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Get Money Budgeting, Saving, & Investing

Get Money Budgeting, Saving, & Investing. RWORLD Get money. Presented by Ty Johnson. Your Odds of Making It. Budget to Save; Save to Invest. Housing 35% - Mortgage or rent, taxes, repairs, improvements, insurance, and utilities

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Get Money Budgeting, Saving, & Investing

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  1. Get MoneyBudgeting, Saving, & Investing

  2. RWORLD Get money Presented by Ty Johnson

  3. Your Odds of Making It

  4. Budget to Save; Save to Invest • Housing 35% - Mortgage or rent, taxes, repairs, improvements, insurance, and utilities • Transportation 20% - Monthly payments, gas, oil, repairs, insurance, parking & public transportation • Debt Budget 15% - Credit cards, personal loans, student loans & other debt payments • All other expenses 20% - Food, insurance, prescriptions, doctor & dentist bills, clothing & personal • Investments & Savings Budget 10% - Stocks, bonds, cash reserves, art, etc.

  5. What is Investing? • Investing is the proactive use of your money to make more money or, to say it another way, it is your money working for you. Investing is different from saving. • Saving is a passive activity, even though it uses the same principle of compounding. Saving is more focused on safety of principal (the amount you start out with) and less concerned with return.

  6. Why Invest Now? • Know money before you get it • Learn how companies & economy work • Head start gives big returns!

  7. Head Start Gives Big Returns! Assumes: $1000 per year 8.5% return

  8. What is the 'Rule of 72'? • The 'Rule of 72' is a simplified way to determine how long an investment will take to double, given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors can get a rough estimate of how many years it will take for the initial investment to duplicate itself. For example, the rule of 72 states that $1 invested at 10% would take 7.2 years ((72/10) = 7.2) to turn into $2. In reality, a 10% investment will take 7.3 years to double ((1.10^7.3 = 2).When dealing with low rates of return, the Rule of 72 is fairly accurate. This chart compares the numbers given by the rule of 72 and the actual number of years it takes an investment to double.

  9. Rule of 72

  10. Investing Process • Stock search method (entire market or industry) • Narrowing 10,000 to 5 stocks • Individual stock analysis • Stock Selection Guide • Additional research • Value Line, Standard & Poor's • Annual Report (or 10K) • Presentation, discussion and vote

  11. Market & Economic Cycle

  12. My Portfolio

  13. Asset Allocation • Asset allocation: the foundation of your portfolioThe foundation of the pyramid is asset allocation. Your asset allocation determines the broad risk level of your portfolio, which should match your risk profile. • In general, by simply subtracting your age from 100% we get how much stock you should own. • Example: Tasha is married with one child at age 20, she could: 100% - age 20 = 80% Stock; model of Moderately Aggressive Allocation. • Or to include spouse and per child add 2 to her age: 100% - 24 ([age] 20 + [spouse] 2 + [child] 2 = 24) = 76% Stock; with increase to other accounts.

  14. Portfolio Selection

  15. Market Capitalization • Once you've diversified across asset classes, you can start diversifying within asset classes. The size of a company is often measured by its market capitalization—the company's stock price multiplied by the number of outstanding shares. On the pyramid, market cap denotes the percentage of large versus small companies in the stock portion of your portfolio. Small-cap stocks tend to be riskier than large-caps, but have the potential for more upside. A sound diversification plan includes both, because nobody knows which of these two asset classes will be in favor at any particular time. For example, in 1998, domestic large-caps outperformed small-caps by 31 percentage points. But in 2003, small-caps outperformed by 19 percentage point

  16. StyleGrowth vs. Value Investing Warren Buffet perfected Value Investing. According to this strategy, if a company's share price is trading below what it's really worth, he buys it. Buffett looks for companies that are well-managed, with simple, easy-to-understand business models, high profit margins and low debt levels. He then determines what he believes to be the company's growth prospects over the next five or 10 years. If the company's share price today is priced below these future expectations, it usually ends up as a long-term holding in Buffett's.

  17. Sector Every stock is in an industry, and every industry is in a market sector. Holding too many investments in the same sector can be risky. As the chart below shows, the information technology sector saw greater single-year gains, but also saw heftier single-year losses from 1990 to 2006. Sectors tend to be riskier than the broad marketRange of annual returns, 1990-2006

  18. Industry Jumping up to the next layer in the pyramid; the 10 sectors comprise 67 industries and 147 sub industries. Even when a sector's performance is up, not all industries within that sector will perform identically. In 2006, the consumer discretionary sector was up 17%. Yet if we look closer at this sector we find it contained 31 different sub industries which had a mixed performance. Two notable examples are the 36% loss in educational services and the 43% gain in broadcasting and cable TV. Depending on what industry you held within the sector, your return could have been quite different.The lesson? For a balanced diet, after you diversify across sectors, diversify across the industries within a given sector.

  19. Geography Over the past 37 years, the U.S. has a 0-37 record as the best performing market in a single year. This shows that you should to look at investment opportunities outside the U.S. As with sectors and industries, your portfolio should include a mix of different countries. For example, the Morgan Stanley All Country World index includes 50 developed and emerging markets around the globe.

  20. Manager Next comes managing your managers. It can be risky to have all of your actively managed mutual funds with the same portfolio manager. Suppose the portfolio manager leaves the firm? Or the fund company goes through a disruptive restructuring? How might changes like these affect your portfolio? Hence, it makes sense to diversify across managers, as well.

  21. Stock Selection Guide (SSG):An Analysis Worksheet Using our Selection Guide is the cornerstone of the BetterInvesting methodology; the process has been successfully used by Better Investing investors for more than fifty-five years. After choosing a company to study, we reveal: • Company Strength (sales and earnings growth) • Management Strength (profitability) • P/E ratios (under/overvalued?) • Upside vs. Downside Potential • Buy, Hold and Sell Ranges

  22. Steps Toward Investing • Pay down your credit cards • Emergency savings • Participate in retirement plans • Start/Join an Investment Club!!

  23. What is an Investment Club? • A group of individuals interested in learning how to invest in companies, make money and have fun doing it!

  24. Clubs Invest In... • Stocks (fraction of ownership in a corporation) • Bonds (debt issued by companies or governments) • Mutual Funds (collection of stocks and/or bonds, managed by professionals) • Real Estate (residential, commercial) Total Return on Investments (1926-1994) Source: “Starting and Operating a Profitable Investment Club”, p.4, by T. O’Hara, K.S. Janke, and K. Janke

  25. RWORLD Investors Club • Conceptualized and organized in 2008 after RW Financial Seminar presented by Ty Johnson • Limited Liability Company January 2010 • Over $1,000 in assets with socially responsible stocks and ETF’s • $100/month contribution • Belong to National Association of Investors Corporation (NAIC) & American Association of Individual Investors (AAII)

  26. Investment ClubMission Statement • The RWORLD Investment Club is a stock investment club organized to promote investment education and profit through the shared research and study of companies by its members.

  27. RWORLD Objectives/Goals • Education • Stock Search • Stock Analysis • Profit • Growth (growth companies: 14.5% per year) • Buy and Hold/Homework (reduces cost and taxes) • Diversification (size and industry) • Regular Investing (dollar cost averaging) • Earnings Reinvestment (compounded interest)

  28. Is An Investment Club Right For Me? • Responsibilities • Regular Meetings • Monthly Tasks • Monthly Contribution • Benefits • Less Cash to Start • Diversify Quicker Than If Alone • Study Group for Motivation

  29. If you have questions or want to give us feedback: Ty Johnson, Managing Partner: ty.getmoney@live.com • Further your investing education for free at: RWORLD Get Money www.rworldgetmoney.ning.com

  30. RWORLD Forms Prospectus Application Building Wealth Exercise

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