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Financial Investing Presentation to USF Graduate & Professional Student Council 05/21/10 Delroy M Hunter PowerPoint Presentation
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Financial Investing Presentation to USF Graduate & Professional Student Council 05/21/10 Delroy M Hunter . The Investment Process. What is INVESTING? Is it different from SAVING? Saving requires the consumption of only a part of your income

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Financial Investing Presentation to USF Graduate & Professional Student Council 05/21/10 Delroy M Hunter


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    1. Financial Investing Presentation to USF Graduate & Professional Student Council 05/21/10 Delroy M Hunter

    2. The Investment Process What is INVESTING? Is it different from SAVING? • Saving requires the consumption of only a part of your income • Investing requires a decision to allocate the savings to one or more asset classes, typically with a given objective(s) in mind

    3. The Investment Process What are the implications of “investing”? 1. Requires conscious, active (not passive) decisions 2. A crucial decision is the allocation across asset classes 3. Investing is goal oriented

    4. Essential Nature of Investing 1. Reduce current consumption (save) 2. Invest using a two-step, “top-down” process • Asset allocation • Security selection 3. Enjoy higher (real) consumption at end of investment horizon

    5. Doing the “Two Steps” What is Asset Allocation? • The process of deciding the relative proportions of the investment budget that is invested in various asset classes • The “top” of the “top-down” approach to investing • Different from security selection, which is the identification of individual securities or even sub-classes of assets, once the asset allocation decision has been made • Studies and life experiences show that asset allocation is the dominant determinant of an investor’s terminal wealth

    6. ALLOCATION! What Allocation? Essentials of Asset Allocation • Investor-specific – though investors can be broadly grouped and offered a similar allocation (e.g., Lifestyle Funds) • Is influenced by age, risk tolerance, investment objective, investment horizon • Not a science, although there are some “rules”: • e.g., % equity allocation = (100 – AGE)% • Should be the cornerstone of local and international DIVERSIFICATION

    7. Asset Classes Main asset classes • Equities (stocks) – issued by private sector firms • Bonds (medium to long-term fixed-income securities) – issued by private and public sectors • Real estate (through investment companies or owner-managed) • Cash equivalents (short-term, fixed income securities) – issued by private and public sectors • Commodities (typically through investment companies)

    8. Asset Classes There is a risk-return trade-off to investing in risky securities • What is return? • What is risk? • Where is the trade-off? Higher risk securities are priced to offer higher returns

    9. Investing in Equities • Using investment companies for a fee • Equity mutual funds • Morningstar (http://screen.morningstar.com/FundSelector.html?fsection=ToolScreener) • Yahoo (http://www.finance.yahoo.com/funds) • Investment Co. Institute (http://www.ici.org/stats/index.html) • Exchange traded funds (http://screen.morningstar.com/ETFScreener/Selector.html) • SPDRS (Standard & Poors Depositary Receipts) • VIPERS (Vanguard Index Participation Equity Receipts) • DIAMONDS (DJIA index)

    10. Investing in Equities • Using investment companies for a fee • Closed end funds (http://www.cefconnect.com/Screener/FundScreener.aspx) • Selecting individual stocks (http://finance.yahoo.com/) • Beware of following the hype • Choose stocks that are not highly correlated • Limit the proportion of your portfolio invested in individual stocks

    11. Investing in Fixed Income • Using investment companies for a fee • Bond mutual funds • Morningstar (http://screen.morningstar.com/FundSelector.html?fsection=ToolScreener) • Selecting individual bonds – • U.S. government bonds (http://www.treasurydirect.gov/indiv/myaccount/myaccount_treasurydirect.htm) • Corporate bonds (local and foreign) and foreign sovereigns – see a broker

    12. Investing in Other Asset Classes • Using investment companies for a fee • Real Estate mutual funds (REITs) • (http://finance.yahoo.com/)) • Money Market Funds - through mutual fund families • Commodities - through sector-focused ETFs