1. Session 1 Industry Perspective Why Invest? Key Principles for Investing Understanding Asset Allocation Investing in Mutual Funds Why FIDUCIARY Matters

2. Why Should You Invest? Because you want to stop working (someday) Because you want to be financially secure Because you need to stay ahead of inflation Because you want to have freedom Because life is short and YOU HAVE IMPORTANT LIFE GOALS

3. Key Principles For Investing 1.Start with Goals 2.Understand the Concept of Asset Allocation 3.Know the Risk/Return Relationship 4.Diversification Can Reduce Risk 5.Costs Create Hurdles 6.Invest by Time Horizon 7.Think Long Term & Take Action 8.Be Systematic & Stay on Track

5. 2. Understand the Principles of Asset Allocation © 2010 Morningstar. All Rights Reserved. 3/1/2010 Asset allocation is the process of combining asset classes such as stocks, bonds, and cash in a portfolio in order to meet your goals. Stocks Bonds Cash

6. How to Get Started Risk and Return Investment ADVICE – Why Fiduciary Matters

7. Risk Tolerance Spectrum © 2010 Morningstar. All Rights Reserved. 3/1/2010 High risk Low risk Small stocks International stocks Large stocks Corporate bonds Government bonds Cash equivalents High return Low return

8. Mutual Funds Can Provide Solutions A mutual fund is a company that pools money from many investors Offered in Most Retirement Plans Convenient and Flexible Wide range of investment options Costs CAN be Lower

9. Asset Class RISK and Returns Highs and lows: 1926–2009 Past performance is no guarantee of future results. Each bar shows the range of annual total returns for each asset class over the period 1926– 2009. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2010 Morningstar. All Rights Reserved. 3/1/2010 Compound annual return: 11.9% 9.8% 5.4%5.3% 3.7% Small stocks Large stocks Long-term government bonds Intermediate-term government bonds Treasury bills 150% 100 50 0 –50–50 –100 142.9% –58.0% –43.3% –14.9% –5.1% 0.0% 14.7% 29.1% 40.4% 54.0%

10. Why Fiduciary Matters? How important is it that your financial advisor have a fiduciary responsibility to put your interests first? Do you want to rely on the advice that is provided to you? Are you ever concerned that an advisor might be recommending something that benefits them more than you? Has the advisor disclosed all important details including all expenses and risks? Has the advisor disclosed all real or potential conflicts of interest?

11. 5 Fiduciary Principles Put the client’s best interest first Act with due care and utmost good faith Do not mislead clients; provide clear and conspicuous, full and fair disclosure of all material facts Avoid conflicts of interest Disclose and fairly manage any remaining material conflicts in the client’s favor

12. Session Two Key Principles For Investing The Power of Compound Interest –Rule of 72 What is investment diversification important? Sequence Risk Why Investment Expenses Matter

13. Key Principles For Investing 1.Start with Goals 2.Understand the Concept of Asset Allocation 3.Know the Risk/Return Relationship 4.Diversification Can Reduce Risk 5.Costs Create Hurdles 6.Invest by Time Horizon 7.Think Long Term & Take Action 8.Be Systematic & Stay on Track

14. “ Rule of 72 ” * Divide 72 by your expected investment return to find out how long it will take to double your money $Small Company Stocks: 72/12.1 = 6 years $Large Company Stocks:72/9.9 = 7.3 years $Government Bonds:72/5.5 = 13.1 years $Treasury Bills:72/3.6 = 20 years $Inflation:72/3.0 = 24 years

15. 0.10 1 10 100 1,000 $10,000 192619361946195619661976198619962006 Historical Returns Ibbotson ® SBBI ® Stocks, Bonds, Bills, and Inflation 1926–2010 Past performance is no guarantee of future results. Hypothetical value of $1 invested at the beginning of 1926. Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2011 Morningstar. All Rights Reserved. 3/1/2011 $16,055 $2,982 $21 $12 Compound annual return Small stocks 12.1% Large stocks Government bonds Treasury bills Inflation 9.9 5.5 3.6 3.0 $93

16. Power of Compounding Safe T Bills vs Balanced Investments Beth Saves $2,400 a year for 30 years in a balanced mutual fund that returns 8% Total Investment = $60,000 8% average annual return After 30 years of investing Beth has $293,630 Michael Saves $2,400 a year for 30 years in U.S. Treasury Bills and CDs that return 3.6% Total Savings = $60,000 3.6% average annual return After 30 years of saving Michael has $130,487

17. Diversification Can Reduce Risk Mixing Asset Classes Mutual funds provide an opportunity to diversify

18. Asset Class RISK and Returns Highs and lows: 1926–2009 Past performance is no guarantee of future results. Each bar shows the range of annual total returns for each asset class over the period 1926– 2009. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2010 Morningstar. All Rights Reserved. 3/1/2010 Compound annual return: 11.9% 9.8% 5.4%5.3% 3.7% Small stocks Large stocks Long-term government bonds Intermediate-term government bonds Treasury bills 150% 100 50 0 –50–50 –100 142.9% –58.0% –43.3% –14.9% –5.1% 0.0% 14.7% 29.1% 40.4% 54.0%

19. Reduction of Risk Over Time 1926–2010 Past performance is no guarantee of future results. Each bar shows the range of compound annual returns for each asset class over the period 1926–2010. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2011 Morningstar. All Rights Reserved. 3/1/2011 Small stocksLarge stocksGovernment bondsTreasury bills –60 –30 0 30 60 90 120 150% 1-year Holding period 5-year20-year1-year5-year20-year1-year5-year20-year1-year5-year20-year Compound annual return: 12.1% 9.9% 5.5% 3.6%

20. 200819961997199819992000200120022003200420052006200720092010 11.623.033.428.629.821.522.817.860.720.714.026.925.9 9.917.622.820.327.35.93.81.639.218.47.816.21.6 5.510.315.913.121.00.63.7–6.528.712.07.315.8–20.7 5.46.415.912.214.3–3.6–0.8–13.324.810.95.712.9–36.7 4.75.25.34.94.7–9.1–11.9–15.71.48.54.94.8–37.0 –5.2–0.92.1–7.3–9.0–14.0–21.2–22.11.01.23.01.2–43.1 32.5 28.1 26.5 14.0 0.1 –14.9 Asset-Class Winners and Losers Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2011 Morningstar. All Rights Reserved. 3/1/2011 Highest return Lowest return Small stocks Large stocks International stocks Long-term government bonds Treasury bills Diversified portfolio 31.3 15.1 13.6 10.1 8.2 0.1

21. Diversification May Lessen the Impact of Market Swings Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2011 Morningstar. All Rights Reserved. 3/1/2011 Highest return Lowest return (100% Stocks)(75% Stocks, 25% Bonds)(25% Stocks, 75% Bonds)(100% Bonds)(50% Stocks, 50% Bonds) Portfolio 1 Portfolio 2 Portfolio 4 Portfolio 5 Portfolio 3 199619971998199920002001200220032004200520062007200820092010 10.1 9.1 6.8 5.5 23.033.428.621.012.67.612.928.710.94.9 17.526.924.415.17.02.93.621.88.74.1 12.220.519.99.31.5–2.0–5.315.16.63.2 7.114.415.13.7–3.9–6.9–13.98.64.42.3 2.18.410.2–1.8–9.1–11.9–22.12.42.31.4 15.8 12.5 9.3 6.2 3.1 8.0 13.1 –1.5 –26.4 –37.0 –14.6 26.5 19.1 4.6 –2.4 11.7 15.1 13.5 9.5 7.1 11.6

22. 9 Years of Retirement - Actual, and Reverse Order Summit Financial Strategies, Inc.

23. Why Investment Expenses Matter Low fees are likely to be the best predictor of a mutual fund's future success, according to a new study by Morningstar Inc. Low-cost funds performed better on average than high-cost funds

24. Expense Comparison Beth Invests $60,000 in her 403 B in the Vanguard Wellington Fund Total Investment = $60,000 Beth ’ s Fund earns an 8% average annual return before deducting fund expenses which are.22% Future Investment Value: $567,932 Michael Invests $60,000 his 403 B in the VALIC PD Vanguard Wellington Fund Total Investment = $60,000 Michael ’ s Fund earns an 8% average annual return before deducting fund expenses which are 1.55% Future Investment Value: $391,310

25. Session 3 The Seven Stages of Money Maturity Spending Plans Discretionary Spending Worksheet

26. The Seven Stages of Money Maturity ® ( Information provided by George Kinder and The Kinder Institute of Life planning) Maturity Adulthood Childhood Aloha Vision Vigor Understanding Knowledge Pain Innocence

27. Spending Plans Work A Spending Plan means that you chose how to spend the money you have available to you.

28. Spending Plans Action: Track Spending For 6 Months $ office.microsoft.com/en-us/templates free cash flow Excel template office.microsoft.com/en-us/templates $ www.budgetpulse.com www.budgetpulse.com $ www.Mint.com.com www.Mint.com.com Focus on GOALS and compare actual expenses to planned expenses

30. Spending TIPS Write down every cent that you spend Build in a 30 day waiting period Shop with purpose - Make a list and only purchase items on your list Ask “is there a lower cost alternative?” Convert the cost of a purchase into the number of hours you must work to pay for it Couples should have pre agreed upon spending limits Remember: Little Things Make A Big Difference

32. Spending Fast Case Study Expenses Reduced In Feb 2011 Groceries (spent $50 per week)($200) Dinners Out($135) Takeout($129) Clothes($25) "Weak moment spending"($40) Misc.($20) Saved($549)

33. Recommendation The Financial Success Approach

34. Financial Success Approach Track Expenses and have a spending plan - know your core rate of spending! Pay down high interest Credit Cards Put your contributions / savings on “automatic pilot” and understand that declines will happen from time to time. Have an adequate emergency fund (20-40% of annual income)

35. Financial Success Approach A well-diversified equity allocation before retirement for long-term money Begin reducing equity exposure ~ 5 years before retirement Be patient with your investments Stay on Track – Focus – Rebalance Get help when you need it from a FEE ONLY Advisor

36. Questions For Financial Planning Help: www.NAPFA.ORG www.GarrettPlanningNetwork.com Email questions to: michael@knightinvestmentplanning.com 847-367-5191