The Risk and Return of Growing Money

The Path of Money Human Capital Capital Assets Cash Flow Spend it Donate it Hold it Invest it LEND OWN You work for money Your money works for you Two Types of Capital Four Choices for Cash Flow Two Basic Investment Choices PASSIVE ACTIVE Two Basic Positions FINANCIAL RETURNS

Two Investment Choices Lending Those in which you lend your money to an organization which typically pays you a fixed rate of interest Ownership Those that you own a piece of some asset or company and have the ability to generate revenue and future profits

Considerations Lending versus Ownership Investments You need current income You don’t need current income You don’t expect capital growth You expect capital growth You are willing to accept a lower return for a higher degree of safety You are willing to accept a higher degree of risk for the opportunity for a greater return You cannot ignore significant ups and downs because you might need your capital back soon You can ignore significant ups and downs because you do not need your capital back soon

PASSIVE ACTIVE “Others Control It” “You Control It” Lending Ownership Savings Account Stocks Owner Financing (Lending on assets you’ve sold) Business Money Market Accounts Mutual Funds Private Lending (Lending on assets you didn’t sell) Real Estate Money Market Mutual Funds Minority Shares of Privately Held Companies Precious Metals CDs Collectibles Government Securities Bonds Annuities

Balancing Risk and Return Highly Risky Alternative Investments Long-term hold (5 yrs or more) Own Business Real Estate Stocks Moderately Risky Medium-term hold (3-5 yrs) Bonds Mutual Funds Annuities Minimally Risky Short-term hold (3 yrs or less) Savings Alternatives Treasury Securities More Risk More Return Less Risk Less Return FINANCIAL FOUNDATION Financial Growth Financial Protection (Insurance) 1. Goals 2. Budget 1. Health 2. Life 3. Records 4. Net Worth 3. Disability 4. Property/Liability Sources: National Institute of Consumer Education – Eastern Michigan University/AIG KW Research 6

A Closer Look at a Few Investment Options . Futures Collectibles More Risk More Return Speculative Common Stocks Junk Bonds Precious Metals Less Risk Less Return Owning Your Own Business RE Investment Properties Puts And Calls Blue Chip Common Stocks Growth Mutual Funds Balanced Mutual Funds High Grade Preferred Stock High Grade Convertible Securities High Grade Municipal Bonds High Grade Corporate Bonds Fixed Annuities Treasury Securities Certificates of Deposits Money Market Mutual Funds Money Market Accounts Insured Checking and Savings Accounts Note: Any uninsured investment vehicle is a risk Source: Adapted from Investment Pyramid – Essex Corporation

Questions for Your Financial Advisor Does my investment appreciate in value? Will it generate income through interest or dividends? Is it likely to outperform inflation? What are some risks I might encounter? Are there any tax advantages? What fees and charges are involved? Can I borrow against it? Can I sell it quickly? What are some economic factors that should affect my decision to buy, hold or sell? Should I consider diversification?

Please read: All information and investment strategies presented herein are intended and should be used for educational purposes only.  Nothing herein should be construed as investment advice.  You should always conduct your own research and due diligence and obtain professional advice before making any investment decision.  All investments involve some degree of risk. All information provided herein is believed to be reliable, but may be subject to errors and omissions.  Keller Williams Realty, Inc. ("KWRI") does not guarantee and is not responsible for the accuracy or completeness of information, and provides said information without warranties of any kind.  KWRI will not be liable for any loss or damage caused by your reliance on information contained in this presentation.  You are solely responsible for your own investment decisions.