Personal Investing Jamie Harmon Vice President Fidelity Investments

1. Personal InvestingJamie HarmonVice PresidentFidelity Investments smartwomansecurities December 13, 2006 2006 Smart Woman Securities. All materials are for SWS members’ use only

2. Section 1:INTRODUCTION

3. My Story • Personal investing • Alan Abelson • From Gov concentrator to Fidelity • Internship • Fidelity • Associate to Portfolio Manager • I am always growing as an investor • You should be, too

4. Overview • Intro • Investing Basics • Open a Roth IRA • Asset Classes • What to Buy? • Stocks • Bonus

5. Section 2: INVESTING BASICS

6. Investing Goals? • Beat CPI • Make tons of money • Learn about investing • Have experience to discuss in interviews • Note: Don’t say you are interested in personal investing unless you really are!

7. What Is an Investment? • Expensive shoes • Car • “12” on roulette • College education • Savings account • Art • House

8. An Investment Is… • An asset with an expected return that is strong on a real basis • “Expected Return” is key • Current income • Capital appreciation • Growth • Valuation • NPV of cash flows

9. Problem 1: Inflation

10. Problem 2: Growth Source: FMR; FactSet; S&P 500

11. Problem 3: Valuation

12. What You Need • Temperament • Research • Spend more time buying stocks than shoes • Savings

13. Section 3:OPEN A ROTH IRA

14. Requirements • Earned income equal to your IRA contribution (or greater) • But less than $95k • Regular IRA has no max on income • Parents can fund • But you still need earned income

15. Advantages • Compounds tax free • Can be withdrawn tax free • What is this worth?

16. How Much Can You Put In? • Up to $4k per year • If possible, invest in 06 and on 1/1/07 • Is it worth borrowing to do this?

17. Where? • Fidelity Investments • Local branches • $2500 minimum • I use Fidelity, and it seems good to me • E*Trade or Ameritrade • No branches (?) • No Minimum

18. When? NOW!! • Save money from age 20 to 65 • 4k per year for 45 years at 8% = $1,669,704 • What if you wait 1 year? • 4k per year for 44 years at 8% = $1,542,022 • You lose $127,682 !!!

19. How? • Web • Phone • In person

20. Section 4: ASSET CLASSES

21. Asset Classes • Financial assets • Fixed income • Equity • Hard assets • Residential real estate • Commercial real estate • Other

22. Fixed Income • Short term • T bills • Savings accounts, etc. • Long Term • Government bonds • Government, Sovereign, Municipal • Relation to national debt • Corporate debt • Corporates, High yield • Asset-backed securities

23. Equity • Stocks • Mutual funds • Private companies

24. Stocks • Pieces of businesses • Why do they exist? • To help companies • Raise money • Compensate employees • Buy other companies • Estate planning • Etc.

25. Types • Large, small • Fast growing, slow growing • Low PE, high PE • IPO’s • Specialty • REITs, biotech, international

26. Mutual Funds • A group of stocks (or bonds) • Diversified • Strategy • Growth, emerging markets, big cap • Types • Actively managed funds • Index funds • ETF’s

27. Mutual Funds (more) • Want • Lower fees • Higher performance • Minimum investment • Often $1k or $2.5k • Vs. hedge funds

28. Private Companies • A mature business • Local 7-11 • Leverage Buyouts • A start up business • Friend with an idea • Venture Capital • Similar to stocks in some ways…

29. Hard Assets • Residential real estate • Commercial real estate • Other • Gold, art

30. Section 5: WHAT TO BUY?

31. Long Term Real Returns Source: Prudential Securities; Ibbotson data

32. Cash Equivalents • Expected return? • Sample rates • 0% checking • 2.5% savings • 4.5% money market • 3 months of expenses in cash • Or less

33. Bonds • Expected return? • Sample rates: • 10 year = 4.5% • Mexican 10 year = 5.5% • High yield = 8.0% • No growth • Credit risk • Interest rate risk

34. Bond Yields Are Low Source: Haver Analytics; FMR

35. Baa Spread is Low Source: Merrill Lynch

36. High Yield Spread is Low Source: Merrill Lynch US High Yield Master II Index

37. EM Spreads Are Low Source: JP Morgan EMBI Global Index

38. Paying Down Your Debt • Expected return? • Credit card rates average 14% • Better types of debt • Student loans • Mortgage • Tax advantages

39. Gold • Expected return? • Carrying cost • Good inflation hedge • Supply and demand • Never gets used up

40. Other Collectables • On Nov 30, 2006, a bottle of Scotch whiskey from 1856 sold for $28,820 • This seems extraordinary for a collectable • What was the return?

41. Residential Real Estate • Has been good longer term • More complex than most people think • Still a good place to look

42. Conventional Wisdom • Median existing home price has increased at about 6% per year since WWII • No down years • Might go down 4% in 07? • With 20% down, that is 30% a year, right?

43. Dig Deeper • High end real estate vs. the median home • Think about expected return • Cash costs of owning vs. renting • Growth in rent • Capital appreciation • Leverage • Rent vs. Buy example

44. House Price vs. Income Source: FMR Real Estate

45. Affordability is Mixed Source: FMR Real Estate

46. Residential Rent Growth Source: FMR Real Estate

47. Commercial Real Estate • Has also been good longer term • Easy to leverage • Different from residential real estate • Expected Return • NOI yield • Growth in rents • REITs as a way to get exposure

48. Commercial RE is good LT Source: FMR;Prudential

49. Office Rent Growth Source: FMR Real Estate

50. REIT’s Pricey vs. Bonds? Source: FMR Real Estate