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Investing For Your Future: A Resource For Financial Security In Later Life
By Ravinder Tulsiani
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Investing: A Topic of Great Interest Baby boomers approaching retirement More “do it yourself” employer pensions About $7 trillion in mutual funds Almost half of U.S. households own stock
directly or through funds, 401(k)s Increased media attention to investing Empirical research: investing is a topic of
interest to learners
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History of Investing For Your Future Project Committee wanted national implementation regardless of
investment knowledge and comfort level of FCS educators, subject matter responsibilities, agent & specialist vacancies, etc.
Spring 2000- Print version of IFYF home study course available & online course (www.investing.rutgers.edu) introduced
Summer 2000- Monthly e-mail message Fall 2000- IFYF curriculum available Fall 2001- IFYF Study Guide & Web site enhancements &
research study data analysis
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IFYF Project Development
Funded by three grants from – Rutgers Cooperative Extension– NE Regional Center For Rural Development– The Foundation For Financial Planning
Developed by a team from 6 universities and two government agencies
“Deliverable” for Extension Financial Security in Later Life initiative
Over 1,200 registered online users Over 4,500 pre-orders for 2nd edition
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Target Audience For Program
Beginning investors
– “20 and 30-somethings”
– Older persons transitioning from savings
Investors with small dollar amounts to invest at a time
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Home Study Course Components
11 units + glossary Starts with “the basics” Action Steps at the end of each units “Ask the Experts” on online version Optional monthly e-mail message available
to registered online users Two evaluation forms: 2 months and 6
months
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The Second Edition of IFYF
Four additional external reviewers Completely updated for 2001 tax law and
other changes Professionally printed and distributed through
NRAES Two-color print and glossy cover Perfect bound Very reasonable cost (much cheaper than
duplicating and binding masters)
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IFYF Study Guide
110 pages Master copies available from Dr. O’Neill:
– Send $5 for a print copy
– Send a zip disk to get files (no charge)
Written by Dr. Ruth Lytton, Va Tech Components:
– Review Questions
– Applications (e.g., problems and Web sites)
– Answers to Review Questions (separate)
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Web Site Enhancements
Ask the Experts Calculating What You Need to Save
– Retirement
– College
– Other financial goals
Online Extension publications (links)
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Class Series Components
Printed copy of speaker’s notes Marketing materials Initial and follow-up evaluation forms PowerPoint slide files on a CD-ROM Completely updated in December 2001
Class series content is exactly the same as the home study course
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Class Session Titles
Basic Concepts and Investing Pre-requisites Equity Investing Fixed-Income Investing Investing in Mutual Funds Investing Tax-deferred and With Small Dollar
Amounts Getting Help and Avoiding Investment Fraud
Session 1
Basic Concepts and Investing Prerequisites
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Basic Building Blocks of Successful Financial Management
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Key Investing Concepts Difference between saving and investing Risk tolerance Risk versus rate of return Impact of time on money accumulation Asset allocation Personal factors that affect investing
decisions
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Breaking Habits = $$ to Invest 6 Easy Steps
1. Identify habit, frequency, and cost 2. Make decision to change 3. Act immediately 4. Share your plan 5. Stick with your plan to change 6. Celebrate your success
Session 2
Equity Investing
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Common Stock
Share of ownership in a company
Elect directors
Vote on other matters
Two ways to earn money
– value of stock increases
– stock pays dividends
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Real Estate Options
Home Rental property Crop/mineral land Land for development Real Estate Investment Trust (REIT) Real estate limited partnership
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To Make Money With Collectibles Keep items in top condition Focus on true value of property Document evidence of value Insure property You may have to wait for right buyer No regular income provided
Session 3
Fixed-Income Investing
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Two Types of Investments:
Ownership– Investors own all or
part of an asset
– Examples include:• stock• real estate• growth mutual funds• collectibles
Loanership– Investors loan money
to companies, government, or financial institutions
– Examples include:• bonds• money market funds• CDs
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Bond Ratings
Ratings predict ability of a bond issuer to repay debt
Investment grade: top 4 grades– Baa to Aaa from Moody’s
– BBB to AAA from Standard & Poor’s
Lower ratings: substandard grade (a.k.a., “junk”, “high yield”)
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Five Tips for Fixed-Income Investors: 1. Know the risks 2. Beware of guarantees 3. Ladder your portfolio 4. Use zero-coupon bonds to hedge
stock investments 5. Match investments with goals
Session 4
Investing inMutual Funds
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What Is Net Asset Value (NAV)?
The NAV is the price your fund pays you per share when you sell.
Value of fundNumber of shares = NAV
Example: $52,500,000 3,500,000 = $15 per share
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Match Your Goal to the Right Fund Categories with a growth objective
Growth
Aggressive growth
Small cap
Specialty (Sector)
International
Global
Index
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Seven Steps to Finding the Right Fund
1) Identify type of fund that matches goal
2) Do more reading
3) Research specific funds
4) Determine selection criteria
5) Get and read the prospectus
6) Make your purchase
7) Establish a schedule to buy more
Session 5
Investing Tax-Deferred and With Small Dollar Amounts
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Class Topics Include:
Tax-Deferred Investing– Tax-free versus tax-
deferred– Employer retirement
savings plans– IRAs– Plans for the self-
employed
Investing With Small Dollar Amounts– Employer plans– IRAs– Fixed-income assets– Equity assets– Mutual Funds– Other investments
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27,6
00
31,3
00
48,3
00
58,6
00 75,8
00 98,8
00
112,
200
157,
900
160,
300
244,
700
$0
$50,000
$100,000
$150,000
$200,000
$250,000
10yrs 15yrs 20yrs 25yrs 30yrs
Taxable Returns (at 28%) Tax-Deferred Returns
German/Forgue, PERSONAL FINANCE, Fifth Edition, Tax-Sheltered Returns are Greater than Taxable Returns (Illustration: 8% Annual Return and $2000 Annual Contribution)
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Here’s What $20 a Week Adds Up To: 5% Return:
– 20 Years: $36,100
– 30 Years: $72,600
– 40 Years: $131,900
10% Return:– 20 Years:
$65,500– 30 Years:
$188,200– 40 Years:
$506,300
Session 6
Getting Help and Avoiding Investment Fraud
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What This Lesson Covers
Investment resources (e.g., investment clubs, Web sites, publications)
Selecting financial professionals Investment fraud and how to avoid it
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Questions for Financial Planners
What services do you offer? What can I expect from you? What will it cost and how are you paid? Who will work with me? May I see a sample financial plan? Are you registered with state or federal
regulators?
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Types of Fraud:“Pump and Dump” Scams Promoter urges you to
“buy now or lose out” Price rises sharply Fraudsters sell at peak Price drops when the
hype stops Investors lose money
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1015
2025
30
Day1
Day2
Day3
Day4
Day5
Stock Price
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Why Pyramid Schemes Collapse Levels Number of Participants
1 62 363 2164 1,2965 7,7766 46,6567 279,9368 1,679,6169 10,077,69610 60,466,176 11 362,797,056 - more than U.S. Population12 2,176,782,336 13 13,060,694,016 - more than double World
Population
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IFYF Class Series Evaluation
Post-class evaluation– Reactions to class
– Usefulness of information
– Demographic info about participants
Follow-up evaluation– 15 specific financial behaviors- planned & actual
change as a result of IFYF
– Increased savings amount
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IFYF Class Marketing Materials
Promotional flyers Radio script News release Certificate of
completion Guidelines for using
financial professionals as IFYF volunteers
Speaker agreement form
Logos
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IFYF Class Series is Meant to be Flexible Use individual sessions (e.g., mutual
funds) as stand-alone classes
Use parts of class sessions (e.g., investment fraud in Session 6) as short presentations
Mix and match or delete slides, as desired
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Supplemental Materials Could Include: Net worth worksheet Applicable Web site information (e.g.,
article about decimalization of stock share prices)
Applicable clipping from newspapers (e.g., The WSJ)
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Additional Supplements
Investment books (display) Pages from Morningstar & Value Line Newspaper financial pages Clippings about current investment news
(e.g., change in savings bond rates) Guest speakers Investment quizzes (financial firms) Hands-on activities (e.g., reading prospectus)
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IFYF Research Results
195 respondents– 127 online (nationwide) of 752 usable surveys sent
– 68 print version (3 states: NJ, FL, AZ) Data collected June-July 2001 Purposes of study
– identify characteristics/behaviors of users– feedback on course content and format– determine knowledge gained and behavior
changed
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The Sample
Predominantly white & middle aged– 17.7% age 35 to 44– 29.2% age 45 to 54– 21.3% age 55 to 64
53.7% had a college degree 69.1% were married; 31.4% with dependents
51.3% had “some” prior investing experience; 28.3% had “a little”
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Course Ratings
45.4% “very valuable” 44.3% “valuable” Five highest ranked units (in order)
– Unit 8 (Investing With Small Dollar Amounts)
– Unit 6 (Investing in Mutual Funds)
– Unit 2 (Investing Basics)
– Unit 4 (Equity Investing)
– Unit 5 (Fixed-Income Investing)
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Other Findings
70.2% of respondents rated course as “basic”; 27.5% as “somewhat advanced”
128 (70%) reported investing money since completing course
Median amount: $1,800 (mode: $1,000) Significant variable relationships
– content level rating and course rating– being a saver and demographic variables– amount of savings and demographic variables– knowledge gained and planned action
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Behavioral Changes
Questions about 15 behavioral changes Behaviors from IFYF Action Steps Top 3 actions taken:
– using new investor resources (63.4%)– learning more about investment fraud (56.1%)– investigating specific investments (48.9%)
Top 3 actions planned:– determining amount needed to achieve goals (37.0%)– setting specific (date/cost) financial goals (34.5%)– increasing amount invested monthly (30.9%)
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Implications
IFYF is positively impacting participants Diversity of audience outreach can be
improved The level of course content is on target Emphasizing action steps results in action Need to help learners with planned
behavior changes (e.g., goals)
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Any Questions?
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