1 / 34

Financial Literacy

Learn how to build wealth through savings and investments in brokerage accounts. Discover the benefits and risks of investing in stocks, bonds, and mutual funds. Understand the importance of asset allocation and reducing investment fees. Plan for your future with retirement and taxable brokerage accounts.

goble
Télécharger la présentation

Financial Literacy

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Financial Literacy Building wealth through savings

  2. Brokerage Firms Specialize in accounts for stocks, bonds, mutual funds Banks Checking & Savings accounts, credit cards, loans, etc

  3. Brokerage Accounts • Most financial institutions offer brokerage accounts • allow you to invest in stocks, bonds, mutual funds, commodities, etc…. • Beware:many brokerage firms have high/hidden fees • mutual funds fees, management fees, etc…..

  4. Real Estate risk? Cash Account Bonds Stocks Asset Allocation Process of picking buckets to invest in high risk med. risk no risk

  5. Intro. Investment Reading in nominal terms

  6. Rule of 70 Money Doubles in in nominal terms 70/20% = 3.5 years 70/ 10% = 7 years 70/ 5% = 14 years

  7. How to Save Money & Build Wealth! Banks Checking & Savings accounts, credit cards, loans, etc Brokerage Firms Specialize in accounts for stocks, bonds, mutual funds • Link checking & brokerage accounts • keep them at separate institutions • Save $ through Direct Deposit & Automatic Investing

  8. Real Estate risk? Bonds Cash Account Stocks I think I’m brilliant Human Nature Building wealth requires: being patient , delaying gratification (saving), thinking long term, reducing investment fees, avoiding the “big mistake” no risk med. risk high risk very high risk

  9. Strategy of Your Stock Bucket? YOUR PORTFOLIO OF STOCKS SP500 INDEX

  10. Small Cap Vanguard Index Fund: 1992 – 2015 2,000 stocks 1.9% Dividend Yield 2018 $554,000 2015 $446,000 2006 $270,000 1999 $200,000 Start 1992 $100,000 (7700 shares) 2007 $115,000 2002 $107,000 With Dividends $100,000 => $600,000 +8.0% per year

  11. End Day 1

  12. Bank Account Checking & Savings accounts, credit cards, loans, etc Review: Brokerage Account Specialize in accounts for stocks, bonds, mutual funds • Link both accounts • keep them at separate institutions • Use Automatic Investing in “buckets”

  13. Brokerage Advertising https://www.youtube.com/watch?v=X4GZfvXx9Js

  14. Your Stock Bucket SP500 INDEX Fund versus $100,000 Portfolio: Step 1: Asset Allocation Step 2: Choose investment by bucket

  15. Mutual Funds • Professionally managed collective investment vehicle that pools money from investors to purchase securities • You pay a yearly management fee (can be high or low) (some fees/loads are “hidden”) • Funds buy stocks, bonds, commodities, etc…. ora combination of different asset classes • Some funds are index funds &some are “actively managed” • Funds do not trade during the day (buy/sell only at mkt close) Money Pooled in a specific fund

  16. Exchange Traded Funds • ETF’s = Similar to mutual funds, except they trade in the form of a stock. • Examples:SPY (sp500), XLK (technology), GLD (gold) • ETF’s vs. Mutual funds • Positives: • Fees can be lower than many mutual funds • Can trade throughout trading day (very liquid) • Negatives: • Encourage “trading” • Not efficient for dollar cost averaging • Can not re-invest dividends • Many “leveraged” funds 2:1 or 3:1 ratio funds

  17. Investment Philosophy Active Investing Buy & Hold Investing Passively manage stocks Never “market time” (get in, get out) Pay lower fees, taxes, trading costs Take less risk, match market return Actively manage stocks to “beat market” Often “market time” (get in, get out) Pay higher fees, taxes, trading costs Take more risk, often underperform market SP500 Market Return

  18. Reading:Just How Dumb are Investors?

  19. Why investors underperform the market Investors trade “too much” & buy high (greed) sell low (fear) Take money out for life expenses Mutual funds underperform: 92.2% of large-cap funds lagged S&P 500 index fund Investors pay high fees ---lose 63% of potential return over time Some 401-K plans have poor choices

  20. Continued: Retirement Gamble PBS Video 2013 PBS special on retirement investment dangers…. http://video.pbs.org/video/2365000843/?starttime=3131000 Play part 1: 1-19 minutes Play part 2: 19-32 mintues

  21. Types of Brokerage Accounts 401-K IRA Roth IRA IRA => put money in “before taxes” => pay taxes in future Roth IRA => put money in “after taxes” => tax free in future 1) Retirement: 2) Specific 3) Taxable 529 (college savings) Regular brokerage

  22. End Day 2

  23. Active Investing Re-invest dividends Add new $ cost effectively https://www.bankrate.com/calculators/savings/simple-savings-calculator.aspx Buy &Hold Investing Passively manage stocks Never “market time” (get in, get out) Pay lower fees, taxes, trading costs Take less risk, match market return Actively manage stocks to “beat market” Often “market time” (get in, get out) Pay higher fees, taxes, trading costs Take more risk, often underperform market SP500 Market Return

  24. Types of Brokerage Accounts 401-K IRA Roth IRA IRA => put money in “before taxes” => pay taxes in future Roth IRA => put money in “after taxes” => tax free in future 1) Retirement: 2) Specific 3) Taxable 529 (college savings) Regular brokerage

  25. Should Gov’t “nudge” people? 5 Areas to nudge people Ways to “Nudge”

  26. Irrational Behavior? Lesson: We Discount Negative Outcomes . Lesson: We overestimate Positive Outcomes

  27. A nudge to save more People tend to procrastinatewhen it comes to unpleasant tasks, • such as spending cuts or saving for retirement. Allowing people to save more in the future => ↑ Savings

  28. BEHAVIORAL ECONOMICS continued (day 3) Flawed decision making: 1)We overestimate gain or likelihood of “winning” 2) We underestimate potential loss or true % risk 3) We are impulsive 4) We get emotional People can be “nudged” to make better decisions or worse! -eat better, save more, protect environment, spend wisely - Buy stuff we don’t need/want, stay on social media too long, fall in debt, etc

  29. A nudge to save more People tend to procrastinatewhen it comes to unpleasant tasks, • such as spending cuts or saving for retirement. Allowing people to save more in the future => ↑ Savings

  30. Continued: Retirement Gamble PBS Video PART 2 http://video.pbs.org/video/2365000843/?starttime=3131000 Play part 2: 19-32 mintues

  31. End Day 3

  32. Warren Buffet Advice

  33. Financial Advisors Financial Advisors are not required to act in your “best interest” • Unless they are a Fiduciary They are paid often indirectly through fees, commissions, etc… Flat fee advisors charge a % of your assets(1.0% - 2.0% of portfolio) - $1 million portfolio @ 1.0% = $10,000 per year Most people do not know what they pay

  34. Continued: Retirement Gamble PBS Video PART 3 http://video.pbs.org/video/2365000843/?starttime=3131000 Play part 2: 30 -50 mintues

More Related