How to Get Started with Investing

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How to Get Started with Investing

• Steve Skrocki, Business Manager
• January 16, 2001

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Agenda
The opinions and recommendations expressed by the
presenter do not necessarily represent the views
of the Penn Manor School District administration
or board of directors. This presentation provides
an overview of basic investing.

• Overview
• Needs and Goals
• Asset Allocation
• Retirement and College Planning
• Information Resources
• Discussion

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Overview

• Purpose
• Format
• General discussion vs. specific detail
• Future direction
• Investment club
• Targeted speakers with taped library
• Regular discussion meetings

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Determining Your Financial Needs and Goals

• Deciding whether to pay outstanding debts or
  invest your
• Debt reverse investing
• Not all debt bad (tax deductions)
• Pay off credit card balances
• Margin (borrowing money from broker) is dangerous

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Determining Your Financial Needs and Goals

• Setting Goals and Developing a Plan
• Make goals specific
• Retire a millionaire
• Put children through college
• Buy a home
• Develop plan to meet goals
• Work backward to determine how much you need to
  invest
• Pay yourself first
• Be patient
• Start NOW!!!!!!!

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Determining Your Financial Needs and Goals

• Ten Tips for Saving Money
• Set up separate account (dont mix)
• Spend less.its not what you make, its what you
  spend!
• Use automatic deductions for savings
• Avoid financing with credit cards
• Reduce taxes
• Section 125 plan

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Determining Your Financial Needs and Goals

• Ten Tips for Saving Money
• Save all found money
• After you pay a debt, save the same amount
• Do your research
• Use a piggy bank
• Set up a money-saver buddy system
• Investment club
• Discussion group

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Saving vs. Investing

• Saving
• Short term needs
• Safety
• Low returns
• Investing
• Long-term capital growth
• Risk
• Returns superior to savings accounts

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Determining Your Financial Needs and Goals

• The Power of Compounding
• Rule of 72
• Invest from age 21-66 (45 years)
• 2,000/year, 90,000 total
• 8 10 12
• 834,000 1,581,000 3,042,000

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Common Investment Options

• Risk
• Stocks (13)
• Corporate Bonds (8)
• Treasury Securities (6)
• Municipal Bonds (5)
• CDs (5)
• Money Market Funds (5)
• Savings Accounts (2)
• Safety

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Asset AllocationAggressive Portfolio

• Instructions
• This is an embedded graph.
• To edit this graph simply double-click anywhere
  on the graph.
• When youre done editing the graph, click outside
  of the graph to return to PowerPoint.

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Asset AllocationConservative Portfolio

• Instructions
• This is an embedded graph.
• To edit this graph simply double-click anywhere
  on the graph.
• When youre done editing the graph, click outside
  of the graph to return to PowerPoint.

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PSERS Asset Allocation

• Instructions
• This is an embedded graph.
• To edit this graph simply double-click anywhere
  on the graph.
• When youre done editing the graph, click outside
  of the graph to return to PowerPoint.

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Investing in Equities

• Indirect Ownership
• PSERS
• Insurance Companies
• Direct Ownership
• Traditional Broker
• Discount Broker
• Mutual Funds
• DRIPs

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Mutual Funds

• Research done for you
• Inherent fees
• Match your investment philosophy
• Equity funds not all stocks
• Excellent vehicle for beginners
• Index funds
• Vanguard, Fidelity, Janus

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DRIPs

• Low initial cost
• Direct stock purchase
• Dollar cost average
• Fees could be issue
• Individual does own research
• Pay yourself first philosophy
• Reinvest dividends (taxable)

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Retirement

• PSERS considerations
• Traditional IRAs
• Roth IRAs
• 403 b plans

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PSERS

• Normal Retirement
• Age 60 with 30 years
• Age 62 with 1 year
• 35 years regardless of age
• Penalties otherwise
• Vested after 10 years
• Net benefit approximates 75 of working income

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Roth IRAs

• Deductions taxable
• 2,000 per year
• Capital gains not taxable
• Withdrawals penalty-free if taken for higher
  education expenses
• Withdrawal penalty-free if held 5 years and for
  1st-time home
• April 15 deadline for prior year contributions

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403 (b) Plans

• Offered via payroll deduction at Penn Manor
• Approved reps and companies
• Contributions pre-tax on federal income tax basis
• Maximum of 10,500 generally
• Rules for withdrawal
• Taxable upon withdrawal

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Investing for College

• Costs
• Education IRAs
• Tuition Account Program
• UGMAs

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Investing for College

• Starting Public Private Fancy
• Year School School School
• 2000 41,300 105,000 148,000
• 2004 52,000 132,000 187,000
• 2008 66,000 167,000 236,000
• 2012 83,000 211,000 298,000

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Education IRAs

• 500 year per child maximum
• Qualified higher education expenses
• Can be used for second child
• Child under 18 is named beneficiary
• Tax-free growth
• Contributions not tax deductible
• Adult control until age 30
• Relatives can contribute

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Tuition Account Program

• Offered through payroll deduction at PMSD
• Pre-pay college tuition at todays rates
• Growth deferred on federal level
• www.patap.org

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UGMAs

• Uniform Gift to Minors Accounts
• Invest in childs name with adult as custodian
  until age 18
• Tax advantages
• Financial aid disadvantages
• No limit to investment type or amount
• What happens at 18?

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Publications

• Individual Investor
• Money
• Smart Money
• Barrons
• Investors Business Daily
• Business Week
• Wall Street Journal
• Value Line

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Web Research

• www.dripcentral.com
• www.netstockdirect.com
• www.sharebuilder.com
• DRIP and direct stock purchases
• www.yahoo.com
• General financial research

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Web Research

• www.fidelity.com
• www.vanguard.com
• www.janus.com
• www.strongfunds.com
• Mutual fund sites with excellent general
  investing information

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Web Research

• www.ameritrade.com
• www.schwab.com
• www.waterhouse.com
• www.etrade.com
• www.datek.com
• Online discount brokers
• Little to no advice, low fees

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Discussion

• Questions