A quick introduction to investingby CEO Sarah DemingSeptember 8, 2009

Why do the rich stay rich? Why can people retire before being eligible for social security?

In the long-run, the Dow (DJIA) has significantly out performed the risk-free investment (the t-bill)

Equities/Common Stock Core vs. Growth

Fixed Income Definition Different Ways to Invest

Alternative Investments Options, Real Estate, Hedge Funds, ect.

The WIC portfolio is made up largely of Core (60%) and Growth (25%) Equities

“Big and boring is the key to core investments”

Stable, large, blue-chip companiesLarge Market Capitalization (<10 Billion)Consistent, large ROE (return on equity)Steady Rate of GrowthDividendsExamples in our portfolio:

Boeing, General Electric, Proctor & Gamble

“Glamour Stock” Shares in a company whose earnings are

expected to grow at an above-average rate relative to the market

More risky, greater chance of a higher return

Commonly Technology Companies No Dividends Examples:

Hansen, Amgen, Applied Materials, Nintendo

Dow Jones Industrial Average “When the market is up today” Price-weighted average of 30 large,

significant stocks Most watched index

Standard & Poor’s 500 Leading indicator of U.S. equities Reflects the risk/return characteristics of

the large cap universe

A type of investment that yields a regular (fixed) return—primarily, bonds.

Bonds are debt (stocks are equity)Bonds are used to diversify portfolios Issuers of bonds are generally

corporations and governmentsGovernment bonds are the safest

investments and are used as “risk-free” instruments

Bond funds is a common way to invest in fixed income. Bond funds are primarily invested in a variety of bonds and other debt instruments with a specific focus. Examples of bond funds WIC holds are

Vanguard Total Market Fund and PIMCO Low Duration.

Corporate BondsMunicipal Bonds (tax advantages)U.S. Treasury Bills

Often require large amount of investment Risky but have a high return Limited Regulations, complex, low

liquidity Examples Include:

Private Equity Real Estate Infrastructure Commodities Hedge Funds

Financial ratios are a good quick way of understanding a company’s basic finances without examining the Income Statement, Balance Sheet, and Cash Flow Statements.

Profitability: Return on Assets (ROA) Return on Equities (ROE)

Debt: Debt Ratio

Valuation Ratios: Price to Book Price/Earnings (P/E) Dividend Yield

Since there are no investing classes at Whitman, the best way to learn about investing is to educate yourself (and come to WIC meetings)

Resources: Investopedia Wall Street Journal Yahoo and Google Finance Morningstar