Long Term Investing 401 Ks IRAs Mutual Funds

Long Term Investing 401 K’s, IRA’s, Mutual Funds

Types of Investments (4 -Asset Classes) Average return per year 1926 - 2000 • Stocks • Real Estate • Bonds 9. 8% 5. 0% 3. 5% 3. 0% • Cash Accounts – Checking account, CD’s, money markets $10, 000 invested 30 years ago

Holding Period • When do you need your money back? – Time horizon determines which asset class you should invest in • The longer the holding period----the more risk you should take! – Stocks = long term investment (5 -years or longer) – Bonds = medium term investment ( 1 -3 years) – Bank CD’s = short term investment (30 days to 2 years)

Asset Allocation Process of picking sectors to invest in $10, 000 invested for 30 yrs Cash Account Bonds Stocks no risk med. risk high risk $28, 000 $43, 000 $165, 000 I think I’m brilliant very high risk ? ? ?

Mutual Funds • professionally managed collective investment vehicle that pools money from investors to purchase securities Money Pooled in a specific fund Managers can buy stocks, bonds, commodities, etc….

How to buy stocks, mutual funds? You first need to open a brokerage account Banks Checking & Savings account Brokerage Account Brokerage Firm Specialize in accounts for stocks, bonds, mutual funds

Pick your own mutual fund • Reading:

Hidden Fees on Mutual Funds have yearly expense charges • You should not pay more than. 75% per year Many funds also have fees to buy the fund • Often these “loads” are hidden 401 -K IRA Roth IRA 529 plan Etc…. .

Quantitative Easing Bonds vs. Stocks? ? $10, 000 invested for 30 yrs Cash Account Bonds Stocks no risk med. risk high risk $28, 000 $43, 000 $165, 000 I think I’m brilliant very high risk ? ? ?

Retirement Gamble PBS Video 2013 PBS special on retirement investment dangers…. Retirement accounts: • 401 -K • IRA • Roth IRA Video Link http: //johncbogle. com/wordpress/

The Power of Compounding