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Unformatted text preview: Important Course Activities
Complete Personal Finance Guidebook (pages 77-102) pages 77Guide To Understanding Money and Investing (pages 34-81) 34Buffett Article First Draft of Spending Plan February 16, 2011 Team Investments
Team 1: 3.03% / $10,303 Team 2: (0.18%) / $9,982) Team 3: 1.84% / $10,184 Team 4: 2.00% / $10,200 Team 5: 2.02% / $10,202 Stocks
- What three stocks did you choose? - Give a brief description of the company. - What is the stock’s ticker symbol? - What exchange does it sell on? exchange does it sell on? - What is the stock price? - What type of stock is it? - Who are its competitors? • Why did you choose those particular stocks? Review
Inflation and Compounding
- dangers of inflation the two compounding formulas and how to - know the two compounding formulas and how to use them
CPI and PPI - what are they and how are they used - know the categories 1 Review – Cont’d
Know the importance of budgeting, spending and saving Good debt vs. Bad debt
Credit Cards and Credit Scores Saying for Today
An investor without investment objectives is is like like a traveler without a destination.
Ralph Seger Investing
Investing means that you have money put away for future future use.
What is the operative word or phrase here? INVESTING
INVESTING MEANS – putting away money for future use. INVESTING INVOLVES – the process of making choices. Class Exercise 2 INVESTMENTS Investing Exercise
Come up with as many investment vehicles as you can can think of.
Team Team Exercise • O________ Ownership • •
– – – – – –
Stock Real Estate Small Business CDs Bonds Money Market L _ _ _ _ Investments _ _ _ _ _ _ Lending _ _ _ _ _ _ _ Cash Equivalents C___ ___________ Antiques, Antiques, Growth Stocks, Life Insurance, Corporate Bonds, Mutual Funds, Gem Stones, Money Markets, Fixed Annuities, Sports Memorabilia, Autographs, Eurobonds, ETFs, Futures, Municipal Bonds, Paintings, Currencies, Savings Bonds, Hedge Funds, Value Stocks, Options, Variable Annuities, Treasury Bonds, Coins, Art, Penny Stocks, ETFs, T-Bills, Exploration, Real Estate, TSavings, etc. Investing Vehicles • Stocks • Bonds • Mutual Funds • ETFs • Futures • Currencies So So Many Choices! So Little Money! Money! 3 Team Investments
Team 1: (MGM, Johnson & Johnson, Apple), Municipal Bond, VNQ, Live Cattle , Peso Team 2: (Gap, General Motors, BP Oil), Eurodollar, VCIT, Oil, Renminbi Team 3: (Disney, Wal-Mart, Verizon), Corporate Bond, VAW, Corn, Ruble Team 4: (Nike, Pepsi, Google), Treasury Bill, VFH, Coffee, Rupee Team 5: (GE, Oracle, Comcast), Treasury Bond/Note VEU, Gold, Real Investing / Saving Plans
Come up with as many investment plans as you can investment plans as you can think think of.
Team Team Exercise Investing Investing / Saving Plans
Roth IRA, Traditional IRA, 401k, 403b, Health Savings Account Coverdell Education Account, Coverdell Education Savings Savings Account, DRIPs • Roth IRA • 401(k) or 403(b) or 403(b) • Health Savings Account • Coverdell Education Savings Account 4 Roth IRA
- Individual Retirement Account - Senator William Roth of Delaware - 2009 - 10: Contribution maximum $5,000 *now indexed for inflation* - All earnings are tax free when you or your beneficiary withdraw them Roth IRA – Cont’d
- Contributions to a Roth IRA are not tax deductible - You can only contribute “earned income” into ou ca co a Roth IRA - Withdrawals are tax free - Roth IRA does not require distributions based on age IRAs?
- Pension Plan
NOT TAXED TAXED 401k or 403b $$ $$ Reg IRA $$$$ - Mainly employer sponsored - As an employee you can elect to contribute a portion of your wages to a plan $$$ TAXED Roth IRA NOT TAXED $$ $ $$$ $$$ - Deferred wages are not subject to federal income tax 5 401k or 403b – Cont’d
- Employers have the option of making contributions (Temple: employee 4.5% / Temple 8.5%) - Employer contributions are deductible on the employer’s federal income tax return - Employee benefit - Must pay taxes on earnings Health Savings Account
- Alternative to traditional health insurance - You decide what types of investments to make with the money in the account in order to make it grow - Available to help you pay for the expenses your plan does not cover -A savings account into which you can
deposit money on a tax-deferred basis Future: ???????? Coverdell Education Savings Account
- Similar to a Roth IRA (formally known as Education IRA) - For educational purposes (books, tuition, fees, supplies, room & board, computer technology) - Nondeductible contributions - Account grows tax free - Withdrawals tax free Stocks • Partial ownership in a company • Dividends and Capital Appreciation • More risky than mutual funds or bonds risky than mutual funds or bonds • Many different categories of stocks as • Annual return ≈ 8-10% related to size of company or business of company 6 Types of Stocks • Blue chip stocks • Cyclical stocks • Defensive stocks • Growth stocks • Income stocks • International • Market capitalization • Penny stocks • Sector • Value stocks Mutual Funds • A mutual fund company is a company that
buys different types of stocks bonds bonds • Less risky than stocks but more risky than • Different categories of mutual funds as
related to type of stocks bought Class Exercise • Lower rate of return than stocks Types of Mutual Funds • Asset Allocation Funds • Bond Funds • Equity Funds • Foreign Funds • Growth Funds • Large-Cap Funds • Money-Market Funds • Sector Funds • Value Funds ETFs • Are open-ended mutual funds open• Can be traded at any time throughout the • Can be ttraded jjust llike a stock. be raded ust ike stock • Replicate a stock market index such as the •
Class Exercise course of the day. S&P 500 Replicate a market sector such as energy or technology, or a commodity such as gold or petroleum. 7 Bonds Types of Bonds • A debt security / loan / investment (I O U) • A contract • Issuer is the borrower (debtor), the holder is the • Borrower pays interest to the lender, also known • Principle paid back at a later date • Used to finance long-tem investments • Lower rate of return and less risky than stocks
as the coupon lender (creditor) • Asset Backed Bonds • Corporate Bonds • Eurobonds • Foreign Bonds • Mortgage-backed Bonds • Municipal Bonds • Inflation (TIPs) • Treasury Bonds • Zero Coupon Bonds Class Exercise Futures Currencies
• • •
Physical aspect of a nation’s money supply Central banks control the supply of money Money functions - medium of exchange - unit of account - store of value Currency most used in international transactions? “Greenback” • Buy or sell a particular commodity or financial
instrument at a pre-determined price in the prefuture • Contract (standardized quality and quantity) • Highly leveraged • Used for Hedging or Speculating • Natural Gas, Oil, Corn, Soybean Oil, Coffee,
Orange Juice, Sugar, Pork Bellies, Lumber • 8 Currencies Cont’d • United States: dollar (USD) • Mexican: peso (MXN) • Russia: ruble (RUB) • China: yuan renminbi (CNY) • India: rupee (INR) • Brazil: real (BRL) 9 ...
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This note was uploaded on 04/19/2011 for the course EE 0822 taught by Professor Lengkeek during the Spring '11 term at Temple.
- Spring '11