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Investing in the Stock Market. The stock market is often compared to gambling. The stock market is actually a lot more like gardening. Planting. Growing. Harvesting. Damage Control. And maybe more damage control. Creativity. Money is the language of cooperation.

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PowerPoint Slideshow about 'Investing in the Stock Market' - Melvin


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Presentation Transcript
slide10

Money is the language of cooperation.

http://www.luthersem.edu/images/home/Student_group_holding_hands2.jpg

slide11

Free markets allow thousands of people to cooperate in making an ordinary pencil.

Milton Friedman

Economist, University of Chicago

http://elver.cellosoft.com/Milton_Friedman.jpg

http://www.luthersem.edu/images/home/Student_group_holding_hands2.jpg

social impact of investing
Social Impact of Investing

How do companies use the money you invest?

How does this affect ordinary people?

social impact of investing13
Social Impact of Investing

How do companies use the money you invest?

How does this affect ordinary people?

expand existing businesses

start new businesses

social impact of investing14
Social Impact of Investing

How do companies use the money you invest?

How does this affect ordinary people?

expand existing businesses

start new businesses

creates more jobs

creates higher-paying jobs

slide15

But how do I do it?

Open a Roth IRA

do it right now, takes 10 minutes

Buy shares of SSO

once a year, just 10 minutes

(once a month is even better!)

slide17

Opening your Roth IRA

  • Go to office of a discount stock broker
  • Fill out a form to open a Roth IRA account
  • Give them $500 to put in your account
slide18

Opening your Roth IRA

  • Go to office of a discount stock broker

can also do this on-line, if you like

  • Fill out a form to open a Roth IRA account
  • Give them $500 to put in your account
slide19

Opening your Roth IRA

  • Go to office of a discount stock broker

can also do this on-line, if you like

  • Fill out a form to open a Roth IRA account
      • takes about 10 minutes
      • they give you an account number and password
  • Give them $500 to put in your account
slide20

Discount stock brokers are very different

Minimum amount you may invest

Fee per purchase

Scottrade

$500

$7

TD Ameritrade

No minimum

$10

Charles Schwab

$1,000

$13

E*Trade

$1,000

$13

Fidelity

No minimum

$20

http://scottrade.com/online_broker_comparison/discount_brokerage_comparison.asp

slide21
Scottrade is the cheapest right now
  • only $7 fee for each purchase
  • only $500 minimum is needed to invest
  • as fast as opening a checking account
slide23

Roth IRA

Instead of choosing this box for an individual account…

slide24

Roth IRA

Choose this box for a Roth IRA account

slide25

Roth IRA

and write in “Roth” on this line

Choose this box for a Roth IRA account

slide26

What you get

  • Account number
  • Password
  • Deposit slip for your $500
slide27

But how do I do it?

Open a Roth IRA

do it right now, takes 10 minutes

Buy shares of SSO

once a year, just 10 minutes

(once a month is even better!)

slide28

The Next Day

Your new Roth IRA:

Cash $500

Total Account Value $500

slide29

Your new Roth IRA:

Cash $500

Total Account Value $500

Buy SSO

SSO costs $70 for one share

You buy 7 shares for $490

Fee is $7 for the SSO purchase

slide30

Your new Roth IRA:

Cash $500

Total Account Value $500

After SSO purchase:

SSO – 7 shares $490

Cash $3

Total Account Value $493

Buy SSO

SSO costs $70 for one share

You buy 7 shares for $490

Fee is $7 for the SSO purchase

slide31

Your new Roth IRA:

Cash $500

Total Account Value $500

After SSO purchase:

Five years later:

SSO – 7 shares $490

Cash $3

Total Account Value $493

SSO – 7 shares $980

Cash $3

Total Account Value $983

SSO costs $70 for one share

You buy 7 shares for $490

Fee is $7 for the SSO purchase

Five years pass

WOW!!!

slide33

Time

We usually just think of time as something that turns young people into old people.

slide35

In your job, YOU do all the work.

In the stock market, TIME does all the work.

slide36

In your job, YOU do all the work.

but only if you turn on the faucet

In the stock market, TIME does all the work.

slide37

In your job, YOU do all the work.

1. Open a Roth IRA

2. Buy shares of SSO

In the stock market, TIME does all the work.

but how do i get my money back39
But how do I get my money back?

Easy - go to broker’s office & ask them for a cashier’s check.

For larger accounts, they even give you a regular checkbook, just like an ordinary checking account.

slide40

Two Easy Steps

Open a Roth IRA

do it right now, takes 10 minutes

Buy shares of SSO

once a year, just 10 minutes

(once a month is even better!)

slide41

Why is SSO a

simple, safe strategy for beginners?

slide42

Combined Share Prices of the Biggest 500 Companies (S&P500)

The basic direction of the US stock market is overwhelmingly upwards

Now

1950

http://finance.yahoo.com/q/bc?s=%5EGSPC&t=my&l=on&z=l&q=l&c=

slide43

SSO

stock price

SSO

  • combination of the largest 500 U.S. companies
  • stock price has risen at 14.8% per year for 50 years

General Motors

1962

Now

http://finance.yahoo.com/q/bc?t=my&s=GM&l=on&z=l&q=l&c=&c=%5EGSPC

slide44

When you buy SSO, your only risk is that the entire United States economy will continue to succeed as it has for 200 years.

slide45

crash of 2000

What about stock market crashes?

SSO

stock price

still haven’t recovered!

crash of 1987

crash of 1973-1974

http://finance.yahoo.com/q/bc?t=my&s=GM&l=on&z=l&q=l&c=&c=%5EGSPC

slide46

When you buy SSO every year, crashes average out quickly.

Suppose you started buying SSO at the worst possible time

March 24, 2000

Purchases in later years are much cheaper

http://finance.yahoo.com/q/bc?t=my&s=SPY&l=on&z=l&q=l&c=

slide47

When you buy SSO every year, crashes average out quickly.

Price today

Suppose you started buying SSO at the worst possible time

March 24, 2000

Of the last 8 purchases, 7 are already profitable

http://finance.yahoo.com/q/bc?t=my&s=SPY&l=on&z=l&q=l&c=

buy sso on your birthday each year
BuySSOon your birthday each year.

http://www.americangirlplace.com/images/chi/pkgs/img_chi_pkgs_party.jpg

buy sso on your birthday each year49
BuySSOon your birthday each year.

once a month is even better!

http://www.americangirlplace.com/images/chi/pkgs/img_chi_pkgs_party.jpg

slide50

Is there a

better strategy than SSO?

slide51

EEM stock price is increasing at 36% per year

SSO Standard & Poor’s 500 Index Fund (Ultra)

- largest 500 U.S. companies

EEM Emerging Markets Index Fund (iShares ) - large companies outside the U.S.

SSO stock price is increasing at 14.8% per year

http://finance.yahoo.com/q/bc?s=SPY&t=my&l=off&z=l&q=l&c=eem,iws

slide52

Choosing Your Risk Level

Riskiest

Individual Companies

Exchange Traded Funds

Each is a group of similar stocks

SSO

The 500 largest US companies

Safest

slide53

Choosing Your Risk Level

Riskiest

Individual Companies

Exchange Traded Funds

Each is a group of similar stocks

Just one

choice!

SSO

The 500 largest US companies

Safest

slide54

Choosing Your Risk Level

Riskiest

Individual Companies

600 choices

Exchange Traded Funds

Each is a group of similar stocks

Just one

choice!

SSO

The 500 largest US companies

Safest

slide55

Choosing Your Risk Level

Riskiest

8000 choices

Individual Companies

600 choices

Exchange Traded Funds

Each is a group of similar stocks

Just one

choice!

SSO

The 500 largest US companies

Safest

slide56

Exchange Traded Funds

(ETFs)

An ETF is a group of related stocks

slide57

SSO

Ultra S&P500 ETF

slide58

SSO

Ultra S&P500 ETF

Includes many different companies

slide59

SSO

Ultra S&P500 ETF

Includes 500 different companies

Diversified across many sectors

slide60

IYE

Energy ETF

slide61

IYE

Energy ETF

Includes many different companies

slide62

IYE

Energy ETF

Includes many different companies

Nearly all are in the energy sector

slide64

Retirement Basics

  • typical old-style pension plan
  • 401(k) plan
  • Roth IRA
  • Roth 401(k)
slide65

Retirement Basics

  • typical old-style pension plan
    • you get exactly $3000 per month until you die
    • amount never rises (worth 3.4% less eachyear)
  • 401(k) plan
  • Roth IRA
  • Roth 401(k)
slide66

Retirement Basics

  • typical old-style pension plan
    • you get exactly $3000 per month until you die
    • amount never rises (worth 3.4% less eachyear)
  • 401(k) plan much better
    • you may invest the money, get 14.8% more each year
    • some employers makematching contributions
    • but you still have to pay tax
  • Roth IRA
  • Roth 401(k)
slide67

401(k) Retirement Plan

Ted Benna

https://www.expertplan.com/images/tedbenna2.jpg

slide68

401(k) Retirement Accounts

  • Your best deal if your employer makes a large matching contribution
  • Some employers put $50 into your 401(k) account for every $100 you put in
  • Basically like getting 50% interest, an incredible deal
slide69

Some Brief History

  • typical old-style pension plan
    • you get exactly $3000 per month until you die
    • amount never rises (worth 3.4% less eachyear)
  • 401(k) plan much better
    • you may invest the money, get 14.8% more each year
    • some employers makematching contributions
    • but you still have to pay tax
  • Roth IRA
  • Roth 401(k)
slide70

Some Brief History

  • typical old-style pension plan
    • you get exactly $3000 per month until you die
    • amount never rises (worth 3.4% less eachyear)
  • 401(k) plan much better
    • you may invest the money, get 14.8% more each year
    • some employers makematching contributions
    • but you still have to pay tax
  • Roth IRA also better, but unlike 401(k)
    • you may invest the money, get 14.8% more each year
    • employer not involved,no matching contributions
    • you pay no tax
  • Roth 401(k)
slide71

Roth IRA

Roth Individual Retirement Account -1998

  • you pay NO TAX on Roth IRA
  • you can only contribute $4000 per year
  • start receiving retirement pay at age 60
  • no penalty for early withdrawal
    • but pay 15% capital gains tax on any increases

William V. Roth, Jr.

U.S. Senator,Delaware

www.fairmark.com/rothira/roth101.htm

http://www.sussexcountyonline.com/campaign2000/results/images/roth.jpeg

slide72

15% Capital Gains Tax

  • Deposit $4000 into a Roth IRA in 2007
    • Invest the $4000 in a good stock (like SSO)
    • Stock price increases 10% by 2008 ($400)
  • Roth IRA is worth $4400 in 2008
    • you lose your job, and you need money
    • withdraw the entire $4400 to live on
    • pay 15% tax on $400 increase ($60 tax)
    • you have $4340 left to live on
slide73

Some Brief History

  • typical old-style pension plan
    • you get exactly $2000 per month until you die
    • amount never rises (worth 3.4% less eachyear)
  • 401(k) plan much better
    • you may invest the money, get 14.8 % more each year
    • some employers makematching contributions
    • but you still have to pay income tax each year
  • Roth IRA also better, but unlike 401(k)
    • you may invest the money, get 14.8 % more each year
    • employer not involved,no matching contributions
    • you pay no taxes
  • Roth 401(k)
slide74

Some Brief History

  • typical old-style pension plan
    • you get exactly $2000 per month until you die
    • amount never rises (worth 3.4% less eachyear)
  • 401(k) plan much better
    • you may invest the money, get 14.8 % more each year
    • some employers makematching contributions
    • but you still have to pay income tax each year
  • Roth IRA also better, but unlike 401(k)
    • you may invest the money, get 14.8 % more each year
    • employer not involved,no matching contributions
    • you pay no taxes
  • Roth 401(k) best of both! (new 2006)
slide75

Review

  • Open a Roth IRA
  • Buy shares of SSO
slide76

Review

  • Open a Roth IRA
    • Go to office of a discount stock broker
      • can also do this on-line, if you like
  • Buy shares of SSO
slide77

Review

  • Open a Roth IRA
    • Go to office of a discount stock broker
      • can also do this on-line, if you like
    • Fill out a form to open a Roth IRA account
      • they give you an account number and password
  • Buy shares of SSO
slide78

Review

  • Open a Roth IRA
    • Go to office of a discount stock broker
      • can also do this on-line, if you like
    • Fill out a form to open a Roth IRA account
      • they give you an account number and password
    • Give them $500 to put in your account
  • Buy shares of SSO
slide79

Review

  • Open a Roth IRA
    • Go to office of a discount stock broker
      • can also do this on-line, if you like
    • Fill out a form to open a Roth IRA account
      • they give you an account number and password
    • Give them $500 to put in your account
  • Buy shares of SSO
    • Go to WWW & log into new Roth IRA
    • Buy shares of SSO with your $500
slide80

http://www.cote100.com/fr/boutique/boutique_desc/images/babylone_small.gifhttp://www.cote100.com/fr/boutique/boutique_desc/images/babylone_small.gif

http://www.nnbh.com/base/63/images/9057120763.jpg

http://www.qbooks.com.tw/C_qbooks/book_pic/BIIXXC100004.jpg

www.buch-des-tages.de/ Archiv/20020707.htm

http://www.pragma.cz/files/2f24f9b0ed5a310f5fab5bf90ff65bb6.jpg

http://www.ujkonyvpiac.hu/images/ujkonyvek/Babilon.jpg

http://www.edicionesobelisco.com/portadas/3717.jpg

http://images.amazon.com/images/G/covers/0/45/116/520/0451165209.l.gif

slide81

Pay yourself first.

Save or invest 10% of each paycheck as soon as you’re paid.

Then pay your new bills.

slide82

But I’m just a kid.

My job at Quizno’s doesn’t pay that much.

  • shouldn’t I wait until I get a real job?
slide83

But I’m just a kid.

My job at Quizno’s doesn’t pay that much.

  • shouldn’t I wait until I get a real job?

No. You need actual practice in investing.

slide84

But I’m just a kid.

My job at Quizno’s doesn’t pay that much.

  • shouldn’t I wait until I get a real job?

I already have a lot of student loan debt

  • shouldn’t I pay that off first?

No. You need actual practice in investing.

slide85

But I’m just a kid.

My job at Quizno’s doesn’t pay that much.

  • shouldn’t I wait until I get a real job?

I already have a lot of student loan debt

  • shouldn’t I pay that off first?

No. You need actual practice in investing.

No. You need to invest even when you’re in debt.

slide86

What if I’m in debt?

Save or invest 10% of each paycheck as soon as you’re paid.

Use the next 20% of each paycheck to pay a portion of your debt.

Then pay your new bills.

pay all credit card debt first
Pay all credit card debt first
  • your absolute highest priority
  • credit card interest is ridiculous, often 20%

www.best-credit-card-deals.com/images/best-credit-card-deals.jpg

giving
Giving
  • get started now
  • it’s important to practice giving, even when you don’t have much
slide91

If you die, when your new baby sister turns 60, she’s already a multimillionaire TAX-FREE

x

x

Jennifer Thompson

3 Jan 08

123-45-6789

sister

100

slide92

If you die, your favorite charity gets a million dollars

FEIN

123-45-6789

charitable foundation

x

American Red Cross

100

x

csu student investing club
CSU Student Investing Club
  • every Monday
  • 6 PM
  • Rockwell Hall, Room 119

You will not be spending any money!