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MAKING MONEY SENSETIPS AND IDEAS TO HELP YOUR FAMILY PROSPER

Product and Investment Training

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STOCK BASICS Represent units of ownership or shares in a

company. Traded in the US on various exchanges like the

NYSE, the AMEX, the OTC and the NASDAQ. International stocks are traded in foreign exchanges like the FTSE and the Shanghai.

Stock prices go up and down on a daily basis, but compared to other types of investments, stocks have produced among the highest long-term returns over the past several decades.

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HOW TO READ A STOCKo Columns 1 & 2: 52 Week high and low - These are the highest and the lowest prices at which a stock has traded over the previous 52 weeks (one year). Typically does not include the previous day’s trading.oColumn 3: Company name & type of stock – Lists the names of the company. If there are no special symbols or letters following the name, it is a common stock. Different symbols imply different classes or shares. For example, “pf” means the shares are preferred stock.oColumn 4: Ticker symbol – This is the unique alphabetic name which identifies the stock.oColumn 5: Dividend Per Share – This indicates the annual dividend payment per share . If this space is blank, the company does not currently pay out dividends.oColumn 6: Dividend Yield - The percentage return on the dividend. Calculated as annual dividends per share divided by price per share.

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HOW TO READ A STOCK CONT…oColumn 7: Price/Earning Ratio – This is calculated by dividing the current stock price by the earning per share from the last four quarters. oColumn 8: Trading Volume – This figure shows the total number of shares traded for the day, listed in hundreds. To get the actual number traded, add “00” to the end of the number listed. oColumn 9 & 10: Day high and low – This indicates the price range at which the stock has traded at throughout the day. In other words, these are the maximum and the minimum prices that people have paid for the stock. oColumn 11: Close – The close is the last trading price recorded when the market closed on the day. If the closing price is up or down more than 5% than the previous day’s close, the entire listing for that stock is bold-faced. You are not guaranteed to get this price if you buy the stock the next day because that price is constantly changing.oColumn 12: Net Change – This is the dollar value change in the stock price from the previous day’s closing price. When you hear about a stock being “up for the day”, it means the net change was positive.

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BOND BASICS

IOU’s issued by corporations or governments in exchange for a loan of money to them.

The corporation or government entity promises to pay interest on that loan, usually every six months. They promise to repay the principal amount of the bond itself on a specific maturity date (up to 30 years in the future).

Bonds are traded on exchanges or in markets here and abroad.

Bond offer a stable investment alternative when stocks are volatile.

Taxable bonds (corporate & government) vs. tax-free bonds (municipal)

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MUTUAL FUNDS

A mutual fund provides a way for people with common financial goals to pool resources together.

The money that is brought in is invested by a professional financial manager(s) in a number of different securities.

Typically invest in securities such as stocks, bonds and other specialized types of investments.

Potentially, investors can reap rewards from pooling their assets in mutual funds vs. buying individual securities.

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ANNUITY

A contract between you and an insurance company, under which the insurer agrees to make periodic payments to you.

Fixed annuities offer guaranteed tax deferred rates that rival the rates of CD’s.

Variable annuities offer a variety of mutual fund choices that invest in stocks, bonds, money markets instruments or some combination of the three.

Annuities may be funded with a single investment or a series of systematic payments.

Annuity returns are tax deferred until withdrawn.

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COMMON INVESTMENT VEHICLES

401K 403B

Traditional IRA Roth IRA

Pension Plans

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401K VS. 403B

• Employee funded with possible employer contribution.

• Sole proprietors, partnerships, corporations and non-profits.

• Employees can defer up to $15,500; total combined employer and employee contributions cannot exceed $46,000. Any person over 50 years old can contribute an additional $5,000.

• Employees can change rate of contribution subject to plan limits.

• Employer establish eligibility requirements.• Distributions can only be taken after age 59 ½ or

with a triggering event (i.e. death, disability, hardship, termination)

• Plans may allow loans• Employers must set up plans and administer

401K

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401K VS. 403B

• Primarily employee funded; employer can contribute.

• Employees of public schools and 501(c)(3) organizations.

• Employees can defer up to $15,500; total combined employer and employee contributions cannot exceed $46,000. Any person over 50 years old can contribute an additional $5,000.

• Employee can change rate of contributions subject to plan limits.

• Employees eligibility, generally all employees.• Distributions can only be taken after age 59 ½

or with triggering event (i.e. death, disability, hardship, termination)

• Do not require employer involvement beyond making the payroll deduction.

403 B

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TRADITIONAL IRA VS. ROTH IRA

Traditional IRA

• Contributions may be deductible and grow tax deferred.

• Contributions are made by the individual.• Money invested and earned is subject to

income taxes at the time of withdrawal.• Contributions for 2010 tax year, $5,000 for

those under 50 and $6,000 for those 50 and over.

• Withdrawals can be made without penalty once a person reaches the age of 59 ½.

• A person must begin withdrawing from the account at the age of 70 ½.

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TRADITIONAL IRA VS. ROTH IRA

Roth IRA

• Contributions are made after tax and grow tax free.• Contributions are made by the individual.• Money earned can be withdrawn tax free after the age

of 59 ½. Contributions may be withdrawn at any time tax free and with no IRS penalty.

• Contributions for 2010 tax year, $5,000 for those under 50 and $6,000 for those 50 and over.

• Withdrawals can be made without IRS penalty once a person reaches the age of 59 ½ provided the funds have been in the account for 5 years.

• Contributions can be made even after the person reached the age of 70 ½.

• No required minimum distributions at 70 ½.

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PENSION PLANS A type of retirement plan, usually tax exempt,

where an employer makes contributions toward a pool of funds set aside for an employee's future benefit.

The pool of funds is then invested on the employee's behalf, allowing the employee to receive benefits upon retirement.

There are two main types of pension plans: Defined-benefit plan: the employer guarantees that

the employee will receive a definite amount of benefit upon retirement, regardless of the performance of the underlying investment pool.

Defined-contribution plan: the employer makes predefined contributions for the employee, but the final amount of benefit received by the employee depends on the investment's performance.

Source: http://www.investopedia.com/terms/p/pensionplan.asp

5 STEP FINANCIAL PLANNING PROCESS

1. Clarify your present

financial situation

2. Identify your goals and objectives

3. Develop a plan

4. Implement the plan

5. Review and update the plan

Source: www.practicalmoneyskills.com

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Financial Planning Process

10 STEPS TO GOOD FINANCIAL HOUSEKEEPING

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1. Update your will2. Evaluate current debt3. Insurance4. Budget or track monthly expenses5. Pay yourself first6. Prioritize your financial goals7. Build professional relationships8. Proper asset allocation9. Protect important documents10. Investment diversification

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Sources: American Funds, LPL Financial, CU Employee Solutions, http://www.oppenheimerfunds.com/investors/educaton/mutualFundsBasics.jhtml, http://retireplan.about.com/od/rothandtraditionaliras/a/iravsroth.htm, http://www.sec.gov/investor/pubs/varannty.htm,