Investment basics wayne lippman Wayne Lippman has forty years of involvement in broad daylight bookkeeping incorporating a quarter century Price Waterhouse, where he served as an expense accomplice in the San Francisco and Oakland workplaces. He was already Managing Tax Partner of the Walnut Creek office of Price Waterhouse. Wayne spends significant time in individual assessment getting ready for corporate officials and corporate duty anticipating firmly held organizations. He has huge involvement in investment opportunity arranging, exploration and trial credits and multi-state tax assessment. His industry experience incorporates the tax assessment of assembling, dispersion, development, high innovation, retail, benefit commercial enterprises, land organizations and endeavor reserves. Wayne is dynamic in expert associations and is a past administrator of the Taxation Committee of the California Society of Certified Public Accountants, East Bay Chapter. Wayne Lippman got a Bachelor of Arts degree in Economics from the University of California, Berkeley and a Master of Science degree in Taxation from Golden Gate University.

1. Basics of Investing
http://lippmancpas.com

2. Welcome
 Please ask questions or ask for
clarification as we go along.
 I may defer some Q that require a
detailed answer to the end
2

3. 3
Things To Do Before Investing
 Pay off credit card debt!
 No investment pays as much as
credit card companies charge
 Build an emergency fund
 Consider your goals
 Timeline
 How soon will you need the $?

4. 4
Consider your Goals
 Vehicle purchase/replacement
 Down payment on a home
 Child’s education
 To build wealth
 For retirement
 What are your financial goals?
 How much $ will you need?

5. 5
Determine your Risk Tolerance
 How much risk can you stand?
 If you have trouble sleeping at
night because you are worried
about your investments then pick
a more conservative mix
 For experienced investors:
 How did you react to 2008-2009
losses?
 Risk tolerance scale-worksheet

6. Relationship Between Risk and Return
Risk HighLow
Expected
Return
High
Low
Cash
Equivalents
Bonds
Int’l Bonds
Real Estate
Stocks
Int’l Stocks

7. 7
Before you Invest
 Is your budget balanced?
 Do you save every month?
 Do you pay credit cards in full
every month?
 Do you carry adequate insurance
to protect against major
catastrophes?

8. Potential Risks
 Being too conservative (Savings
accounts, CDs, etc.)
 Keeps principal safe but…
 Inflation reduces purchasing
power
 Inflation averages about 3.1%
 Risk not reaching your goal(s)
8

9. Risks
 Being too aggressive (too much
in stocks)
 Higher potential for growth but…
 More market volatility
 No guarantee or insurance
 Potential to lose some or all of the
principal
9

11. 11
Managing Risks
 Consider your goal
 Emergency fund- be conservative
 Retirement- be more aggressive
 Match your goals with your risk
tolerance
 Can you handle the market
volatility?

12. 12
Managing the risks continued
 Consider your time frame
 Short Term – months to 3 years
 Stick with safe savings options
 Mid Term – 3 to 10 years
 Take some risk to grow your $ &
beat inflation
 Long Term – 10 or more years
 Take more risk to grow your $ &
beat inflation

13. 13
Saving Terminology
 Cash Equivalents
 Usually low risk
 Savings, CDs, cash on hand
 Also called liquid assets
 Use for short term goals or if you
have you have low risk tolerance

14. 14
Investing Terminology
 Stock – ownership in a company
 Bond – loan money to issuer
 Mutual fund – A diversified
portfolio of stocks and/or bonds
 Opposite of putting all your eggs
in one basket

15. 15

16. 16
Retirement Funds
 401(k) retirement plan offered by
employer
 $ grows tax deferred
 Some employers will match (~3%)
 Need to invest > just the match
 IRA: individual retirement account
 Invest on your own
 $ grows tax deferred

17. Retirement Funds
 Roth IRA
 Pay taxes now
 No taxes when you withdraw
= no taxes on the growth!
 Traditional IRA
Upfront tax deduction
Pay taxes at withdrawal
17

18. Retirement Funds
 Retirement accounts are NOT
an investment
 How the government treats that
money for tax purposes
 Where you put that money is up to
you
18

19. IRA Criteria
 Must have an earned income
 If married, non-earning spouse
can use a spousal IRA
 $5,500 annual limit
 You can contribute less
 Age 50+: $6,500
19

20. 401(k), Roth, or traditional IRA?
 Invest in 401(k) up to full match
 Instant 100% rate of return!!
 Possible downsides
 employer picks the funds
 May charge heavy fees
 If no employer match, consider
an IRA
20

21. 401(k), Roth, or traditional IRA?
 Use a traditional IRA if
 Your employer doesn’t match
or you’ve already invested up
to the match
 You expect to be in a lower
tax bracket at retirement
Take the tax break now
21

22. 401k, Roth, or traditional IRA?
 Use a Roth IRA if
 You expect taxes to rise
 You expect to be in a higher
tax bracket at retirement
 Offers tax diversification
 If most of your retirement
income will be taxable… invest
in a Roth
22

23. Establish Your Long-Term
Investment Strategy
 Strategy 1: Buy and hold
anticipates long-term economic
growth.
 Stock market has offered a
positive return over every 15 year
period
 Past returns no guarantee, but long-
term buying and holding is a great
strategy
23

24. Long-Term Investment
Strategy 2
• Dollar-cost averaging buys at
“below-average” costs
– Invest same amount every month
–Avoid following the crowd
– Jumping in when the market is high
– Pulling out when it drops
– Set up automatic deposit
24

25. Long-Term Investment
Strategy 3 & 4
• Portfolio diversification
reduces volatility
• Money is like manure. Left in
a pile, it stinks. If you spread
it around, it'll grow some stuff.
– Dave Ramsey
• Asset allocation keeps you in
the right investment categories
at the right time
25

26. Determinants of Portfolio Performance
Asset
Allocation
91.5%
Other
2.1%
Market
Timing
1.8%
Security
Selection
4.6%
Source: “Determinants of Portfolio Performance II, An Update” by Gary Brinston, Brian D. Singer and Gilbert L. Beebower,
Financial Analysts Journal May-June 1991.

27. 27
Investing Made Easy
 Set up Automatic Investing
 Payroll deduction or
 Automatic transfer from checking
to:
 Individual Retirement Account
 Mutual fund
 Other investment

28. Mutual Funds
 Advantages
 Professional management
 Reduce risk through diversification
 Own small part of lots of different investments
 Monitoring investments is easy
 Disadvantages
 Funds charge fees
 Be aware
 follow market performance (down & up)
 No guaranteed rate of return 28

29. Successful Investing
 Educate yourself
 Determine your risk tolerance
 Decide on asset allocation
 Stick to your plan
 Monitor investment performance
 If you need help, consult a
professional advisor
 (N.B. most are salespeople)
 Avoid fraud!
29

30. More Successful Strategies
 Ask questions about…
 Expenses
 Historical performance: 3, 5, 10 yrs.
 Investment goal (e.g., capital
appreciation)
 “Rule of Three” comparison
 Compare at least 3 investments
 “Core and Explore” approach
 For more adventurous
30

31. Low-Maintenance Strategies
 Target maturity date mutual
funds for retirement
 Index funds
 Automatic deposits
 Annual financial check-up
31

32. Ideas on where to invest
Fidelity (800) 343-3548
Vanguard (877) 662-7447
T. Rowe Price (855) 389-9464
Charles Schwab (866) 855-9102
Russell (800) 426-7969
*This is not a comprehensive list
or an endorsement
32

33. Remember
Never invest in something
you don’t understand
33

34. Investing Resources
 Risk tolerance quiz:
http://njaes.rutgers.edu/money/riskquiz/
 Investing for Your Future
http://www.extension.org/pages/
10984/investing-for-your-future
 Money 101 #4: Investing basics:
http://money.cnn.com/magazines/moneym
ag/money101/lesson4/index.htm
34

35. Questions? Comments?
Experiences?

36. Where to Find FPW
 http://usu.edu/fpw/
 http://fpwusu.blogspot.com/
 https://www.facebook.com/Finan
cialPlanningforWomen
 Second Wednesday of the
month TSC room 336 11:30-
12:30
 Family Life Center 493 North
700 East. 7:00 to 8:30 36

37. 37
Financial Planning for Women
www.usu.edu/fpw
 April 10th: Social Security with
SSA expert Mickie Douglas
 11:30 only; no evening program
 May 8th: Great Mutual Funds for
your IRA
 June 12th: Get your house in order
before you buy
 July 10th: Investing for College

38. About Wayne Lippman
https://www.facebook.com/lippma
n.associates.CPAs
https://www.youtube.com/waynelip
pman
http://waynelippman.com
https://twitter.com/waynelippman
Wayne Lippman has forty years of
experience in public accounting
including twenty years with Price
Waterhouse, where he served as a tax
partner in the San Francisco and
Oakland offices. He was previously
Managing Tax Partner of the Walnut
Creek office of Price Waterhouse.
http://Waynelippman.wordpress.c
om