A quick introduction to investing by CEO Sarah Deming September 8, 2009

 Why do the rich stay rich? Why can people retire before being eligible for social security?  In the long-run, the Dow (DJIA) has significantly out performed the risk-free investment (the t-bill)

 Equities/Common Stock  Core vs. Growth  Fixed Income  Definition  Different Ways to Invest  Alternative Investments  Options, Real Estate, Hedge Funds, ect.

 The WIC portfolio is made up largely of Core (60%) and Growth (25%) Equities

 “Big and boring is the key to core investments”  Stable, large, blue-chip companies  Large Market Capitalization (<10 Billion)  Consistent, large ROE (return on equity)  Steady Rate of Growth  Dividends  Examples in our portfolio:  Boeing, General Electric, Proctor & Gamble

 “Glamour Stock”  Shares in a company whose earnings are expected to grow at an above-average rate relative to the market  More risky, greater chance of a higher return  Commonly Technology Companies  No Dividends  Examples:  Hansen, Amgen, Applied Materials, Nintendo

 Dow Jones Industrial Average  “When the market is up today”  Price-weighted average of 30 large, significant stocks  Most watched index  Standard & Poor’s 500  Leading indicator of U.S. equities  Reflects the risk/return characteristics of the large cap universe

 A type of investment that yields a regular (fixed) return—primarily, bonds.  Bonds are debt (stocks are equity)  Bonds are used to diversify portfolios  Issuers of bonds are generally corporations and governments  Government bonds are the safest investments and are used as “risk-free” instruments

 Bond funds is a common way to invest in fixed income. Bond funds are primarily invested in a variety of bonds and other debt instruments with a specific focus.  Examples of bond funds WIC holds are Vanguard Total Market Fund and PIMCO Low Duration.  Corporate Bonds  Municipal Bonds (tax advantages)  U.S. Treasury Bills

 Often require large amount of investment  Risky but have a high return  Limited Regulations, complex, low liquidity  Examples Include:  Private Equity  Real Estate  Infrastructure  Commodities  Hedge Funds

 Financial ratios are a good quick way of understanding a company’s basic finances without examining the Income Statement, Balance Sheet, and Cash Flow Statements.  Profitability:  Return on Assets (ROA)  Return on Equities (ROE)  Debt:  Debt Ratio

 Valuation Ratios:  Price to Book  Price/Earnings (P/E)  Dividend Yield

 Since there are no investing classes at Whitman, the best way to learn about investing is to educate yourself (and come to WIC meetings)  Resources:  Investopedia  Wall Street Journal  Yahoo and Google Finance  Morningstar