Asset allocation is the process of spreading your assets among several different types of investments, usually by percentage, to lessen risk.

1. Investment For Your Better
Future
Reichman Partners

2. Investing for the Future: Goal Setting
• Investment goals should be specific and
measurable. Develop your goals by
asking questions:
• What will I use the money for?
• How much will I need?
• How will I get the money I need?
• How long will it take me to get the money I
need?
• How much risk am I willing to take on?
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3. Goal Setting
• What could make me change my goals?
• Given my economic circumstances, are
my investment goals reasonable?
• Am I willing to make the sacrifices
necessary, to meet my goals?
• What will the consequences be if I
don’t reach my investment goals?
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4. First Steps
• Get a good education and good training to win
the means to finance your future.
• Establish a budget and stick to it.
• Establish a savings account.
• Save for emergencies (3 – 9 months of living
expenses).
• Save for your education.
• Save to invest.
• Avoid debt.
• Make sure you are insured.
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5. Second Steps
• Start or have someone start for you a
Roth IRA
• Choose a reputable no-load mutual
fund or Exchange-traded fund.
Plow into your future as much as you
can of gifts, inheritances, and windfalls.
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6. Third Steps
• Participate in any 401(k) or other
savings / investing plan your employer
may offer.
• Add to your portfolio of mutual funds
and exchange-traded funds.
• Educate yourself about other
possibilities, such as investing directly
in the stock market.

7. The Value of Investing into and for the
Future
• Many people don’t start investing because
they only have a small amount to invest,
but....
• Even small amounts invested regularly
grow over a long period of time.
• If you save $2,000 each year at 5%, you
would have $241,600 at the end of 40
years. The higher the rate of return the
greater the risk. 13-6

8. Factors Affecting the
Choice of Investments
• Safety and risk.
• Safety means a lessening of the possibility of
losing your money.
• Risk means hat there’s a chance you WILL
lose your money.
• Investments range from very safe to very
risky.
• The greater the risk, the greater the potential
return: risk is best borne by the young.
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9. Five Components of Risk
• Inflation risk - during periods of high inflation your
investment return may not keep pace with the inflation
rate.
• Interest rate risk - you may invest in a bond at a 6%,
rates later go up to 8%; your bond price falls.
• Business failure risk - bad management or products
affect stocks and corporate bonds.
• Market risk - prices fluctuate because of behaviors of
investors.
• Global investment risk - changes in currency affect the
return on your investment.
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10. Investment Risk: the Lows and
Highs
• Safe investments = predictable and low
income.
• Savings accounts and certificates of deposit.
• U.S. savings bonds.
• United States treasury bills.
• Riskier investments = higher potential
income.
• Municipal bonds.
• Corporate bonds.
• Preferred stocks and income common stocks.
• Income mutual funds.
• Real estate rental property.
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11. Investment Growth and Liquidity
• Growth:investment will increase in
value over time.
• Liquidity.
• The ability to buy or sell an investment quickly
without substantially affecting the investment’s
value.
• Cash is immediately liquid.
• Savings is very liquid.
• Precious metals are not very liquid.
• Real estate is not very liquid.
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12. Asset Allocation and Diversification
• Asset allocation is the process of spreading
your assets among several different types of
investments, usually by percentage, to lessen
risk.
• Determine what percent you want in stock,
bonds, CDs, and mutual funds based on your
time frame, age, and tolerance for risk.
• Investing in different asset classes provides
diversification.
• Younger investors generally should put a larger
percentage in growth-oriented investments.
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13. Investment Alternatives - Stock
• Stock or equity financing.
• Equity capital is provided by stockholders,
who buy shares of a company’s stock.
• Stockholders are owners and share in the
success of the company.
• A corporation is not required to repay the
money obtained from the sale of stock.
• They are under no legal obligation to pay
dividends to stockholders. They may
instead retain all or part of earnings.
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14. Investment Alternatives - Bonds
• Corporate and government bonds.
• A bond is a loan to a corporation,
the federal government, or a
municipality.
• Bondholders receive periodic
interest payments, and the principal
is repaid at maturity (1-30 years).
• Bondholders can keep the bond
until maturity or sell it to another
investor before maturity. 13-13

15. Investment Alternatives – Mutual Funds
• Mutual funds.
• Investors’ money is pooled and invested by a
professional fund manager.
• You buy shares in the fund.
• Provides diversification to reduce risk .
• Funds range from conservative to extremely
speculative.
• Match your needs with
a fund’s objective.
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16. Investment Alternatives - Real Estate
• The goal of a real estate investment is
to buy a property and sell it at a profit.
Nationally, 3% appreciation in price a
year is average.
• Location, location, location is important.
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17. Speculation – Don’t Be Stupid!
• Speculative investments.
• A speculative investment is a high-risk
investment made in the hope of
earning a relatively large profit in a
short time. Typical speculative
investments include:
• Antiques and collectibles.
• Options.
• Commodities.
• Coins and stamps.
• Precious metals and gemstones.
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18. A Personal Investment Plan
• Establish realistic goals.
• Determine the amount of money needed to
meet your goals.
• Specify the amount of money available to
fund your investments.
• List different investments you want to
evaluate.
• Evaluate risk and potential return for each.
• Reduce possible investments to a
reasonable number.
• Choose at least two different investments.
• Continue to evaluate your investment
program.
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19. Your Role in the Investment Process
• Evaluate potential investments.
• Seek the assistance of a financial
planner (see Appendix at the back of
the text).
• Monitor the value of your
investments.
• Keep accurate and current records.
• Consider the tax consequences of
selling your investments.
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20. Sources of Investment Information
• The internet.
• A wealth of investment information is
available.
• Newspapers and news programs.
• Business periodicals such as
Smart Money and government publications.
• Corporate Reports.
• Investor services and newsletters, such as Value
Line or Morningstar.
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