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CEO of Connect.com
Startup Guide RYAN ALLIS
Building a Better World Through Entrepreneurship
With Ellen Daly
The
2013 Edition
More slides at www.s
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SECTION 6
Money
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THIS presentation IS PART OF A LARGER slide DECK on
building a better world through entrepreneursh
Startupguide.com
ABOUT THIS PRESENTATION
For more slides & CONTENT visit:
MONEY
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MONEY IS A REALLYIMPORTANT TOPIC
TO UNDERSTAND
money Key lessons
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MONEY IS SIMPLYA STORE OF VALUE
WHICH ENABLESTWO PARTIES TO EXCHANGE
EVEN IF they cannot barter
money Key lessons
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HERE ARE THREEKEY LESSONS
ABOUT MONEY
money Key lessons
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SPEND LESS MONEYTHAN YOUR EARN
EVERY MONTH
money Key lessons
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NEVER GO INTO DEBTFOR SOMETHING THAT
YOU DO NOT NEED
money Key lessons
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SAVE UP EARLY IN LIFEAS the law of compoundINTEREST HELPS A LOT
OVER TIME
money Key lessons
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HERE ARE FIVE KEYSTO BUILDING
WEALTH
money Five Keys to wealth
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PAY OFF DEBT1
money The secrets to wealth
money s c s o
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BUILD UP SAVINGS2
money The secrets to wealth
money The secrets to wealth
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INVEST IN CASHPRODUCING ASSETS
3
Savings Accounts LendingClub Notes
Certificates of Deposit PRIVATE COMPANY STOCK
Treasury Bonds PUBLIC COMPANY STOCK
Municipal Bonds VENTURE FUNDS
Corporate Bonds HEDGE FUNDS
3
money The secrets to wealth
money The secrets to wealth
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THEN USE THE CASHFLOW FROM YOUR
INVESTMENTS TO MAKE
MORE INVESTMENTS
4
money The secrets to wealth
money The secrets to wealth
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earn equity in
companies you workfor or start
5
money The secrets to wealth
money The secrets to wealth
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CONTINUE THIS CYCLE
For 40 years
6
money The secrets to wealth
money The secret to wealth in REVIEW
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1. PAY OFF DEBT2. BUILD UP SAVINGS3. INVEST IN CASH PRODUCING ASSETS4. THEN USE THE CASH FLOW TO INVEST IN MORE CASH
PRODUCING ASSETS
5. EARN EQUITY IN COMPANIES YOU WORK FOR OR START6. THEN CONTINUE THIS CYCLE OVER AND OVER
money The secret to wealth in REVIEW
money The middle class vs the rich
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Individuals in the middle class accumulate more debt as they be
more successful. A pay raise qualifies them to borrow more monefrom the bank so they can buy personal items like bigger cars,
vacation homes, boats, and motor homes. Their wage income comes
and is spent on current expenses and ONLY then on paying off thei
personal debt. SO As their income increases, so does their persona
debt. This is what we call the rat race.
- Robert kiy
money The middle class vs. the rich
money The middle class vs the rich
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The rich have their assets work for them. They
have gained control over their expenses (by savingand investing money each month) and focus on
acquiring or building assets. Their businesses pay
more of their expenses, and they have few, if any,personal liabilities.
- Robert kiyosaki
money The middle class vs. the rich
money Key lessons
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IF YOU SAVE UP & INVESTHERE IS WHAT YOU CAN
EXPECT TO HAVE
money Key lessons
money What you can expect to retire with
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MonthlySAVINGS 20 Yrs 25 Yrs 30 Yrs 35 Yrs 40 Yrs 45 Yrs 50$1,000 $0.52M $0.81M $1.22M $1.81M $2.64M $3.82M $5
$2,000 $1.05M $1.63M $2.45M $3.63M $5.29M $7.65M $10$3,000 $1.57M $2.44M $3.68M $5.44M $7.94M $11.47M $16$4,000 $2.09M $3.26M $4.91M $7.25M $10.58M $15.29M $21
WHAT YouLL HAVE IF YOU SAVE & INVEST
ASSUMES 7% AFTER INFLATION ANNUAL RETURN FROM INVESTING | ADD ADDITIONAL TIME TO PAY OFF ANY CURRENT DEBT
money What you can expect to retire with
money Two types of investments
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THERE ARE TWO TYPESOF INVESMENTS
DEBT & EQUITY
money Two types of investments
money Two types of investments
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DEBT INVESTMENTSARE LOANsIN WHICH YOU EARN A FIXED
INTEREST RATE RETURN
money Two types of investments
money Two types of investments
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EQUITY INVOLVESINVESTMENTS in EXCHANGEFOR PARTIAL OWNERSHIP
IN A COMPANY
money Two types of investments
money Two types of investments
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WITH EQUITY YOU MAKEMONEY WHEN THE VALUE
OF THE COMPANY GOES UP
money Two types of investments
money types of investments
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DEBT EQUITYMutual FundsIndex Funds/ETFS
Small Cap Stocks
MID CAP STOCKS
LARGE CAP STOCKS
VALUE STOCKSGROWTH STOCKS
Emerging Market Stocks
options
VENTURE FUNDS
HEDGE FUNDSPRIVATE COMPANIES
Savings AccountsTreasury Bonds
Municipal Bonds
Corporate Bonds
P2p LENDING
money types of investments
money Average returns
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HERE IS A SIMPLIFIED EXAMPLEOF HOW YOU CAN HAVE
$1M in 30 years
money Average returns
money To have $1m in 30 years
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To have $1m in 30 yearsSAVE $1k every month
AND INVEST IT
money To have $1m in 30 years
money To have $1m in 30 years
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To have $1m in 20 yearsSAVE $2k every month
AND INVEST IT
money To have $1m in 30 years
Two ways TO BECOME FINANCIALLY WEALTHYmoney
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THERE ARE TWO MAIN WAYS TO BECOME
A MILLIONAIRE
1) Build a business
2) Save & Invest wisely for 30 years
money Two ways TO BECOME FINANCIALLY WEALTHY
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If entrepreneurship isnt for you
Heres how to become a millionaire Automatically
1. Save $1000 per month2. Invest it at a 7% after inflationreturn3. Dont take any out for 30 years
money ANNUAL RETURNS OF INVESTED CAPITAL
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BUT HOW CAN YOU MAXIMIZE YOURCHANCES OF EARNING a 7%
AFTER INFLATION RETURN?
money Average returns
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HERE IS A TABLE OFAVERAGE YEARLY RETURNS BY
TYPE OF INVESTMENT
money HISTORICAL RETURNS
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OF COURSE PAST RETURNSArent ensured in the futur
But they are STILL HELPFUL
money Table of average returns after inflation
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Investment Type Approx.. Avg. Annual ReturnAfter Inflatio
(-2.8%)
Savings Accounts 0.10% -2.70%
Certificates of Deposit 1.70% -1%
Treasury Bonds 2.50% -0.30%
Municipal Bonds 4.50% 1.70%
Corporate Bonds 6% 3.20%LendingClub A-C Notes 8% 5.20%
S&P 500 Index Fund 10.60% 7.80%
Dow Jones Index Fund 11.10% 8.30%
LendingClub D-F Notes 12.10% 8.90%
money How to invest
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ONE INTERESTING NEWINVESTMENT OPTION ISPURCHASING
LENDINGCLUB NOTES
money Price to earnings ratio
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ONE KEY METRIC TO LOOK ATWHEN INVESTING IN A PUBLICCOMPANY IS THE
PRICE TO EARNINGS RATIO
money PE RATIOS
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I AVOID INVESTING IN BUSINESSES WITH
PE RATIOS ABOVE 30AND LOOK INTENTLY AT INVESTING IN
BUSINESSES WITH PE RATIOS
BELOW 15
money CASHFLOWS
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THE BEST WAY TO DETERMINE THETRUE VALUE OF A PUBLIC COMPANY IS
TO CREATE A DISCOUNTED CASH FLOW (DC
FORECAST
money Buffets margin of safety
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BUFFETs investing method
INVOLVES UNDERSTANDING A FIRM WELLCALCULATING WHAT HE BELIEVEs
THE fiRM IS ACTUALLY WORTHTHEN PURCHASING SHARES WHEN
Enough of a margin of safety exists
money CASHFLOWS
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WARREN BUFFET IN ESSENCE
CREATES DCF MODELS ON EACH COMPANY
HE INVESTS IN AND ENSURES THERES A
BIG MARGIN OF SAFETy BETWEEN WHAT HTHINKS THE FIRM IS WORTH AND WHAT
THE MARKET THINKS THE FIRM IS WORTH
money Portfolio theory
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PORTFOLIO THEORY STATESTHAT FOR THE AVERAGE INVESTORRETURNS ARE MAXIMIZED BY
DIVERSIFYING YOUR INVESTMENTSAND INCLUDING LOW CORRELATING
ASSET CLASSES
money Portfolio theory
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BUT IN PRACTICE THE HIGHEST RETURNSARE SEEN WHEN YOU INVEST
IN JUST A FEW ASSETS YOUUNDERSTAND VERY WELL
money Summary of money section
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YOU CAN BECOME WEALTHY OVER TIME BY
PAYING OFF DEBT SAVING INVESTing USING PROCEEDS FROM INVESTING TO INVEST MORE AND NOT GOING into debt FOR UNNEEDED THINGS
money Summary of money section
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THERE ARE TWO SEGMENTS OF PEOPLE IN THE WORLD
WHICH SEGMENT ARE YOU IN?
PEOPLE WHO PAY INTEREST ON LOANS AND WORK AT
COMPANIES
PEOPLE WHO RECEIVE INTEREST ON LOANS and own PARTS
companies
1
2
The
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CEO of Connect.com
Startup Guide RYAN ALLIS
Building a Better World Through Entrepreneurship
With Ellen Daly
2013 Edition
More slides at www.s