Financial Terms Agenda• Introduction• Assets• Investment Methods• Markets• Selecting a Financial Advisor

Introduction

• Definitions, not investment advice• Some definitions vary widely• Some are very broad (mutual fund, ETF)• Some depend on context

Common definitionContribution Gift or donation to charityAllocation Amount expected of an item in short supplyElection The process of choosing political candidatesDistribution How companies get goods to consumersRollover A trick one teaches their dogSecurity Freedom from danger/fearVehicle A car or truck

Common Words

4

Net WorthPLOTTING YOUR COURSE

Assets (what you own)

− Liabilities (what you owe)_____________________________________________________________________________

= Net Worth

5

BUILDING YOUR ASSETS

Savings vs. Investing

6

Financial Plan

• Financial goals• Personal net worth• Cash flow analysis• Retirement strategy• Comprehensive risk management• Long-term investment plan• Tax reduction strategy• Estate plan

7

Investment Portfolio

• Retirement– Taxable– Tax Deferred– Roth

• Other Investment Goals– Education– Legacy

• Charity• Family

8

Portfolio Terms

• Diversification• Allocation• Rebalance• Risk

9

Types of Assets

• Invest in company ownership– Common stock– Preferred stock– Restricted stock– Venture Capital

10

Types of Assets, continued

• Corporate Bonds – loan money to company– Credit Rating

• Investment Grade• Junk

– Maturity– Convertible– Callable– Secured/unsecured– Senior/subordinated

11

Types of Assets, continued

• US Government Bonds– Federal– State– Local

• Government bonds for other countries

12

• Cash– FDIC Insured– Money Market

• Commodities• Real Estate• Alternative• Annuity

– Pension– Social Security– Purchased

Types of Assets, continued

13

Returns over Time

1 YR 3 YR 5 yr 10 yr

Total US Stock (5.17) 9.00 7.92 13.26

US Large Cap Stock (500 indes) (2.36) 9.24 10.92 14.98

US Mid-Cap Stock (9.22) 6.40 6.24 13.91

US Small Cap Stock (9.33) 7.62 5.24 13.53

US Short Term Bond 1.38 1.40 1.32 2.09

US Intermediate Bond (.08) 2.09 2.50 3.48

US Long Term Bond (4.68) 4.03 5.37 5.88

Developed Market (14.79) 3.25 0.87 6.49

Total International Stock (14.61) 4.44 1.05 6.64

14

Asset Average Returns

AssetAllocation

Average annual return

Best year Worst year Years with loss

100% bonds 5.4% 32.6% (1982) -8.1% (1969) 14 of 92

50% stocks/ 50% bonds

8.4% 32.3% (1933) -22.5% (1931) 17 of 92

100% stocks 10.3% 54.2% (1933) -43.1% (1931) 25 of 92

15

Investment Methods

• Individual Stocks/Bonds• Mutual Fund• Exchange Traded Fund (ETF)• Closed-end mutual funds

16

Mutual Fund or ETF?

• Common Features– Collection of stocks, bonds, other investments– Diversified– Have market risk– Expense Ratio– Vary widely, need to look at details

17

Mutual Fund - ETF Differences

ETF Mutual Fund

Find what you own

Holdings are disclosed daily. Holdings updated per the policy of each fund company data usually at least 1 month old.

Trade Throughout the trading day and during extended hours trading.

Trades fulfilled once per day, after market close.

Costs May have commissionBid-Ask spreadPremium/Discount

May charge sales loads, short-term redemption and/or transaction fees

18

Fund Types

• Active– Generally higher costs– Manager making specific decisions

• Passive– Stock Market Index (Dow, S&P, NASDAQ, Russell)– Sectors– Value– Growth– and more

• Hybrid Funds: Balanced, Lifestyle, Target

19

Market Terms

• Index– Dow Jones– S&P 500– NASDAQ– Russell– etc

20

DOW Jones Industrial Companies

Apple Inc International Business Machines Pfizer Inc

American Express Co Intel Corp Procter & Gamble Co

Boeing Co/The Johnson & Johnson Travelers Cos Inc

Caterpillar Inc JPMorgan Chase & Co UnitedHealth Group Inc

Cisco Systems Inc Coca-Cola Co United Technologies Corp

Chevron Corp McDonald's Corp Visa Inc

Walt Disney Co 3M Co Verizon Communications

Dow Inc Merck & Co Inc Walgreens Boots Alliance

Goldman Sachs Group Inc Microsoft Corp Walmart Inc

Home Depot Inc NIKE Inc Exxon Mobil Corp

21

S&P Sectors

• Consumer discretionary• Consumer staples• Energy• Financials• Health• Industrials• Materials• Real estate• Technology• Communication services• Utilities

22

Type of Market

• Size of company– Large cap– Mid cap– Small cap

• Geographic– US– Developed– Developing: Emerging and Frontier

23

Developed Market

Country FTSE MSCI S&PAustralia Y Y YAustria Y Y YBelgium Y Y YCanada Y Y YCyprus N Y NDenmark Y Y YFinland Y Y YFrance Y Y YGermany Y Y YHong Kong Y Y YIceland N Y NIreland Y Y YIsreal Y Y YItaly Y Y Y

Country FTSE MSCI S&PJapan Y Y YLuxembourg N Y YNetherland Y Y YNew Zealand Y Y YNorway Y Y YPoland Y N NPortugal Y Y YSingapore Y Y YSouth Korea Y N YSpain Y Y YSweden Y Y YSwitzerland Y Y YUnited Kingdom Y Y YUnited States Y Y Y

24

Investment Costs

• Buy/Sell– Commissions– Front end load– Back end load– Trading costs

• Annual– Management fees

• Advisor

25

Why a Financial Planner

• Information Overload• Too Many Choices• Too Little Time• Lack of Expertise• Personal Biases

26

Finding a Financial Advisor

• Ask a friend• Questions to ask potential advisors

– How are you compensated?– What is your education and certifications?– How many clients like me do you have?– What specifically will you do for me?– How do you prefer to communicate?

• Fiduciary• Check record• Comparison shop for products• Know the warning signs of fraud

27

FINRA Suggested Questions

• What experience do you have working with people like me?• What professional licenses do you currently hold?• Are you registered with FINRA, the SEC or a state securities regulator? If so, for how

long and in what capacity?• Do you have any disciplinary actions, arbitration awards or customer complaints? If

so, please explain them. Compare responses to information found in BrokerCheck and other third-party sources.

• Do you or your firm have an overarching investment philosophy? What type of investment products and services do you offer? Are there any products or services you don’t offer? Why?

• Do you or your firm impose any minimum account balances on customers? If so, what are they? What happens if my portfolio falls below the minimum?

• How do you get paid? Do you receive commissions on products I buy or sell? A percentage of the amount of my assets you manage? A flat fee? Any other method?

• What other fees and expenses do you charge?• Can you provide me with any customer references?• Are there conflicts of interest that we have not discussed? What are they and how do

you resolve them?

28

Credit Reports & ScoresMANAGING CREDIT & DEBT

Credit report = History of payments& overdue debt

Credit score = Number that helps lenders determine your credit worthiness

Credit Freeze = Restrict access to credit report.

29

Get Your Free Credit ReportMANAGING CREDIT & DEBT

877-322-8228