Investing for YOUR Retirement:
It Begins NOW!
Presented by
Maria L. Edlin, Assistant Director
MTSU Center for Economic Education
maria.edlin@mtsu.edu 615.898.5291
What is in your 403b?
 Are you investing in your 403b?
 Do you know how your 403b is invested?
 Do you know what the expected balance of your 403b
is at your projected retirement age?
 If you made a few adjustments, could you retire earlier
and still be comfortable?
 Could you adjust your budget so you could put an
additional $100/month in your retirement plan?
 According to a study by TransUnion as reported in the
Nashville Business Journal (2010, August 25),
Tennessee has the second-highest level of credit card
debt in the country.
 Tennesseans hold an average of 3.5 credit cards with
11 percent of the them having 10 or more credit cards.
More than 13 percent of Tennesseans have used over
half of their credit line and carry a month-to-month
balance on multiple cards (Money, 2007, February 14).
The Magic of
Compounding Interest
Albert Einstein once noted that the
most powerful force in the universe
was the principle of compounding
The numbers…..
Interest Rate
Monthly Deposit
# of Years
Balance
Interest Earned
8%
$250.00
5
$18,864.14
$3,614.14
8%
$250.00
10
$46,596.33
$16,346.33
8%
$250.00
15
$87,913.02
$42,663.02
8%
$250.00
20
$149,468.51
$89,218.51
8%
$250.00
25
$241,176.69
$165,926.69
8%
$250.00
30
$377,807.73
$287,557.73
8%
$250.00
35
$581,366.90
$476,116.90
8%
$250.00
40
$884,638.65
$764,388.65
8%
$250.00
45
$1,336,466.77
$1,201,216.77
Before We Talk About Stocks….
 Let’s talk about the difference between a company and
a brand.
 You invest in companies that OWN brands
 You invest in companies that are publically traded
 Let’s examine some brands and get our students busy at
the keyboard researching those brands and companies!
 Alphabet Soup
Alphabet Soup!
On the sheet titled “Alphabet Soup Exercise!” write
the name of the company or brand with which each
letter is associated.
Stocks
Stock is partial ownership in a company.
Common stock
Preferred stock
Making money with stocks….
 Price is determined by the simple principle
of supply and demand!
 Buy
Low – Sell High
 Sell
High – Buy Low
Bonds
Bonds
 Bonds are loans.
 Debt financing vs. the equity financing you get from
issuing stock.
 Bonds are not typically traded daily.
 There are over 3 million
domestic bond options!
 Government
 Municipal
 Corporate
Bond Terminology
 Par Value = Face Value
 Accrued Interest – the interest that has accumulated
sine the principal investment, or since the previous
interest payment.
 If a bond is resold (secondary market) it can be:
 At a discount = < par
 At a premium = > par
 This fluctuates based on interest rates and time until maturity
 The coupon rate = periodic interest rate paid between
time of purchase and maturity.
Bond – making money
There are two ways to increase your
investment:
 Interest Payments
 Increase in the resale price of the bond
Things That Affect Bond Prices
 Economic Crisis
 Natural & Unnatural Disasters
 Peace & Prosperity
 Interest Rates
 Rates increase = bond price decrease
 Rates decrease = bond price increase
Mutual Funds
Mutual Funds
A company that pools money from many investors to
purchase some combination of stocks, bonds, real estate
and other securities.
Mutual funds exemplify the adage “Don’t put all of your
eggs in one basket.”
Diversification
Can my money earn money when
I diversify my portfolio?
 Risk vs. Reward
 The greater the risk, the greater the potential for reward.
 The greater the risk, the greater the potential for disaster.
Types of Mutual Funds
 Mutual funds come with varying levels of risk and
different philosophies
 Examples:
 Some funds invest in only blue chip stocks
 Some funds invest in only start-up businesses
 Some funds invest in only bonds
 Some funds invest in green companies
Types of Mutual Funds (cont.)
 Mutual funds are also called open-end funds. This means that the
fund will usually sell as many shares as investors want to buy.
 Closed-end funds, like mutual funds, are collections of securities
managed by a professional investment advisor. But unlike
mutual funds, there are a fixed number of shares available and
these shares are traded on the stock exchange.
 Exchange-traded funds, are also like mutual funds in that they
are collections of securities managed by a professional advisor,
and like closed-end funds are traded on the stock exchange.
A Look at a Mutual Fund Portfolio
 Fidelity Magellan Fund
 (FMAGX)
Top 10 Holdings
2
as of 03/30/2012
APPLE INC
EXXON MOBIL CORP
CHEVRON CORP
JPMORGAN CHASE & CO
WELLS FARGO & CO
GENERAL ELECTRIC CO
PROCTER & GAMBLE CO
MICROSOFT CORP
BERKSHIRE HATHAWAY INC CL B
CITIGROUP INC
Strategy
Normally investing primarily in common stocks.
Investing in either "growth" stocks or "value" stocks
or both.
Objective
Seeks capital appreciation.
Top 10 Holdings Represent 25.32% of Portfolio
Total Number of Holdings: 278
Build Your Own Mutual Fund Portfolio
 Have students determine what their risk level is – are they high risk,
moderate or low risk takers?
 Have them search for several stocks and or bonds (at least 10) that match
their level of comfort.
 Have the students determine how many shares of each stock (or how
many $ they want to spend in bonds) they want to purchase. Set a total
value that they need for their mutual fund.
 Have the students write several paragraphs explaining what they invested
in and why they included those investment items in their mutual fund
portfolio.
Want to Learn on Your Own?
What Animal Are You?
 Are you a bull?
 Are you a bear?
 Are you a chicken?
 Are you a pig?
Stock Market Game
 The Stock Market Game is a real-world market
simulation that provides you with the opportunity to
learn the basics of the market on your own or with a
team of friends.
 $100,000 in a portfolio
 Purchase stocks, bonds, and mutual funds
 Real world pricing – the program gets their pricing for the servers
of the New York Stock Exchange, NASDAQ, and AMEX
Let’s Chat…..