Personal Investments
Personal Investments
1
Unit 1
Introduction – Your financial
life
2
Activity: Financial dreams/Financial nightmares
• List all your financial
dreams
• List all your financial
nightmares
3
Your (financial) Life
Your Financial Life
High
School
and
College
Income
$60,000
$40,000
$20,000
-$10,000
Childhood
You begin by
being a financial
drain to your
middle-class
parents at
$10,000 a year
or $184,000
until you leave
the roost—and
that doesn’t
include college
tuition.
10
You’re starting
to earn money
(not much)
and getting the
education
(expensive) to
earn more.
This is when
you start with
credit cards
and student
loans.
20
Growing your
career and
managing
life’s ups and
downs
Starting a
family
Your earnings start
to take off and you
settle down to start
a family. With that
comes your first
house (down
payment of about
$30,000),
mortgage, and the
kids who now drain
you $10,000 a
year. You need an
emergency fund of
six months. You
protect your assets
with insurance.
30
You move towards
your peak earning
years and use this
time to grow your
wealth.
You upgrade your
house and save for
your kids’
education
($100,000) and
your retirement ($1
million). You may
be unemployed
(by choice or not)
at times. You may
divorce. You may
have to care for
your parents. All
these could set
you back.
40
Age (years)
4
50
Retirement
If you’ve been good
about saving, you will
enter retirement debtfree and comfortable
for the rest of your life.
If you haven’t, the
only option is to
continue working if
you can. Healthcare
becomes a big
expense.
Your income could
fall well before you
reach retirement age.
You continue to
accumulate for
retirement and plan
how your nest egg will
last for the rest of your
life. Health issues
start to crop up and
you look to protect
your health and
assets. You may work
longer because you
need to or because
you want to.
60
70
80
People change jobs on
average every two years.
Expect to be selfemployed,underemployed or unemployed
sometimes.
5
Typical income
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Your financial life - income
2005 Median Household Income by Age
70000
60000
Income in 2005 dollars
50000
40000
30000
20000
10000
-20000
Age in years
Source: US Census Current Population Survey 2006
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Over 75
70 to 74
65 to 69
60 to 64
55 to 59
50 to 54
45 to 49
40 to 44
35 to 39
30 to 34
25 to 29
15 to 24
5 to 14
-10000
Under 5
0
Based on gender?
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Based on education
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Salaries are leveling
off.
You can still improve
your earnings with
education.
Washington
Total:
2-person families
3-person families
4-person families
5-person families
6-person families
7-or-more-person families
10
2006
Median
Income
63,705
58,584
66,252
75,140
68,562
62,484
61,212
Income is not rising but debt is
Consumer debt has doubled in the past 10 years
(Consumer credit $ millions - does not include mortgages)
3000000
2500000
2000000
1500000
1000000
500000
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2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
0
People are raiding the piggy bank
Homeowner equity is falling as more debt is assumed
(Homeowner's equity/Value of Household Real Estate)
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1950-9
1960-9
1970-9
Source: Mortgage Bankers Association
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1980-9
1990-9
2000-6
Spending power?
Personal Disposable Income and Outstanding Household Debt
$ Billions
12,000
10,000
Personal Disposable Income
Outstanding Household Debt
8,000
6,000
4,000
2,000
0
1979
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1984
1989
1994
13
1999
2004
How are we doing at savings?
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Could we save more?
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Summary
• Consider your entire financial life and be
aware of all the twists and turns
• Choose a good career and educate
yourself
• Don’t borrow to spend
• Save – even if you think you’ve saved
all you can, save more
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What we will do in this course
•
•
•
•
•
•
•
Focus on financial goals
Save and let Uncle Sam help
Learn about different investments
Asset allocation NOT investment selection
Evaluate funds
Learn when to buy and sell
Protect your wealth
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Your financial goals
(optional)
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Setting goals – start small
• What do you want to achieve this
year?
• Over the next year, what ONE
occurrence would have to happen for
you to feel you’ve made significant
financial progress?
• Write this occurrence as a goal.
• Describe why it is important to you.
• Describe how you will feel when you
have accomplished this goal.
19
Cost out your goals
• Down payment on house (The more you put down the
less risk to default and less monthly payments)
• Wedding (yours or your kids)
• Car (Budget or goal?)
• College tuition (you/your kids/your grandkids)
(http://cgi.money.cnn.com/tools/collegecost/collegecost.html)
• Starting your own business
• Retirement (Rule of thumb – annual income divided by
4%)
(http://sites.stockpoint.com/aarp_rc/wm/Retirement/Retirement.asp?act=L
OGIN)
• Estate (Inheritance or charity)
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Your net worth
What you own (home, car, bank
accounts, etc.)
Less
What you owe (mortgage, car loans,
student loans, credit card balance, etc.)
Keep track of it and grow it every year.
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Your financial life – net worth
Household Wealth - Survey of Income and Program Participation 2000
140000
120000
Median Net Worth
Excluding Home
100000
80000
60000
40000
20000
0
Less than 35
years
35 to 44
years
45 to 54
years
55 to 64
years
Source: US Census
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65 to 69
years
70 to 74
years
75 years and
older
Summary
• Set goals – start small and keep at it
• Make your goals specific and cost them
out
• Calculate your net worth
• Grow your net worth
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Unit 2 -Tax-advantaged
saving Saving with help from Uncle
Sam.
24
The importance of saving early
Which is more?
900000
800000
700000
600000
500000
400000
300000
200000
100000
0
1. Saving $4000 a year
from 25 to 45 years old
and then no more
savings but you leave it
in your account (at 8%
per year)
2. Saving $8000 (double)
a year from 45 to 65
years old
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25 to 45
years
25
45 to 65
years
Finding money to invest – time
value of money (a review)
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3. The effect of saving every year
• You cut out candy and soda for savings
of $25 every week.
• What will you have in 40 years?
27
Time value of money – a review
Interest rate Savings per
week
2008
Number of
Years
Future Value
5%
$25
40
$152,602.02
5%
$50
40
$305,204.03
5%
$75
40
$457,806.05
28
The effect of a better return
Interest rate
Savings per
week
Number of
Years
Future Value
8%
$25
40
$349,100.78
8%
$50
40
$698,201.57
8%
$75
40
$1,047,302.35
29
Start early and let your money work for you
Earnings are much higher than contributions
900000
Contributions
800000
Earnings
700000
600000
500000
Number of Savings
Total
years
per year contributions
25-65
years
30-65
years
35-65
years
40-65
years
Earnings
Total
40
4000
160000
$798,540
$958,540
35
4000
140000
$552,947
$692,947
30
4000
120000
$377,843
$497,843
25
4000
100000
$252,996
$352,996.
400000
300000
200000
100000
0
25-65 years
30-65 years
35-65 years
30
40-65 years
Case study: Cost of cashing out
• About 57% of people who leave companies cash
out their retirement benefits of $8445. If you left
this money in a retirement plan for 40 years at a
return of 8%, calculate what it contributes to your
retirement.
31
Cost of cashing out
• You lose about $183,500 for your
retirement fund. If you cash out, you pay
taxes on your withdrawal plus a 10%
penalty on top of that. That would leave
you with $6000 now versus $183,500
when you retire.
32
Maximizing retirement saving
• 54% have access to employer-sponsored plans and 43%
participate
• 53% of white-collar occupations
• 40% of blue-collar occupations
• 20% of service occupations
• Employees make contributions to retirement savings plan
• Employers may match contributions up to a certain amount
• When employee leaves company, the money goes with him or
her (portable)
• Retirement income depends on how much employee contributes
and the returns on the money
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Employer Plans
• Most common defined contribution plan
is 401K
– 43 million participants
– 457,830 plans
– $2.1 Trillion in assets
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401K – How does it work?
• Jill is single and makes $30,000 a year
gross salary and she wants to put
$1800 away for retirement in 30 years.
• She is considering three options:
– 401K contribution
– Traditional IRA contribution
– Roth IRA contribution
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401K – How it works
• Salary is typically contributed pretax – will reduce
your salary for tax purposes
• Maximum contribution $15,500 (2008) with an
additional catch-up of $5000 for those over 50 years
old
• 82% of employees contribute
• On average participants put in 6.8% of salary
• 91% of employers match your contributions up to on
average 3.3% of your salary
• There is a 10% penalty for withdrawing before age 59
½ and you have to pay taxes on your withdrawal
• When you leave your company, you may rollover
your 401K to a Individual Retirement Account (IRA)
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Traditional IRA
• Jill’s income level is low enough (see IRA
publication 590 for limits) to put money away
pretax into a traditional IRA
• IRAs like 401Ks may have
– Her salary for tax purposes is reduced by $1800 to
$28,200 so she pays less taxes now
– In 30 years, at 8% return, Jill has $18,113 which
will be taxed when she takes a distribution
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Roth IRA
• Jill’s income level is low enough to put
money into a Roth IRA (see IRS
publication 590 for limits)
– Her salary is not reduced so she has no
tax savings now
– In 30 years, at 8% return, Jill has $18,113
which will be NOT be taxed when she
takes a distribution
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401K
•
Jill puts 6% ($1800) in a 401K. Her
company matches up to 50 cents for every
dollar the employee contributes up to 6%.
–
–
–
Her salary for tax purposes is reduced by $1800
to $28,200 so she pays less taxes now
Her company matches 3% of $900 so the total
contribution is $2700
In 30 years, she will have $27,169 which will be
taxed when she takes it out
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401K, IRA or Roth IRA for Jill?
• If a company matches, 401K is best up
to the maximum of the match
• If your tax rate is low now and higher
when you retire or you want more
flexibility on your distribution, the Roth
IRA is the next best
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Risks with 401K
• 18% to 25% of employees don’t
participate or contribute
• About half of those under 25 contribute
• Participants don’t know how to allocate
assets (100% company stock is a risk)
• When people leave company they cash
out their 401Ks instead of rolling it over
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401K Checklist
•
•
•
•
Max out employer contribution
Monitor asset allocation
Ask about fees
Always roll over when leaving a
company
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IRA
• You can contribute up to what you earn
for the year
• Roth IRAs are best if your tax rate is low
• When you leave a company, make sure
that you roll over your savings to a IRA
– keep it separate
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Issues in retirement planning
• It’s up to you and not your employer –
save in a tax-advantaged way
• How much should you save? Lots of
opinions but 10% to 15% a year will be
a good safety net
• Don’t cash out retirement savings – it
costs you a lot
• Don’t borrow on your 401k—it costs you
too
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Who is eligible
Maximum you can
contribute
401K
Determined by employer.
Roth IRA
Anyone who had income from
working and his or her
nonworking spouse.
$15,500 (2008 with cost of living after
that) or maximum set by employer.
$5000 catch-up contribution for those
50 and over.
There are income limits.
$5000 (2008) each with $1000
catch-up contributions for those
over 50.
Traditional IRA
Anyone up with age 70 ½ with
income from working and his
or her nonworking spouse.
There are no income limits.
$5000 (2008) each with $1000
catch-up contributions for
those over 50.
Your employer may contribute a match
which makes this attractive.
Tax status of contributions
Contributions are pretax.
Contributions must be after-tax.
Tax status of earnings
Earnings are tax deferred. You pay
Earnings are tax free.
ordinary income tax when you take the
money out therefore missing out on
lower capital gains tax.
Earnings are tax deferred. You
pay ordinary income tax when
you take the money out
therefore missing out on lower
capital gains tax.
Withdrawals
Withdrawals made before age 59 ½
will be subject to a penalty of 10% in
addition to tax.
Withdrawals made before age
59 ½ will be subject to a
penalty of 10% in addition to
tax.
Contributions may be withdrawn
without penalty.
Earnings can be withdrawn
without penalty for some
expenses.
Mandatory age for
withdrawals
70 1/2
http://www.irs.gov/publications/p590/a
r01.html#d0e124 for the latest limits.
None
45
Contributions may be pretax
up to certain income limits.
70 1/2
Unit 3: Investments
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Understanding Returns
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A real life example
• You will get your paycheck next week
but you need $100 now. You arrange
for a payday loan paying a fee of $15
for the use of $100. The payday loan
company will collect the $100
electronically from your bank account
when your pay check is deposited next
week. What is the rate charged?
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Income investments
• Invest only in instruments you
understand
• Most investors start off with income
investments such as certificates of
deposit or bonds
49
Certificate of Deposits
• Invest a fixed amount of money (principal) in a CD.
Your principal is guaranteed plus a fixed amount of
interest:
– Receive interest monthly, quarterly or at maturity.
– You will incur penalty fees for withdrawing your money early before
the term expires (before it reaches the maturity date).
• CDs can be purchased through banks, credit unions
or brokerages. CD considerations are:
– Time period (maturity date)
– Interest yield includes the effect of compounding interest rate and is
usually higher than the interest rate of statement savings accounts.
– Interest payments may be withdrawn as they are paid by the bank
– CDs are insured by the FDIC or NCUA up to $100,000 ($250,000
on retirement accounts)
50
Bond Primer
• Similar to CDs in
that interest (yield)
is paid usually
semiannually
• Has a maturity,
however may be
redeemed before
maturity.
• May be sold before
maturity.
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Primer on bonds
52
Capital gain or loss on bonds
53
Stocks
•
Annual Stock Price Changes from 1900 to 2006
(Percent change year to year in S&P 500)
•
45%
25%
5%
1900
1910
1920
1930
1940
1950
1960
1970
1980
-15%
-35%
-55%
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1990
2000
•
When you own a share of
common stock, you own a
share of the company.
Owning stock is also
referred to as owning
equity or having a
shareholder stake since
you are a shareholder in
the company.
Stocks are historically
much more volatile than
bonds in that their prices
can go up and down
much more.
Other investments
•
•
•
Real Estate - can be broken down into residential (places where
people live) and commercial (office buildings, shopping centers, hotels,
warehouses, manufacturing facilities, and such). Estimates of
worldwide value of commercial real estate is $14 trillion with the US
having about $4.7 trillion.
International -The 51 stock exchanges in the World Federation of
Exchanges accounted for companies with $61 trillion in market value at
the end of 2007. Over the past ten years, US exchanges and those of
developed countries in Europe and the rest of the world accounted for
less growth than markets in emerging economies such as China, India,
and Latin America.
Commodities - Commodities are raw materials such as oil, agricultural
products such as wheat, cocoa or pork bellies, metals such as silver,
gold, or copper. Commodities also include currencies, Treasury
securities, and stock indexes. Speculators typically buy and sell
commodities with options and futures contracts on an exchange.
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Investment Risk
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Major asset classes: Risk & Return
Index Funds (2007)
Average
Return %
42
Risk
%
18
25
10
International stocks of developed countries
23
9
Real estate
22
17
Small cap stock - Small US companies $300 M to
$2 B
Mid cap stock - companies $1.5B to $5 B
15
12
16
10
S&P 500 - Largest US stocks
13
8
4
3
Emerging markets are international stocks of
developing countries
European large stocks
Bonds
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Return versus Risk
If you receive an
offer of a
guaranteed high
return, is that
possible?
Only if they
guarantee a high
loss as well.
There are no
guarantees in any
investment. All
investments go up
and down. Higher
return means
higher risk.
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Given the same return, the investment with less
risk is better
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The Northwest is the best.
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Combined – Risk Return
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Year-to-year stock returns
Annual Stock Price Changes from 1900 to 2006
(Percent change year to year in S&P 500)
45%
25%
5%
1900
1910
1920
1930
1940
1950
-15%
-35%
-55%
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1960
1970
1980
1990
2000
Risk gets lower with time
Average Previous Five Years S&P 500 Gains
30%
25%
20%
15%
10%
5%
0%
1900
1910
1920
1930
1940
1950
-5%
-10%
-15%
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1960
1970
1980
1990
2000
Lowest risk over ten years
Average Previous Ten Years S&P 500 Gains
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
1900
-2%
1910
1920
1930
1940
1950
-4%
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1960
1970
1980
1990
2000
Summary
• All investments have risk
• Buy and hold market index funds
(doesn’t work for individual stocks)
• Have an emergency fund (3 to 6
months) to tide you over
• Have other sources of income so you
don’t have to cash out during down
markets
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Asset Allocation
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All eggs in one basket?
• 34.6 percent of families had stock in
only one company
• 59.5 percent had stock in three or fewer
companies
• 9.5 percent had stock in fifteen or more
companies
Source: 2004 Consumer
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Why asset allocate?
• It has to do with return and risk
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Can you predict the best return?
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Does the risk double with two investments?
The key is
having two
investments
which aren’t
correlated.
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Adding a riskier investment to your portfolio
decreases overall risk.
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If you allocate the right amount you reduce risk
and increase return!
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Pension Fund Asset Allocation
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“Millionaires” Portfolio
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David Swensen suggests a portfolio
75
Summary
• Don’t put all your eggs in one basket.
• Rebalance every year to keep your
portfolio on track.
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Funds
Unit 5: Selecting funds
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Types of funds
• Mutual funds
• Closed-end funds
• Exchange-traded funds (ETFs)
Mutual fund industry
Closed-end funds
ETFs
Evaluating funds
 Objective
 Relates to your asset allocation goals
 Check the portfolio to be sure
 Fees
 The lower the better – check against index funds
 Performance
 How does it do against the index? How does it do against other
funds?
 Risk
 Is it lower risk than other funds?
 Management
 If you are choosing an actively-managed fund – how experienced is
the manager?
 www.morningstar.com or www.marketwatch.com for Lipper
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Fund Fees
True or False?
•
•
•
•
All fund fees are charged when you buy.
All fund fees have the same effect.
A no-load fund has no fees.
All funds should have the same level of
fees and expense ratios.
• Expense ratios are such a small part of
your investment you shouldn’t worry
about them.
96
Index Funds
• Index funds are funds that represent
certain categories of assets
• There are index funds for large, medium
and small stocks, international stock,
bonds, industries, real estate,
commodities, and more.
• They are not actively managed. Their
investments don’t change.
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Beating the indices -- negatively
Source: Statement of John C. Bogle to the United States Senate
Governmental Affairs Subcommittee, November 3, 2003
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How fees (negatively) impact your return
Source: Statement of John C. Bogle to the United States Senate
Governmental Affairs Subcommittee, November 3, 2003
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Percent of actively-managed funds that
beat their index
70%
60%
50%
40%
30%
20%
10%
0%
1995
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1996
1997
1998
1999
2000
100
2001
2002
2003
2004
2005
2006
Evaluate your fund performance/fees against
index funds performance/fees
Mutual Fund Category
Emerging markets are international stocks of
developing countries
European large stocks
International stocks of developed countries
Real estate
Small cap stock - Small US companies $300 M to $2
B
Mid cap stock - Medium-sized US companies $1.5B
to $5 B
S&P 500 - Largest US stocks
Bonds
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Index Fund
All Funds
Expense Expense Ratio
Ratio %
%
0.77
0.6
0.35
0.35
1.77
1.64
1.65
1.46
0.2
1.41
0.2
0.09
1.39
1.25
0.2
1.05
101
Unit 6: When to buy and sell
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102
Bond/CD Laddering
Bond laddering is buying income investments over many periods rather than just at one time.
The advantages of a bond ladder (or CD ladder) are:
•
You will have a mixed yield portfolio of bonds coming due in the short and long term, which
will give you a better current bond yield.
•
If interest rates go up, you will have a bond maturing shortly that you can reinvest at a
higher interest rate for another five year term.
•
If interest rates drop, only a small portion of your portfolio (the one-year bond maturing)
would be reinvested at the lower rate.
•
You can match your cash needs with how long you make the bond ladder by deciding the
type of bond for the ladder.
Be careful how you build your bond ladder. Here are some suggestions to keep in mind:
•
The longer the maturity, the higher your yield but the risk will be greater.
•
For your bond ladder, the more rungs on your ladder, the more diversified your investment
portfolio will be.
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Bond Ladder
Bond laddering gives you a mix of interest rates
18.00
16.00
12.00
10.00
8.00
6.00
4.00
2.00
1981
1982
1987
6.64%
1991
7.7%
1992
6.24%
104
1996
5.36%
1997
6.33%
2000
6.58%
2001
2002
4.34%
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1995
7.76%
1990
8.12%
1986
8.68%
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1985
12.77%
1980
10.74%
DRAFT 3/6/2007
1984
1983
1982
1981
0.00
1980
5-year Treasury Bond
14.00
2005
3.71%
2006
2007
4.75%
The effect – not always better
Lump
sum
100000
1980 10.7%
1981 12.8%
1982 14.7%
1983 10.0%
1984 11.4%
1985 10.9%
At maturity
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153700
105
Ladder
20000
20000
20000
20000
20000
20000
190490
Rebalancing
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106
Do we buy at the right time?
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107
Rebalancing
• Adjusting portfolio based on asset
allocation goals
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108
No rebalancing
Year
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
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Bond
40%
40%
39%
35%
32%
27%
24%
21%
24%
28%
36%
31%
30%
29%
27%
109
Stock
60%
60%
61%
65%
68%
73%
76%
79%
76%
72%
64%
69%
70%
71%
73%
Rebalancing
Final Value - No Action Portfolio $376,353
Final Value Rebalance Portfolio - $381,608
35%
30%
No action
Rebalanced
25%
20%
15%
10%
5%
0%
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
-5%
-10%
-15%
-20%
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110
Advice from the pros
David Swensen who manages the Yale University endowment, and
who is considered one of the best investment managers, has
sobering advice to give to individual investors:
• Individuals shouldn’t pick stocks themselves. The markets are
competitive and they don’t have the information to compete nor
the clout to negotiate.
• Beware of actively-managed mutual funds. They allow popular
funds to grow too big so they can’t beat the market. They also
tend to promote the wrong fund at the wrong time. The vast
majority of actively-managed funds underperform the market.
• Mutual fund monitoring companies don’t help you either. They
downgrade funds after the damage has been done.
• Individuals are best served by index funds with the lowest fees.
• Have a diversified portfolio and rebalance.
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111
Investor Fraud
Unit 6: Protect your wealth
Choosing a financial advisor
•
•
•
•
Comparison shop - talk to people at several firms. Meet with them face to face
at their offices. Make a list of questions to ask. Get a copy of their Form ADV.
Qualifications - What is the advisor’s education? What certification does he or
she have? Does it relate to financial knowledge? Ask about their clients. How
many clients do they have? How long do clients stay with them? What are the
total assets they are advising on? What is the average portfolio of their clients?
Make sure you fit the profile.
Style: Ask if the advisor or an assistant will handle your portfolio. Ask for at least
three references. Do you feel comfortable with the advisor? Investing is a very
personal activity. Does the advisor’s investing style match yours? You need to
feel that the advisor is working in your best interest.
Disclosure - Make sure that you have complete disclosure of any fees and the
commission schedule. Ask if there is any potential conflict of interest. Get this all
in writing.
113
Investment Fraud
• Investment fraud criminals use a wide array
of influence tactics.
• Research done by the National Association of
Securities Dealers on transcripts from phone
calls of these con artists found 1,100
separate uses of the influence tactics in 128
transcripts.
• First the con artist identifies victims and then
cases out the potential victim. They establish
that the victim has money. Then they create
the “ether” or the state where the victim is
susceptible to the fraud.
Commonly Used Influence Tactics
• Phantom Fixation – The con puts something that is completely
unavailable before the victim. Often it appeals to health issues,
wealth, popularity or avoiding death. The amount of money that
they claim you can earn is astronomic. For example, earn
$30,000 a month.
• Commitment – “You can vote to stop drilling, but if you do, all
the rest of what you have invested will be lost.”
• Authority – “I have been in the oil business for over 30 years
and I have seen it all.”
• Social Proof – Everyone is getting in on the offer
• Scarcity including product scarcity (only three left) and time
scarcity (offer good only today)
Other influence tactics
• Comparison – Inflated “regular” price
• Profiling – Probe for information and then customizes
pitch
• Friendship – Changes the relationship from con to
victim to friend to friend
• Reciprocity – Does favor so you will return favor
(gifts, free lunch, etc.- with gift response rate goes
from 17% to 36%)
• Landscaping – changes social interaction so it lead to
where the con wants to go by setting the agenda,
limiting choices or controlling information.
www.dfi.wa.gov
• If it sound too good to be true, it is.
• Don’t invest in anything you don’t
understand.
• Check out your investment advisor and
your investments at www.dfi.wa.gov
• Report any suspicious activity right
away.
Activity
• Similar to a will that outlines your
wishes for your children, what are the
most important financial lessons you
want to pass onto your children? When
would you start teaching them these
concepts?
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