A very basic introduction to the concept of building wealth.

1. An Introduction to Investing
Mike Davis
GAAM, Inc.
480-366-5983
mdavis@gilbert-aam.com
Offices in Arizona, Tennessee and
Virginia
Member FINRA/SIPC

2. AN INTRODUCTION TO INVESTING
Today We Will Talk About…
 The need to build wealth
 Investment tools
 How to manage risk
Fee Based Asset Management & Securities Offered Through LPL Financial
Member FINRA/SIPC
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3. AN INTRODUCTION TO INVESTING
Why Invest?
Accumulate wealth for:
 Retirement income
 Education costs
 Major purchases like a home
 Health care for you and your family
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4. AN INTRODUCTION TO INVESTING
The Changing Look of Retirement
Sources of Retirement Income
Earnings
29.6% Social Security
36.5%
Asset Income
12.7%
Private and
Other
Government
2.7%
Pensions
18.5%
Source: Standard & Poor’s. Data is from Fast Facts & Figures About Social Security, published by the Social Security
Administration, September 2010. (CS000123)
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5. AN INTRODUCTION TO INVESTING
Education Costs are Rising
Anticipated College Costs
Source: Standard & Poor’s. Projections are based on 2010-2011 total costs of $36,993 for a four-year private college and
$16,140 for a four-year public college (in-state rate), as reported by the College Board. (CS000113)
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6. AN INTRODUCTION TO INVESTING
Wealth-Building Tools
 Types of investments
 Choices
 Strategies
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7. AN INTRODUCTION TO INVESTING
Setting Investment Goals
 List your goals and time frames
 How much money will you need?
 Gauge your tolerance for
investment risk
 Make sure you have emergency
funds
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8. AN INTRODUCTION TO INVESTING
Types of Investments
 Stocks
 Bonds
 Cash securities
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9. AN INTRODUCTION TO INVESTING
Stocks
 Higher risk/higher return potential
 Own part of a company
 Tradeoff between risk and return
Stock investing involves risk, including loss of principal.
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10. AN INTRODUCTION TO INVESTING
Bonds
 Mainly for income
 Interest payments by bond issuer
 Issuer promises to repay principal
 Variety of risks
 Lower risks and returns than
stocks
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values
will decline as interest rates rise and are subject to availability and change in price.
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11. AN INTRODUCTION TO INVESTING
Cash
 Protect principal
 Treasury bills
 Certificates of deposit (CDs)
 Money market accounts
Government bonds and Treasury bills are guaranteed by the U.S. government as to the
timely payment of principal and interest, and, if held to maturity, offer a fixed rate of return
and fixed principal value. CDs are FDIC insured and offer a fixed rate of return if held until
maturity.
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12. AN INTRODUCTION TO INVESTING
How Investments Stack Up
Stocks
Bonds
Cash Equivalents
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13. AN INTRODUCTION TO INVESTING
The Inflation Factor
30-Year Historical Market Performance
Annualized Return Inflation-Adjusted Return
Stocks 10.72% 7.33%
Bonds 8.92% 5.59%
Cash 5.29% 2.07%
Sources: Standard & Poor’s; the Federal Reserve; Barclays Capital; Bureau of Labor Statistics. For the 30-year
period ended December 31, 2010. Stocks are represented by the S&P 500 index, an unmanaged index of stocks
generally considered representative of the U.S. stock market. Bonds are represented by the returns of the Barclays
U.S. Aggregate Bond Index. Cash is represented by a composite of yields on 3-month Treasury bills and the
Barclays 3-Month Treasury Bills Index. Inflation is represented by the change in the Consumer Price Index. Investors
cannot invest directly in any index. Past performance is not indicative of future results.
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14. AN INTRODUCTION TO INVESTING
Mutual Funds
 Pool investors’ dollars
 Invest in a mix of securities (for example, stocks,
bonds, cash or a combination of them)
 Pursue a stated objective (for example, “growth”)
 Managed by professionals
 Provide diversification to help control risk
Investing in mutual funds involves risk, including possible loss of principal. Investments in specialized industry
sectors have additional risks, which are outlined in the prospectus.
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15. AN INTRODUCTION TO INVESTING
Special Investment Vehicles
Tax-saving incentives help
you accumulate funds for:
 Retirement
 Education
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16. AN INTRODUCTION TO INVESTING
Strategies for Managing Risk
 Asset allocation
 Diversification*
 “Buy-and-hold”
 Dollar-cost averaging**
There is no guarantee that a diversified portfolio will enhance overall returns or
outperform a non-diversified portfolio.
* Diversification does not ensure against market risk.
** Dollar-cost averaging involves continuous investments in securities regardless of price
fluctuations. An investor should consider their ability to continue purchasing through
periods of low price levels. Dollar-cost averaging does not ensure a profit or protect
against a loss in declining markets.
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17. AN INTRODUCTION TO INVESTING
What Does “Asset Allocation” Look Like?
Stocks Bonds Cash
For illustrative purposes only. Your situation may vary. Asset allocation does not ensure a profit or protect
against a loss. A more aggressive portfolio may carry greater risk.
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18. AN INTRODUCTION TO INVESTING
Put Time On Your Side
What Missing the Best Days Could Mean for You
(Initial $10,000 investment)
Source: Standard & Poor’s. For the 20-year period ended December 31, 2010. Stocks are represented by the S&P 500, an
unmanaged index that is generally considered representative of the U.S. stock market. Past performance is not a guarantee
of future results. The S&P 500 is an unmanaged index that may not be invested into directly. (CS000076)
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19. AN INTRODUCTION TO INVESTING
Dollar Cost Averaging
An Example: Dollar Cost Averaging With $50 a Month
M onth Jan Feb M ar Apr M ay Jun Jul Aug Sep Oct Nov Dec
Share Price $15 $13 $12 $14 $13 $12 $13 $14 $15 $16 $17 $16
Shares Bought 3.3 3.8 4.2 3.6 3.8 4.2 3.8 3.6 3.3 3.1 2.9 3.1
Total Shares Purchased: 42.7
Average Price per Share: $14.17
Average Cost per Share: $14.05
Systematic investment strategies such as dollar cost averaging doesn’t assure a profit or protect against losses
in declining markets. Investors should consider the risks involved in purchasing shares during declining markets.
For illustrative purposes only. This example is not indicative of any particular investment. Investing in mutual
funds involves risk, including possible loss of principal. Investments in specialized industry sectors have
additional risks, which are outlined in the prospectus.
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20. AN INTRODUCTION TO INVESTING
To Summarize…
 Identify your specific
investment goals
 Align your portfolio with
these goals
 Balance risk against
potential return
 Consult a professional
for advice
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21. AN INTRODUCTION TO INVESTING
Questions?
Contact:
Mike Davis
mdavis@gilbert-aam.com
480-366-5983
Fee Based Asset Management & Securities Offered Through LPL Financial
Member FINRA/SIPC
RP-07746-1211
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