How To Invest In A Fund

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Maximilian Neal
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1 Utah Valley University: Investing Basics Workshop Sponsored by UVU s Human Resources Department and the Woodbury School of Business Personal Financial Planning Program

2 Stocks, Bonds & Mutual Funds Cost of Investing Building a Portfolio Diversification Selecting Investments Retirement Prep.

3 URS Retirement Options For non-exempt, full-time employees (URS) Non-Contributory Defined Benefit 7.59% URS 401(k) 2.41% Executive/Faculty/Exempt employees 401(a) Defined Contribution 14.2% All employees: 457 plan- a cross between an IRA & 401(k) 529 plan- educational IRA

41% Executive/Faculty/Exempt employees 401(a) Defined Contribution Plan @ 14.

4 Investing 101

5 Mutual Fund Basics

6 Index Funds

7 Does return matter? Real Returns Would you rather have a real (net) return of 7% or raw (gross) return of 9%? What erodes return?

8 Apples for Sale $2.49 each $0.10 each

9 Expense Ratios

10 Are loads good or bad? Any Questions?

11 Building Your Portfolio

12 Asset Classes Grouping Investments

13 Why Mix assets

14 Why Mix assets

15 Why Mix assets

17 How it Works

19 Source: 7-Twelve, Craig Israelsen Diversification

20 Source: 7-Twelve, Craig Israelsen Diversification

21 What we teach: Choosing a Fund Risk premiums theory alpha beta inflation protection S.D. distributions correlation coefficients covariance ratios return periods Sharpe ratio Treynor s ratio geometric mean arithmetic mean Trades margins long positions short positions options derivatives futures hedging indexing asset classes holding period returns innumerable valuation techniques loads ETFs expense ratios REITs regulation trading costs inflation protection EMH CAPM E(r) portfolio optimization behavioral bias Fama-French arbitrage Markowitz diversification SML tracking monitoring rebalancing survivorship bias market efficiency bubbles behavioral economics ratios TIPS liquidity risk management liquidity bond pricing YTM P/E sector rotation industry life cycle fiscal policy monetary policy P/B ratio.. What you need: Asset allocation Expense ratios

22 Researching Funds

23 Take Action Now You have $8,000 going into your UVU retirement account every year. You earn an average of 7%, but diversification could increase it to 8.5%. What s the difference? Year: 7.00% 8.50% Difference 1 $ 8, $ 8, $ $ 49, $ 51, $ 2, $ 118, $ 128, $ 10, $ 350, $ 419, $ 68, $ 808, $ 1,078, $ 269,599.48

24 Portfolio Maintenance & Retirement Preparation Sponsored by UVU s Human Resources Department and the Woodbury School of Business Personal Financial Planning Program

25 Three Mistakes Most Investors Make Funding Retirement Postpone starting to fund retirement Make contributions that are TOO small Sell low and buy high

26 How much should you be putting away monthly? Retirement Age: Present Age , ,502 1, ,328 1,502 1, or older: See a financial planner, now

27 Rebalance $100,000 Portfolio Asset Class % Investment $ Invested Small Cap 20% ABC Fund $20,000 Large Cap 20% DEF Fund $30,000 International 20% GHI Fund $15,000 Bonds 20% JKL Fund $20,000 Real Estate 20% MNO Fund $15,000 Sell $10,00 of the Large Cap and buy $5,000 each of the International and Real Estate

28 Rebalancing (Russell growth & Agg. Bond) Let s assume that you have $8,000 going into your UVU retirement account every year. You rebalance to 50% in two funds each year. Year: Rebalance Static Difference 1 $ 10, $ 10, $ $ 54, $ 53, $ $ 153, $ 151, $ 1, $ 587, $ 574, $ 13, $ 660, $ 601, $ 58, Various rebalancing strategies with index funds available through UVU s plan resulted in up to a 10% larger portfolio after 24 years.

29 IRAs- ROTH vs. Traditional IRA- Individual Retirement Account Traditional IRA: Get a tax break for saving for retirement Pay taxes on all funds at retirement Tax deferred growth ROTH IRA: All funds are taxed now No taxation on funds in the account if you follow the rules Which is best for you?

30 Annuities Annuities- A series of payments A great retirement options for some. Can be set up with nearly infinite payment options Watch for fees Single payment vs. serial funding Payment duration Spousal considerations

31 The Good News & The Bad News The good news is: we re living longer; The bad news is: we re living longer.

33 BOOMERANGERS

34 Probability Source: Annuity 2010 Mortality Tables Probability of a 65-year-old living to various ages 100% 75% Male Female At least one spouse 50% % % Age

35 Squaring The Curve Health Status Squared Perfect 10 Death AGE Traditional

37 Why Social Security IS in trouble:

38 Choosing a Planner 1) Check for credentials (CFP, CFA) 2) Go to FINRA.org and/or SEC.gov (NASSA.org for individual states) 3) At your first meeting, never commit to handing over money 4) Ask about withdrawal penalties 5) Ask for a written statement as to why the investment is suitable for you 6) Understand recommendations completely- how do they your plan 7) Reverse the roles- ask yourself how the planner makes money 8) Ask about products that are more secure that have similar investment characteristics 9) Watch for warnings: Too good to be true risk free Sign now, or no deal 10) Be cautious with references- someone trusts everyone

39 How Can An Advisor Help You? Risk tolerance Diversify your portfolio Choose mutual funds Rebalance annually Look for additional services TIAA-CREF Dave Penrose ex: 5103 FIDELITY Teo Ngatuvai URS

Stonegate Wealth Management. Registered Investment Advisor 17-17 Route 208 Fair Lawn, N.J. 07410 (201) 791-0085 www.stonegatewealth.

Stonegate Wealth Management. Registered Investment Advisor 17-17 Route 208 Fair Lawn, N.J. 07410 (201) 791-0085 www.stonegatewealth. Stonegate Wealth Management Registered Investment Advisor 17-17 Route 208 Fair Lawn, N.J. 07410 (201) 791-0085 www.stonegatewealth.com Stonegate Wealth Management $200 Million in assets under management.