My Personal Investment Plan

By Miles Lester

Risk Tolerance Assessments Background

• Current Age: 60 Years• $1,000,000 In current investments• Invested since age 20• 90 % Stocks• 10 % Bonds

• Target Retirement Age: 70 Years

• Investment Time Horizon: 40 Years• Be prepared to live until 100 years old

Risk Tolerance and Asset Allocation

•Wells Fargo Risk Tolerance and Asset Allocation

• Charles Schwab Risk tolerance and Asset Allocation

• Vanguard Risk Tolerance and Asset Allocation

Risk Tolerance and Asset Allocation:Wells

Fargo

Risk Tolerance and Asset Allocation: Vanguard

• Age 60• Current Asset Allocation

• 90% Stocks, 10% Bonds, 0 % Short-term reserves• Next 25+ Years

• Suggested Asset Allocation• 80% Stocks, 20% Bonds, 0 % Short-term reserves

Risk Tolerance and Asset Allocation: Charles Schwab

Investment Philosophy •Moderate Aggressive Investor

• Value Investor• Invest stock money in Large-Cap companies

• Strong Dividend Returns• Find undervalued companies• Steady return

• Target Return is 6-8% + Inflation (1-2 %) = 8-10%

• Risk: Higher Risk Tolerance With 25+ Years Left• Adjust after 15 years to more moderate risk• Adjust after 20 years to more conservative risk

My Stock Investment Philosophy

•Market Cap• Market Cap > $2 Billion

• P/E Ratio (Price-to-Earnings)• P/E Ratios <25

•Dividend Returns• Strong history of Dividend returns• Collect Dividend payments and Dollar Cost Average

them

• Earnings Growth and Stability• Positive growth for the future

Mutual Fund Investment Philosophy

Source: Minister Website

Asset Allocation: Current Age

• Moderate -Aggressive Asset Allocation

• 80 % Equities• 40 % Large Cap Individual Equities• 40 % Mutual Funds• 10 % Index Funds• 10 % Speculative for Small-Mid Cap Growth Equities

• 10 % Bonds

• 10 % Cash

• Over 25+ Years Left of Investing

• Higher Risk• More allocation in Equities

Asset Allocation: 15 Years From Now

• Moderate Asset Allocation

• 60 % Equities• 40 % Mutual Funds• 30 % Large Cap Individual Equities• 25 % Index Funds• 5 % Speculation for Small-Mid Cap Growth Equities

• 30 % Bonds

• 10 % Cash

• 5 Years After Retirement

• Less Risk as I Need Money Now That I Am Retired• Still have enough time left to invest 60 % in stocks

Asset Allocation: 25 Years From Now

• Conservative Asset Allocation

• 65 % Bonds

• 25 % Equities• 50 % Index Funds• 40 % Mutual Funds• 10 % Large Cap Individual Equities

• 10 % Cash

• 15 Years After Retirement• Need money from investments since I am 15 years past

retirement• Need less risk than the Moderate balance

• Higher allocation into Bonds than Equities

Stocks: Sector Performance Chart

Source: Fidelity Website

Stocks: Two Sectors• Consumer Staples• Ranked 3rd in highest return for 10 year % change• Has outperformed the S&P 500 by 50.9 % over 10 years• P/E Ratio of 23.64 which is within Graham’s target range• Annual Dividend Yield of 2.85 %• Second-Lowest volatility out of the sectors, so it won’t lose

as much in a bear market

• Consumer Discretionary• Ranked 2nd highest return for 10 year % change• P/E ratio of 19.56 is around Graham’s target range• Outperformed the S&P 500 by 58.85 % over 10 years• Annual Dividend Yield of 2.27 %• Revenue Growth of 13.10%

Stocks: Four Stocks

•McDonald’s Corporation

•Honda Motor Company

•CVS Health Corporation

•Reynolds American Inc.

Stocks: Why I Chose McDonald’s Corporation• Large Cap Company• $98.12 Billion Market Cap

• P/E Ratio <25• P/E Ratio of 18.58

• Annual Dividend Returns• 3.33 % Annual Dividend Yield

• Industry of Hotels, Restaurants, and Leisure has Outperformed the S&P 500 by 68.76% Over 10 Years

Stocks: Why I Chose Honda Motor Company

• Large Cap Company• $50.34 Billion

• P/E Ratio < 25• P/E Ratio of 13.04

•Dividend Returns• Annual Yield of 2.94 %

• Revenue Growth vs. Industry• 15.12 % Growth vs. 13.66 % Industry Growth• 75th Percentile

Stocks: Why I Chose CVS Health Corporation• Large Cap Company• $78.4 Billion

• P/E Ratio < 25• P.E. Ratio of 14.25

• Revenue Growth• 15.75 % compared to industry average of 3.36 %

• 91st percentile of industry

• Dividend Payment• 2.31 % Annual Yield

• Cash Flow Growth• 0.07 % from previous year• Consistent growth through cash flow and revenue

Stocks: Why I Chose Reynolds American Inc.• Large Cap Company

• Market Cap of $77.75 Billion

• P/E Ratio < 25• P/E Ratio of 14.43

• Dividend Yield• Annual Dividend Yield of 3.32 %

• Revenue Growth• 26.82 % compared to industry average of 4.81 %

• Cash Flow Growth• 2.34 % from previous year

• Tobacco Industry• Number one industry for Consumer Staples • Has outperformed the S&P 500 by 133.25 % over 10 years

Mutual Funds: Four Funds

• Fidelity® Blue Chip Growth Fund

• Parnassus Endeavor Fund

• Fidelity® OTC Portfolio

• Fidelity® Contrafund®

• I chose all my mutual funds based off my criteria• 10 Year Return rate of 8-10 % (My Target Return)• 5 Star Morningstar Rating• Expense Ratio < 1.0• Large Cap Companies• No- Load Funds

Mutual Funds: Why I Chose Fidelity® Blue Chip Growth Fund

•Morningstar Rating of 5 Stars

• Low Expense Ratio• Low expense ratio of 0.82 % ($8.20 per $1000)

•Distributes Dividends Annually, and Reinvests Into the Fund For You• $0.09 Per Share

Source: Fidelity Website

Mutual Funds: Why I Chose Parnassus Endeavor Fund

•Number One Rated Large Cap Fund by U.S. News

• P/E Ratio of 16.2

• Expense Ratio <1• 0.95 %

Source: Parnassus Endeavor Fund

Mutual Funds: Why I Chose Fidelity® OTC Portfolio

• Low Expense Ratio• 0.91 % ($9.10 per $1000)

•Number 2 Ranked Fund by Lipper For 10 Year Returns

Source: Fidelity Website

Mutual Funds: Why I Chose the Fidelity® Contrafund®

• Fidelity Fund Pick

• Low Expense Ratio• 0.71 % ($7.10 per $1000)

•Dividend History Payout• $0.014 Per Share

Source: Fidelity Website

Fives Lessons for Investing and Portfolio

Management• Lesson #1: Be a Disciplined Investor

• Lesson #2: Invest in What You Know

• Lesson #3: Start Investing Early

• Lesson #4: Dollar Cost Average

• Lesson #5: Patient Investing

Lesson #1: Be a Disciplined Investor

•Don’t let emotions affect your investing process

•Don’t overpay for a company• Find undervalued companies• Set a price for when you want to purchase, and sell a

stock before investing in it

• Buy when market goes down and sell when the market goes up

• Ignore the noise and don’t let Mr. Market’s fluctuations affect your investing philosophy

Lesson #1: Be a Disciplined Investor

Source: SageOak Website

Lesson #2: Invest in What You Know

• Invest In Companies That You Understand• Feel safe being a business owner of the company

•Don’t Just Invest In Companies You Think You Know• Peter Lynch highlights the importance of finding companies

you know, and then doing research and analysis of the company

• Research The Companies and Know What to Look For• Moats (Competitive Advantage)• Good long term prospects of the company• Consistent operating history• High quality management team and strong financials• High margins, equity, and free cash flow

Lesson #3: Start Investing Early

Source: The Digerati Life Website

Lesson #4:Dollar Cost Average

• Set a fixed amount of income each month to DCA into a no-load index mutual fund

•Use Dividend payments and reinvest those each month

• Find a No- Load Mutual Fund and DCA in that as well

• Allows the investor to purchase more shares in a bear market

Lesson #4: Dollar Cost Average

Source: Cal Berkeley Website

Lesson #5: Patient Investing• Pay Attention to Long Term Results, Not Short Term Gains

• Allow the Market to Work For You• Don’t try to time the market• Don’t be interested in short term valuations or gains

• Returns Over 10 Years• Only look at Funds with at least 10 year results• Invest in companies that you believe can last through

all types of market fluctuations

Lesson #5: Patient Investing

Source: Motley Fool

Conclusion: Wow Information

•How to Pick Stocks Like Peter Lynch• http://

www.investopedia.com/articles/stocks/06/peterlynch.asp

•How to Invest Like Warren Buffett and Peter Lynch• https://www.youtube.com/watch?v=a-q17Ag0Ojc

• 17 Investing Lessons by Warren Buffett• http://www.businessdictionary.com

/article/896/investing-lessons-of-warren-buffett/

Conclusion: What I Learned

• To Value Long- Term Results Over Short -Term Gains

• Diversify Portfolio

• Invest Patiently and Let the Market Work For Me

• Find Undervalued Companies With a Strong History of Dividend Payments

• Besides these four critical points, I learned an incredible amount of important lessons. This class was by far the most useful I took at WMA, and in high school. I hope that every high school student gets a chance to take a class like this. I truly believe it would change the world we live in.

• Thank you Mr. Irzyk for everything you taught me. I can’t wait for Stock Market Analysis!

Works Cited • https://www.wellsfargo.com/investing/retirement/tools/risk-tolerance-qu

iz/

• https://personal.vanguard.com/us/FundsInvQuestionnaire• http://

www.schwab.wallst.com/schwab/Prospect/research/mutualfunds/riskProfileQuestionnaire/riskProfile.asp?YYY101_z5K6INmijHmyop7FVDMq93/HQo0YMHI8ux21i1oMVSICT0Vf9jKBWNTHEXroJYzE

• http://www.investopedia.com/articles/fundamental-analysis/09/five-must-have-metrics-value-investors.asp

• https://eresearch.fidelity.com/eresearch/markets_sectors/sectors/si_performance.jhtml?tab=siperformance

• http://www.slideshare.net/mintster/how-to-invest-smartly• https://

cdn.parnassus.com/downloads/funds/EndeavorFund-FactSheet.pdf• https://www.fidelity.com/mutual-funds/fidelity-funds/overview