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What’s Your Investment I.Q.?
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Page 1: What’s Your Investment I.Q.?. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

What’s Your Investment

I.Q.?

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Prerequisites toInvestments

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

coverage

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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

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Emergency Fund

Financial Foundation

Goals Budget

Financial Plan

Financial Statement

s

Financial Records

Credit Record

Life Health

Insurance

Disability

Property

Liability

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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

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Every Little

Bit

Counts!

Every Little

Bit

Counts!

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Pay Yourself Firstat 5% interest

Save this each week In 10 years, you will have

$ 7.00 $ 4,720

$14.00 $ 9,440

$21.00 $14,160

$28.00 $18,880

$35.00 $23,600

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InterestRate 5 years 10 years 15 years 20

years

If you invest $1,000/year

($19.20/week)

5% $5,524 12,578 21,578 33,0656% $5,637 13,181 23,276 36,7867% $5,751 13,816 25,129 40,9958% $5,867 14,487 27,152 45,7629% $5,985 15,193 26,361 51,160

10% $6,105 15,937 31,772 57,25711% $6,228 16,722 34,405 64,20312% $6,353 17,548 37,279 75,052

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The Rule of 72

(years to double your money)

72 = Years to double moneyInterest Rate

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The Rule of 72 (interest rate needed based on

time)

72 = Interest Rate RequiredYears to double Money

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Investments

Actively Manage

Understand Risk

Know Your Tax Bracket

Appropriate For Your Timeline

Protect Against Inflation

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It’s Not What You Earn,

It’s What You

Keep

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Rate of Return to Account for Inflation and

TaxesInflation Rate

100 - Federal, State & Local Tax Brackets

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Rate of Return to Account for Inflation and Taxes

3

100 - (28+5+2.5)

RR = 4.65%

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Tax Free Vs. Taxable Yield

Tax Equivalent = Yield

tax free rate (5%)

100 - (tax rate) (28%)

5 = 6.9%72

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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

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Time is a

valuable tool

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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

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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

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Invest$1,000 a year

@ 6%for 20 years

=$36,790

You have earned

$16,790!!!

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Investment Alternatives

Mutual Funds

Stocks and Bonds

Treasury Certificates

Real Estate

Futures

Collectibles

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PortfolioSelection

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Low Risk

$Insured Savings

$Savings Bonds

$Certificates of Deposit

$Money Market Deposit Accounts

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Limited Risk

Blue chip stocks High quality bonds Conservative mutual funds Government securities

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Moderate Risk

• Growth stocks

• Real estate

• Mutual funds

• Medium rated corporate, municipal and zero-

coupon bonds

• Small company stocks

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High Risk

* Futures, options, and derivatives

* Aggressive growth, stocks and mutual funds

* Junk or low rated bonds

* Collectibles, precious metals

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Risk Reward

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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!

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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

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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

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Limited Risk Portfolio

cash

50%

medium

term bonds

30%

stocks

20%

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Moderate Risk Portfolio

long term

bonds

10%

cash

10%

five year

bonds

30%

stocks

50%

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High Risk Portfolio

stocks

100%

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Where can you go for Financial Planning

Information?

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Who would you want to be your financial

professional?

1. A chartered life underwriter 2. A certified financial planner 3. An attorney 4. An accredited financial counselor 5. A financial manager

6. An accountant 7. A real estate broker 8. A stock broker

1. A chartered life underwriter 2. A certified financial planner 3. An attorney 4. An accredited financial counselor 5. A financial manager

6. An accountant 7. A real estate broker 8. A stock broker

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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

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Questions to Ask Your Potential Financial

Professional1. What is your professional background?

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 that you have counseled for at least two years?

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More Questions for 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?

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How is a Financial Professional Paid?

Fee Only Planner

Commission Only Planner

Fee and Commission Planner

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Keys

to

Success

Page 42: What’s Your Investment I.Q.?. $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

What’s Your Investment

I.Q.?


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