Some Historical Financial Insights = worst decade in history (wars, Depression, 12% inflation) Of past 18 decades, 16 were profitable with average 10% per year returns. For the full 18 decades: average return was 8.8% per year. For last 176 years: 130 had positive returns; 46 had negative returns (3:1). 15% of (fewer) negative returns were >20% 32% of (more) positive returns were > 20% 2009: Dropped 25% in first 10 weeks; 63% increase => yearly gain = positive 23%. Smart *investors* ended “worst decade” with larger portfolios! The opinions expressed here are those of Dr. Sutton and do not necessarily represent those of the ECE Department, the Volgenau School, George Mason University, the Commonwealth of Virginia or any other individual, living or dead. My daughter works for Edelman Financial Services.

$340,060 $266,427 8%/year $20,000 $62,000

1.Goals (long term; short term) 2.Annual/monthly income 3.Annual/monthly expenses (minimum) 4.Annual/monthly expenses (nice to have) 5.Savings: (2) – (3 or 4) [till it hurts] Determine

1.6 to 12 months of expenses (Liquid) 2.Retirement account 3.Large goals account (house, car) 4.Kids college expenses (529 Plan) 5.Fun Priorities

Compounding Diversification and Rebalancing Buy low (during “crash”) –Sell high (on the way up; others are buying) Consistency Keys to Wealth building

Capitalization (small, mid, large) Value (“discounted”) vs Growth (earnings) International vs Domestic Emerging vs established markets Real Estate (not houses!) Bond and Cash Reserves Commodities, natural resources, gold, oil Diversification (of assets)

1.Stocks decrease rapidly; bonds stable Sell bonds; buy stocks 2.Large caps increased; small caps decreased Sell Large caps; buy small caps 3.Always look at *all* assets: retirement (yours/spouse) + non-retirement Rebalancing and “Big Picture”

401(k)/403(b)/TSP [pre-tax = “deductable”] IRA–traditional – deductable (taxed at withdrawal) IRA – traditional – non-deductable (don’t) IRA – Roth (taxed investment $$; not taxed at withdrawal) 401(k) – Roth Annuity = “insurance”; fixed/variable; (don’t) Tax deferred Locked in till ~age 60 [Do not borrow] Do not invest (all) in your company stock. Enron! Investment Vehicles (Retirement)

Bank/Credit Union/Savings Account (inflation risk) CD (inflation risk) Fixed Income/Money Market (inflation risk; short term) Stocks (individual; picking takes time and experience) Bonds (US, state, municipal, company; interest rate risk) Mutual Funds (~10%/year; long term; “market” risk) –Equity/Bond Exchange Traded Funds (ETF) (? ~10%/year; long term) –Equity/Bond Investment Vehicles (“Taxable”)

ricedelman.com (and Ric Edelman books) –GPS (Guide to Portfolio Selection) Jump$tart Coalition jumpstart.org American Savings Education Council choosetosave.org/asec National Endowment for Financial Education nefe.org Resources

Highest: Gold; Emerging Markets; Hedge;Penny Higher: International Stock Funds; Growth Stocks; Blue Chip; High Yield Bonds; Equity Income Funds Moderate: Common Stock; Corporate Bonds; Mutual Funds; ETF Low: CD; US Bonds Investment Risk

Health Disability Income (Long term “can’t work”) Long Term Care ($50K/year; do while “young”) Life (Term vs Whole Life) Renters/Home (Property and liability) –Umbrella (cheap liability) Insurance

Mortgage = loan with property as collateral –Always keep a large mortgage. Do not pay it off. Changing jobs? Rollover 401(k) into IRA Employer matching your contribution? Irrelevant! Contribute! Credit cards: “old” is good Credit Score: Pay on time; Have long term active credit cards; Watch total balance/total limit ratio; Have a loan record. Rule of 72 => doubling Bits-n-pieces