECISIVEPATHS

investment paths

PATHS

CRITICAL INVESTMENT PATHS

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FOOD STORAGE


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FOOD

SPEND

LESS


SPEND LESS

THAN INCOME

FOOD

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FOOD

SPEND

LESS


DIVERSIFICATION

DIVERSIFICATION

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FOOD

SPEND

LESS


ALLOCATION

ALLOCATION

FOOD

DIVERSIFICATION

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FOOD

SPEND

LESS


HISTORICAL PRICING MODELS


FOOD

DIVERSIFICATION

ALLOCATION

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FOOD

SPEND

LESS


MANAGE THEMANAGERS

MANAGE THEMANAGERSDIVERSIFICATI

ON

ALLOCATION


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FOOD

SPEND

LESS


INVEST

MORE MONE

Y

DIVERSIFICATION

ALLOCATION


MANAGE THEMANAGERS

Were I to ask the question, how much wheat or anything else a man must have to justify him in letting it go to waste, it would be hard to answer; figures are inadequate to give the amount. Never let anything go to waste.

PRESIDENT B. YOUNGSALT LAKE CITY, JUNE 5, 1853Journal of Discourses 1 Vol.: pg. 248

Be prudent, save everything, and what you get more than you can take care of yourselves, ask your neighbors to help you. There are scores and hundreds of men in this house, if the question were asked them if they considered their grain a burden and a drudge to them, when they had plenty last year and the year before, that would answer in the affirmative, and were ready to part with it for next to nothing. How do they feel now, when their granaries are empty? If they had a few thousand bushels to spare now, would they not consider it a blessing? They would. Why? Because it would bring the gold and silver. But pause for a moment, and suppose you had millions of bushels to sell, and could sell it for twenty dollars per bushel, or for a million dollars per bushel, no matter what amount, so that you sell all your wheat, and transport it out of the country, and you are left with nothing more than a pile of gold, what good would it do you? You could not eat it, drink it, wear it, or carry it off where you could have something to eat. The time will come that gold will hold no comparison in value to a bushel of wheat.

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Gold is not to be compared with it in value. Why would it be precious to you now? Simply because you could get gold for it? Gold is good for nothing, only as men value it. It is no better than a piece of iron, a piece of limestone, or a piece of sandstone, and it is not half so good as the soil from which we raise our wheat, and other necessaries of life. The children of men love it, they lust after it, are greedy for it, and are ready to destroy themselves, and those around them, over whom they have any influence, to gain it.

PRESIDENT B. YOUNGSALT LAKE CITY, JUNE 5, 1853Journal of Discourses 1 Vol.: pg. 248

Save everything

. . . save all the money that you can D&C 48:4If you have more than you need . . . Ask your

neighbors to helpThe time will come that gold will hold no comparison in value to a bushel of wheat.

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6 Investment Essentials1. Diversification2. Allocation

More than one companyMore than one investment objective

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Modern Portfolio TheoryHarry

Markowitz

Green -5%

Yellow 7%

Total Portfolio 2%

Green 20%

Yellow 10%

Total Portfolio 15%

Nobel Prize in 1990Essay “Portfolio Selection” (1952)

Long-term market performance – very efficientShort-term – irrational and inconsistentKey to performance - diversification

"In choosing a portfolio, investors should seek broad diversification, Further, they should understand that equities--and corporate bonds also--involve risk; that markets inevitably fluctuate; and their portfolio should be such that they are willing to ride out the bad as well as the good times."

Harry Markowitz, October 7th, 2008

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Portfolio AllocationConservat

iveBalanced Balanc

edEqui

ty

EquityTilted

Investment Grade Bonds

Emerging Markets Bonds

Large Cap U.S. Stocks

Small Cap U.S. Stocks

International Stocks

Commodity Futures

60%

0%30

%5%

5%

0%

40%

40%

0%

8%

12%

0%

25%

50%

0%

10%

15%

0%

0%

65%

0%

15%

20%

0%

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Downside RiskInvestment losses hurt more than

gains help

20%

33%

25%

50%

43.8%

50%

75%

100%

$100,000

$ 50,000

$ 75,000

50% Loss

50% GainLOSS GAIN

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Downside RiskInvestment losses hurt more than

gains help

20%

33%

25%

11%

50%

43.8%

10%

50%

75%

100%

$100,000

$ 80,000

$ 96,000

20% Loss

20% GainLOSS GAIN

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“Money You Can Afford to Lose”The ‘Rule of 72’

$ 10,000 Investment$ 11,200 Year One$ 12,544 Year Two$ 14,049 Year Three$ 15,735 Year Four$ 17,623 Year Five$ 19,738 Year Six

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$20,000 – Age 26

$40,000 – Age 32


$80,000 – Age 38$160,000 – Age 44 $320,000 – Age 50 $640,000 – Age 56

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$20,000 – Age 26

$40,000 – Age 32


$640,000 – Age 56

$1,280,000 – Age 62

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$1,280,000 – Age 62

Annual Yield

Ann

ual Y

ield

200400600800

1,0001,2001,4001,6001,8002,0002,200

$ 2,400

1 2 3 4 5 6 7 8 9 10 11121314 1516 1718192021222324 25262728 29303132 333435363738394041424344 4546474849 50

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3. Historical Valuation Pricing‘Active’ buy-and-hold

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Historical Valuation Pricing

Average Total Yield 13

%

Technology SectorSubstantially Over

Priced

Substantially Under Priced

Buy

Sell

The GoalPre-established Formula

Based on Long-Term Total Return

Transactions – No Emotion or Speculation

Emotion and Speculation = Market Timing

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11%

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6.5%

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11%

6.5%



3. Historical Valuation Pricing‘Active’ buy-and-hold4. Manage the Managers

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Mark Hulbert Story Investment Newsletters Rating Investment Advice Rating Investment Companies Largest circulation newsletter -

lowest rating “Mark Hulbert started his

newsletter to help you choose yours. Based on proven performance, not unproven claims.”investment paths

Hulbert Mutual Fund Performers – Top 3

Litman Gregory Value Line No Load Fund X

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6 Investment Essentials1. Diversification2. Allocation3. Historical Pricing Models4. Manage the Managers5. Investing More Money6. Store Food & other Emergency

Provisions

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Minimize Investment Expenses

Mutual Funds – Purchase and manage the investment for an additional feeAverage annual expense 1%(Annuity average annual expense 3%)

Index Funds – Purchase the investment / No management feeAverage annual expense .25%

Superior Performance – past 20 yearsIndex Funds72% of the time

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MUTUAL FUND INC

(Investment Company)

INVESTOR

Expenses

DividendsCompone

nts of Return

Stock

- Microsoft- Enron

- IBM

- AT&T- Fly by Night Inc.- Chevron

Management FeeCustodial Fee

Cap Gains (losses)

InterestDividends Capital Gain

Income

Dividend Income

RealizedUnrealized

Mutual Fund

Shares

-Commission -No Load

$$$ Reinveste

dINDEX FUND INC

(Investment Company)

72% of Index Funds Outperform their Mutual Fund Equivalentinvestment paths

INDEX FUND INC(Investment Company)

INVESTOR

Expenses

DividendsCompone

nts of Return

Stock

- Microsoft- Enron

- IBM

- AT&T- Fly by Night Inc.- Chevron

Management FeeCustodial Fee

Cap Gains (losses)

InterestDividends Capital Gain

Income

Dividend Income

RealizedUnrealized

Mutual Fund

Shares

-Commission -No Load

$$$ Reinveste

dVARIABLE ANNUITY

(Insurance Company)

72% of Index Funds Outperform their Mutual Fund Equivalent

Variable Annuity Units

Insurance Fee

78% of Mutual Funds Outperform their Variable Annuity Equivalent

Commission Fee

2.44%

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Vanguard LifeStrategy Accounts Target Retirement

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Four Types of Investments

1. No Investment

2. Speculative Investments

FraudPonsi Schemes

‘Nigerian’ Inheritance‘Secret’ Investments

12 Daily Pro“40% Return Per Month”“Prime Bank Notes”

Currency TradingFuturesCommodity Options

ArbitrageHedge Funds

3. Diversified / Allocated Investments4. ‘Too Conservative’

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What is Opportunity Cost?

The cost of forgoing the next best alternative

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INVESTMENTS

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