When Life Gives You Lemons…Make Money!
Presented by BC Smart Woman Securities for BC Splash
I.
II.
Who should invest? Why invest?
a. Who should invest?
i. Anyone can invest, you don’t need to have a lot of money
ii. What are some of your own potential sources of income?
1.
2.
3.
4.
iii. Even the smallest income adds up when you ____________!
b. Why invest?
i. Time Value of Money
c. Why does it matter when I start?
i. Scenario 1
1. You don’t start investing because you need money for a car and then a
house, and before you know it, you are 40. You decide to start investing
$4,000 per year for 10 years.
a. You will retire with ______________________________
ii. Scenario 2
1. You decide that you don’t have enough money to save right now
because you need to live in that ultra chic apartment, so you decide to
wait. At age 30, you start investing $4,000 per year for 10 years.
a. You will retire with ______________________________
iii. Scenario 3
1. Right now, at age 15, you start investing $4,000 per year for 10 years by
using your savings from summer jobs and eventually or full-time job.
You never save another dime.
a. You will retire with ______________________________
d. Money Grows with Time
i. Power of Compounding Interest
1. Start with $1,000
2. Put it in an investment that earns 10% each year
3. 10% of $1,000 = $100, so after the first year, you then have $1,100
4. Approximately every seven years, your money doubles
a. “Rule of 72”: 72  Annual percentage rate = Amount of time to
double your money
i. i.e., 72 10 = 7.2 years
Investment Options
a. Stocks (Primary Source for _________________)
i. A stock is __________________________________________________
1. Anyone can purchase this stock
2. # of Shares = how much of a company you own
III.
ii. As the company’s business grows, the per share value of the stock grows to
reflect this
1. Many companies also pay back dividends to shareholders (for example, a
company may pay out $1 per share each year)
iii. Your investment return =
___________________ (money the company pays out to share holders) +
________________(rising value of shares also called capital gains)
b. Bonds (Primary Source for __________________)
i. A bond is an ________________
1. You are loaning money to someone (Federal Government, Municipal
Authorities, or Corporations)
ii. You expect the initial loan amount will be returned to you at a stated time in
the future with periodic interest payments.
1. This is a reason why bonds are also referred to as
______________________________
2. You also receive additional regular “payments” for use of your money,
often called “coupons”
iii. Types of bonds (taxable fixed income)
1. Bank CDs = safety and insurance
2. U.S. Treasuries = safety
3. Corporate bonds = high/medium quality
4. High yield bonds = lower quality/high volatility (“junk bonds”)
5. Tax-exempt = Municipal bonds (federal, state, local)
c. Cash (Primary Source for Stability & Liquidity)
i. Also known as __________________________ accounts
1. Checking/Savings Accounts with interest
2. Bank Money Market Funds
3. Mutual Fund Money Market Funds
a. Taxable
b. Tax-exempt
4. Short-Term Bonds (less than one year)
a. Treasury Bills
ii. Low yield/return… but you know your money will be there when you need it
d. Alternative Investments
i. Mutual Funds
ii. Index Funds
iii. Derivatives
iv. Other
1. Commodities
2. Real Estate
3. Hedge Funds
4. Private Equity
5. Venture Capital
So what should you invest in?
a. Determining Your Financial Goals
i. Now that we know some of the main categories of investments, how can you
decide what to invest in?
ii. Step 1: Set your financial goals
1. In order to set your goals, you need to:
a. Determine a ____________________________________ (Are
you saving to buy a car, a house, or retirement?)
b. Determine your ___________________________________
(What stage in your life are you? How much money do you need
to live on? How much risk can you tolerate?)
c. Understand your priorities (What goals are the most important to
you?)
d. Quantify your priorities (How much money are you planning to
save and invest and how much do you wish to have? Do these
align?)
iii. Step 2: Determine your __________________________________
b. Understanding Risk and Returns
i. These are two important components when judging investments
1. The earlier examples about the time value of money were based on
earning a 10% return every year, but 10% return a year is not always
possible
ii. Not all investments have the same risk; thus, not all investments yield the same
return
1. For example, Treasury Bonds (issued by the US Treasury) are considered
low risk, and therefore offer a lower return
iii. Higher risk often leads to ____________________________
1. You must be compensated for taking on higher risk investments whose
growth is harder to predict (more volatile) than lower risk investments
iv. Returns are relative to the market
1. If your return is 10% a year, but the market return is 15% a year, then
you are doing worse than the market
2. Other factors, such as inflation, must be considered as well. If inflation
is 10% and your investment return is 10%, your “real” return is 0%
c. Risk Tolerance Spectrum
i. Small Company Stocks
ii. International Stocks
iii. Large Company Stocks
iv. Corporate Bonds
v. Government Bonds
vi. Cash Equivalents
IV.
Bottom line: Make saving a priority in your financial life, then help your savings
grow by investing!
Let’s Review
1) You should have at least $10,000 in savings before you start investing.
a. True
b. False
2) When you buy stock in McDonald’s Corporation (MCD):
a. You have leant money to the company
b. You are eligible for a free Big Mac every time you eat at McDonald’s
c. Own a small part of the company.
d. McDonald’s will return your original investment to you plus interest after one year.
3) In general, investments that are riskier tend to provide higher returns over time than
investments with less risk.
a. True
b. False
4) What type of bond is the safest?
a. Municipal Bond
b. Corporate Bond
c. High Yield “Junk” Bond
d. U.S. Treasury Bond
5) When you are young, it is okay to have most of your retirement savings invested in risky
assets like stocks.
a. True
b. False
6) Most successful investors like Warren Buffett
a. owe their success to luck or pure chance.
b. do a lot of practical research before making any investment decision
c. use impossibly complicated mathematical formulas to make investment decisions
d. are born with a super-human stock-picking gene
7) A $100 bill that you stash under your mattress today will be worth much more when you
find it there in twenty years.
a. True
b. False
Recommended Reading
PERSONAL FINANCE:
Suze Orman:
The Courage to Be Rich
The 9 Steps to Financial Freedom
Stephen Covey:
The 7 Habits of Highly Effective People
Napoleon Hill:
Think and Grow Rich
Robert T. Kiyosaki:
Rich Dad, Poor Dad
The Cashflow Quadrant
Thomas J. Stanley:
The Millionaire Next Door
The Millionaire Mind
Millionaire Women Next Door
Talane Miedaner:
Coach Yourself to Success
INVESTING:
Joel Greenblatt:
The Little Book that Beats the Market (very short)
You Can Be a Stock Market Genius
David and Tom Gardner:
The Motley Fool Investing Guide For Teens
Peter Bernstein:
Against The Gods: The Remarkable Story of Risk
Nassim Nicholas Taleb:
Fooled by Randomness
BUSINESS/INVESTORS:
Roger Lowenstein:
Buffett: The Making of An American Capitalist
When Genius Failed: The Rise and Fall of Long Term
Capital Management
John Train:
Money Masters of Our Time
Lois Peltz:
The New Investment Superstars
Ben Mezrich:
Bringing Down the House: The Inside Story of Six MIT
Students That Took Vegas for Millions
Ugly Americans: The True Story of the Ivy League
Cowboys Who Raided the Asian Markets for Millions
FINANCIAL PUBLICATIONS:
Janet Hanson:
More Than 85 Broads
ONLINE RESOURCES:
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http://www.mymoney.gov
http://www.fool.com
http://www.investopedia.com
http://www.finance.yahoo.com
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The Wall Street Journal
The Economist
Financial Times
Barron’s
If you have any further questions please do not hesitate to e-mail us at:
bostoncollegesws@gmail.com
For more information about SWS, visit our website: www.smartwomansecurities.com