advertisement

Personal Investing

50 %
50 %
advertisement
Information about Personal Investing

Published on August 5, 2007

Author: nusantara99

Source: slideshare.net

Description

Excellent presentation slides on personal investing
advertisement

Personal Investing

You can download this presentation at: www. L earning P resentation.com Visit www. L earningPresentation.com for more presentations on personal finance and investing

Step 1: Set your financial goals Step 2: Understand investment vehicles Step 3: Develop an investment strategy Step 4: Implement your strategy Step 5: Monitor the performance of your investments Personal Investing Steps

Four Elements in Setting Your Financial Goals Step 1: Set Your Financial Goals Your investment time horizon Your priorities Quantification Your personal investment profile

Your investment time horizon

Your priorities

Quantification

Your personal investment profile

Your Time Investment Horizon The length of time that you have to reach your goal is considered by many advisors as the most important factor in determining which type of invest­ment is best suited to meet that goal

Your Priority You must also prioritize your financial goals and decide which are necessary and which are merely desirable

Quantification After determining your financial priorities, you should develop financial projections and calculate different alternative scenarios to quantify your goals. From these calculations, you can then establish the amount you can save and what rate of return is necessary from your investments to assure that you'll achieve your goals.

After determining your financial priorities, you should develop financial projections and calculate different alternative scenarios to quantify your goals.

From these calculations, you can then establish the amount you can save and what rate of return is necessary from your investments to assure that you'll achieve your goals.

Your Personal Investment Profile Your investment profile is shaped by : Your age and the stage in your career Your need for liquidity The size of your portfolio Your cash flow needs Your income tax bracket Your required rate of return Your risk tolerance

Your investment profile is shaped by :

Your age and the stage in your career

Your need for liquidity

The size of your portfolio

Your cash flow needs

Your income tax bracket

Your required rate of return

Your risk tolerance

Step 2: Understand Investment Vehicle Three Major Investment Vehicles: Cash Bonds Stocks

Cash

Bonds

Stocks

The Bonds Corporate bonds U.S. government securities Municipal bonds Mortgage-backed securities

The Stocks Income Stocks Growth Stocks Value Stocks Cyclical Stocks Defensive Stocks Blue Chip Stocks

Income Stocks

Growth Stocks

Value Stocks

Cyclical Stocks

Defensive Stocks

Blue Chip Stocks

Income Stocks Income stocks are those with a long and sustained record of paying high dividends. Generally, a company whose common stock falls into this category is in a fairly stable and mature industry (e.g., an electric utility company). Because these companies distribute (rather than reinvest) their earnings, their stocks are less likely to experience substantial capital appreciation.

Income stocks are those with a long and sustained record of paying high dividends.

Generally, a company whose common stock falls into this category is in a fairly stable and mature industry (e.g., an electric utility company).

Because these companies distribute (rather than reinvest) their earnings, their stocks are less likely to experience substantial capital appreciation.

Growth Stocks Growth stocks are stocks that are expected to experience high rates of growth in operations and/or earnings. These growth rates are usually substantially higher than the market averages. Growth stocks are generally much riskier than income stocks.

Growth stocks are stocks that are expected to experience high rates of growth in operations and/or earnings.

These growth rates are usually substantially higher than the market averages.

Growth stocks are generally much riskier than income stocks.

Value Stocks These are stocks of companies which are considered undervalued because they may be in an industry that is out of favor, they may be experiencing management turmoil, or they may be restructuring their business operations. These stocks tend to have lower price/earnings and price to book ratios than growth stocks do. Their prices are cheap compared to the prices required to be paid for growth stocks.

These are stocks of companies which are considered undervalued because they may be in an industry that is out of favor, they may be experiencing management turmoil, or they may be restructuring their business operations.

These stocks tend to have lower price/earnings and price to book ratios than growth stocks do.

Their prices are cheap compared to the prices required to be paid for growth stocks.

Cyclical Stocks Typically, cyclical stocks are stocks of companies whose earnings tend to follow the business cycle. Highly cyclical industries include oil and other natural resources, steel, and housing. Cyclical stocks are often more risky than stocks in companies less subject to changes in the business cycle.

Typically, cyclical stocks are stocks of companies whose earnings tend to follow the business cycle.

Highly cyclical industries include oil and other natural resources, steel, and housing.

Cyclical stocks are often more risky than stocks in companies less subject to changes in the business cycle.

Defensive Stocks Defensive stocks are stocks that are, in a sense, countercyclical. Prices of these stocks tend to remain stable or perhaps rise during periods of economic downturn, while showing poorer results (in comparison to other stocks) during periods of economic upturn. Defensive stocks are well-established companies producing goods that are generally still in demand during an economic downturn, such as food, beverages, and pharmaceuticals.

Defensive stocks are stocks that are, in a sense, countercyclical.

Prices of these stocks tend to remain stable or perhaps rise during periods of economic downturn, while showing poorer results (in comparison to other stocks) during periods of economic upturn.

Defensive stocks are well-established companies producing goods that are generally still in demand during an economic downturn, such as food, beverages, and pharmaceuticals.

Blue Chip Stocks The stocks of the companies with the highest overall quality are those considered to be "blue chips." The companies with blue chip common stocks are often financially stable companies with steady dividend-paying records during both good and bad years. They are usually the leaders within their industry or industry segment.

The stocks of the companies with the highest overall quality are those considered to be "blue chips."

The companies with blue chip common stocks are often financially stable companies with steady dividend-paying records during both good and bad years.

They are usually the leaders within their industry or industry segment.

Step 3: Develop An Investment Strategy Developing this strategy involves three tasks: Select an Asset Allocation Formulate a Goal-Funding Plan Understand Transaction Cost

Select an Asset Allocation

Formulate a Goal-Funding Plan

Understand Transaction Cost

Task 1 : Select An Asset Allocation What asset classes do you want in your portfolio, and in what combination? The asset classes should be as many as possible based on your investment profile. The proportion of your portfolio to allocate to each asset class is ideally determined based on historical data.

What asset classes do you want in your portfolio, and in what combination?

The asset classes should be as many as possible based on your investment profile.

The proportion of your portfolio to allocate to each asset class is ideally determined based on historical data.

Task 2 : Formulate a Goal-funding Plan Before you make actual investments, you must identify the specific goals that you want to fund. Then you can purchase the appropriate investments based on when the item being funded will be paid. Therefore, your first task in developing an investment strategy is to formulate a goal-funding plan.

Before you make actual investments, you must identify the specific goals that you want to fund.

Then you can purchase the appropriate investments based on when the item being funded will be paid.

Therefore, your first task in developing an investment strategy is to formulate a goal-funding plan.

Task 2 : Formulate a Goal-funding Plan Here are some typical investments suitable for three sample goals: Contingency fund: money market fund College funding for a 16-year-old: bonds maturing in 2-6 years College funding for a 2-year-old: common stock portfolio

Here are some typical investments suitable for three sample goals:

Contingency fund: money market fund

College funding for a 16-year-old: bonds maturing in 2-6 years

College funding for a 2-year-old: common stock portfolio

Task 3 : Understand Transaction Cost Commissions Income Tax You should consider those two transaction costs because in the long run they can significantly reduce your investment return

Commissions

Income Tax

You should consider those two transaction costs because in the long run they can significantly reduce your investment return

Step 4: Implement Your Strategy Implementing your strategy involves two fundamental issues : How to Buy When to Buy

Implementing your strategy involves two fundamental issues :

How to Buy

When to Buy

How to Buy You have four options to buy : Through an investment advisor or financial planner Through broker (either full-service or discount) Through a professional money manager Through mutual fund Through an insurance company

You have four options to buy :

Through an investment advisor or financial planner

Through broker (either full-service or discount)

Through a professional money manager

Through mutual fund

Through an insurance company

WHEN to Buy You can use dollar cost averaging strategy to decide when to buy Let’s say you have $ 2,500 to invest. Using dollar cost averaging, you’d not invest all your money at once; instead, you’d invest $ 500 per month for 5 months.

You can use dollar cost averaging strategy to decide when to buy

Let’s say you have $ 2,500 to invest. Using dollar cost averaging, you’d not invest all your money at once; instead, you’d invest $ 500 per month for 5 months.

Step 4: Monitor Your Investment Once you implemented your investment strategy, it’s important that you monitor your investment from time to time to ensure that they remain appropriate for your financial goals.

Once you implemented your investment strategy, it’s important that you monitor your investment from time to time to ensure that they remain appropriate for your financial goals.

Step 4: Monitor Your Investment While you should generally try to avoid frequent changes to your investments, you should periodically (for instance, annually) assess each investment’s performance to se that it meets your expectations.

While you should generally try to avoid frequent changes to your investments, you should periodically (for instance, annually) assess each investment’s performance to se that it meets your expectations.

Source : Ernst & Young’s Personal Financial Planning Guide

Add a comment

Related pages

Investing 101: Introduction | Investopedia

Investing 101: What Is Investing? Investing 101: The Concept Of Compounding; Investing 101: Knowing Yourself; ... Personal Finance. Hate Dealing With Money?
Read more

Personal Finance News, Investing Advice, Business Forecasts

Leader in personal finance news and business forecasting. Get trusted advice on investing, retirement, taxes, saving, real estate, cars, college, insurance.
Read more

Personal Investing: With special guide for the Caribbean ...

Audley L Harris - Personal Investing: With special guide for the Caribbean jetzt kaufen. ISBN: 9781482757545, Fremdsprachige Bücher - Einführungen
Read more

Personal Investing: Let a Financial Consultant from ...

Prepare for your future with personal investing guidance from a Citizens Investment Services Financial Consultant. No matter what your current life stage ...
Read more

Personal Investing: ebook jetzt bei weltbild.de als Download

eBook Shop: Personal Investing als Download. Jetzt eBook sicher bei Weltbild runterladen & bequem mit Ihrem Tablet oder eBook Reader lesen.
Read more

Personal Investing - Citizens Business Bank

Through our CitizensTrust Investment Services team, receive personal investing support, including asset allocation, life insurance, and college funding.
Read more

Personal Investing Basics - Lynda.com

- The concept of investing needs a makeover. Too many people have the will to invest or the means to invest, or both, but don't start investing for the ...
Read more

Personal Investing and Trading Solutions from Merrill Edge

Manage your personal investing needs with our easy to use online tools, investment research and wide range of investment choices.
Read more

Personal Investing Services - RBC Investing - RBC Royal Bank

RBC Royal Bank. Ideal for clients who want tailored advice from an RBC advisor and value a single, convenient relationship for all their banking, credit ...
Read more

Personal Finance - Investing on WSJ - WSJ.com

Wall Street Journal expert advice and feature coverage on investment and personal finance including stocks, bonds, mutual funds, ETFs, and brokers.
Read more