Principles of Finance_Biederman_Date_022410

Principles of Finance_Biederman_Date_022410 - -After 20...

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WSJ article 2-24 “Lending falls at Epic Pace” pA1 Don’t buy all foreign stocks, buy some U.S. stocks - Diversification: foundation of modern portfolio theory o Needs to happen to monitor risks Correction- overshot target so will go up to where we should be but still overall down ward trend - Bear market trend then correction DJIA Daily Chart - Secondary movement in a primary downward market Trading range - don’t know if want to go up or down or what we want to do so we “sit” - Can last many years (~15) Volatility- measured by VIX (high in China. Hong Kong, Singapore, Brazil) - ‘Stay-to-it ism’—never know when it will change (adopt)-Israel Deal or No Deal example $530,000 Guaranteed, Estimate amount after tax $320,000
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Unformatted text preview: -After 20 years @8%, $1.5 million @ 10.5% $2.35 million-After 25 years @8%, $2.2 million @ 10.5% $3.9 million Financial follies: life experience or ignorance Payment = $100/month, tax deferred/exempt S&P 500 index fund N=45 years, End Value= $1250000-But if wait until 50 to start monthly payment will be about 3000 and the risk will rise IRA (traditional) - takes pre tax money and leaves it until 70, build and gain interest/capital gain and pay no tax until take it out ROTH IRA- use after tax money now. Make $1250pay $250 take $1000 to ROTH IRA, it grows, when take it out it is fax free S&P 500 Index fund- taxes money, buys 500 companies and decides their ranks in the market...
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