What is in your 403b? Are you investing in your 403b? Do you know how your 403b is invested? Do you know what the expected balance of your 403b is at your projected retirement age? If you made a few adjustments, could you retire earlier and still be comfortable? Could you adjust your budget so you could put an additional $100/month in your retirement plan?
According to a study by TransUnion as reported in the Nashville Business Journal (2010, August 25), Tennessee has the second-highest level of credit card debt in the country. Tennesseans hold an average of 3.5 credit cards with 11 percent of the them having 10 or more credit cards. More than 13 percent of Tennesseans have used over half of their credit line and carry a month-to-month balance on multiple cards (Money, 2007, February 14).
The Magic of Compounding Interest Albert Einstein once noted that the most powerful force in the universe was the principle of compounding
The numbers….. Interest RateMonthly Deposit# of YearsBalanceInterest Earned 8%$250.005$18,864.14$3,614.14 8%$250.0010$46,596.33$16,346.33 8%$250.0015$87,913.02$42,663.02 8%$250.0020$149,468.51$89,218.51 8%$250.0025$241,176.69$165,926.69 8%$250.0030$377,807.73$287,557.73 8%$250.0035$581,366.90$476,116.90 8%$250.0040$884,638.65$764,388.65 8%$250.0045$1,336,466.77$1,201,216.77
Before We Talk About Stocks…. Let’s talk about the difference between a company and a brand. You invest in companies that OWN brands You invest in companies that are publically traded Let’s examine some brands and get our students busy at the keyboard researching those brands and companies! Alphabet Soup
Alphabet Soup! On the sheet titled “Alphabet Soup Exercise!” write the name of the company or brand with which each letter is associated.
Bonds are loans. Debt financing vs. the equity financing you get from issuing stock. Bonds are not typically traded daily. There are over 3 million domestic bond options! Government Municipal Corporate
Bond Terminology Par Value = Face Value Accrued Interest – the interest that has accumulated sine the principal investment, or since the previous interest payment. If a bond is resold (secondary market) it can be: At a discount = < par At a premium = > par This fluctuates based on interest rates and time until maturity The coupon rate = periodic interest rate paid between time of purchase and maturity.
Bond – making money There are two ways to increase your investment: Interest Payments Increase in the resale price of the bond
Things That Affect Bond Prices Economic Crisis Natural & Unnatural Disasters Peace & Prosperity Interest Rates Rates increase = bond price decrease Rates decrease = bond price increase
A company that pools money from many investors to purchase some combination of stocks, bonds, real estate and other securities. Mutual funds exemplify the adage “Don’t put all of your eggs in one basket.” Diversification
Can my money earn money when I diversify my portfolio? Risk vs. Reward The greater the risk, the greater the potential for reward. The greater the risk, the greater the potential for disaster.
Types of Mutual Funds Mutual funds come with varying levels of risk and different philosophies Examples: Some funds invest in only blue chip stocks Some funds invest in only start-up businesses Some funds invest in only bonds Some funds invest in green companies
Types of Mutual Funds (cont.) Mutual funds are also called open-end funds. This means that the fund will usually sell as many shares as investors want to buy. Closed-end funds, like mutual funds, are collections of securities managed by a professional investment advisor. But unlike mutual funds, there are a fixed number of shares available and these shares are traded on the stock exchange. Exchange-traded funds, are also like mutual funds in that they are collections of securities managed by a professional advisor, and like closed-end funds are traded on the stock exchange.
A Look at a Mutual Fund Portfolio Fidelity Magellan Fund (FMAGX) APPLE INC EXXON MOBIL CORP CHEVRON CORP JPMORGAN CHASE & CO WELLS FARGO & CO GENERAL ELECTRIC CO PROCTER & GAMBLE CO MICROSOFT CORP BERKSHIRE HATHAWAY INC CL B CITIGROUP INC Top 10 Holdings 2 as of 03/30/2012 Top 10 Holdings Represent 25.32% of Portfolio Total Number of Holdings: 278 Strategy Normally investing primarily in common stocks. Investing in either "growth" stocks or "value" stocks or both. Objective Seeks capital appreciation.
Build Your Own Mutual Fund Portfolio Have students determine what their risk level is – are they high risk, moderate or low risk takers? Have them search for several stocks and or bonds (at least 10) that match their level of comfort. Have the students determine how many shares of each stock (or how many $ they want to spend in bonds) they want to purchase. Set a total value that they need for their mutual fund. Have the students write several paragraphs explaining what they invested in and why they included those investment items in their mutual fund portfolio.
What Animal Are You? Are you a bull? Are you a bear? Are you a chicken? Are you a pig?
Stock Market Game The Stock Market Game is a real-world market simulation that provides you with the opportunity to learn the basics of the market on your own or with a team of friends. $100,000 in a portfolio Purchase stocks, bonds, and mutual funds Real world pricing – the program gets their pricing for the servers of the New York Stock Exchange, NASDAQ, and AMEX