National Association of Black Accountants, Inc. M ney $ense Investing.

National Association of Black National Association of Black Accountants, Inc.Accountants, Inc.

M ney M ney $$enseenseInvestingInvesting

InvestingInvesting

What is investing?What is investing?

Money set aside for future Money set aside for future income, benefit or profit income, benefit or profit to meet long term goalsto meet long term goals

Saving and Investing: The Saving and Investing: The DifferenceDifference

InvestingInvesting is earning a return on your is earning a return on your moneymoney

Saving Saving is to put aside or reserveis to put aside or reserve

Why Invest?Why Invest?

Best Ways to InvestBest Ways to Invest

Get in the habit of saving. You Get in the habit of saving. You must set aside a portion of your must set aside a portion of your income as often as possible. income as often as possible.

Invest in financial markets so Invest in financial markets so your money can grow at a your money can grow at a meaningful rate. meaningful rate.

Ignore short-term price Ignore short-term price fluctuations, and focus on long-fluctuations, and focus on long-term potential. term potential.

Best Ways to InvestBest Ways to Invest

Ask questions and become Ask questions and become educated before making any educated before making any investment. investment.

Invest with your head, not with Invest with your head, not with your stomach or heart. Avoid the your stomach or heart. Avoid the urge to invest based on how you urge to invest based on how you feel about an investment. feel about an investment.

Before you StartBefore you Start

Organize your financesOrganize your finances Understand the impact of timeUnderstand the impact of time

Time Value of MoneyTime Value of Money

The relationship between time, The relationship between time, money, and rate of return(interest), money, and rate of return(interest), and their effect on earnings growthand their effect on earnings growth

Time Value of MoneyTime Value of Money

Suppose your relative owed you $500. Would Suppose your relative owed you $500. Would you rather have this money repaid to you you rather have this money repaid to you right away, in one payment, or spread out right away, in one payment, or spread out over a year in four installment payments? over a year in four installment payments? Would it make a difference either way? Would it make a difference either way?

You would probably be better off getting You would probably be better off getting your money right away, in one payment. your money right away, in one payment.

You could invest this money and earn You could invest this money and earn interest on it or you could use this interest on it or you could use this

money to pay off all or part of a loan.money to pay off all or part of a loan.

The The time value of moneytime value of money refers to refers to the fact that a dollar in hand today the fact that a dollar in hand today is worth more than a dollar is worth more than a dollar promised at some future time. promised at some future time.

A dollar in hand today can be A dollar in hand today can be invested in an interest-bearing invested in an interest-bearing account that would grow in value account that would grow in value over time. over time.

The trade-off between money now The trade-off between money now and money later depends on, and money later depends on, among other things, the rate of among other things, the rate of interest you can earn by investing.interest you can earn by investing.

Time Value of MoneyTime Value of Money

Opportunity costOpportunity cost: the cost of any decision : the cost of any decision includes the cost of the best forgone includes the cost of the best forgone opportunity.  opportunity.  If you pay $50.00 for a concert ticket, your cost of If you pay $50.00 for a concert ticket, your cost of

attending the concert is not just the ticket price, attending the concert is not just the ticket price, but also the time and cost of what else you might but also the time and cost of what else you might have enjoyed doing instead of going to the concert.have enjoyed doing instead of going to the concert.

Applying this concept to the $500 owed to you, you Applying this concept to the $500 owed to you, you see that getting the money in installments will see that getting the money in installments will saddle you with opportunity cost. By taking the saddle you with opportunity cost. By taking the money over time, you lose the interest on your money over time, you lose the interest on your investment or any other use for the initial $500, investment or any other use for the initial $500, such as spending it on something you would have such as spending it on something you would have enjoyed more. enjoyed more.

Opportunity CostOpportunity Cost

Key Investment Key Investment PrinciplesPrinciples

The power of compound interestThe power of compound interest Rule of 72Rule of 72

72/2=3672/2=36

72/6=1272/6=12

72/8=972/8=9

Activity Activity

Developing An Investment Developing An Investment StrategyStrategy

Purpose for InvestmentPurpose for Investment RetirementRetirement Education Education Wealth AccumulationWealth Accumulation Supplemental IncomeSupplemental Income

Investment OptionsInvestment Options

Financial AdvisorsFinancial Advisors

Measuring EffectivenessMeasuring Effectiveness

Investing for WealthInvesting for Wealth

Planning for wealthPlanning for wealth Make the most of a 401(K)Make the most of a 401(K)

Investing in Your Investing in Your FutureFuture

  Asset allocation is ongoingAsset allocation is ongoing DiversificationDiversification  Life circumstancesLife circumstances  Investment goals, timeframe and Investment goals, timeframe and tolerancetolerance

Investing in Your Investing in Your FutureFuture

Asset AllocationAsset Allocation StocksStocks BondsBonds Cash EquivalentsCash Equivalents

Investing in Your Investing in Your FutureFuture

Long-Term InvestmentsLong-Term Investments Mutual FundsMutual Funds StockStock BondsBonds

Investing in Your Investing in Your FutureFuture

Retirement Specific InvestmentsRetirement Specific Investments 401(k)401(k) IRAIRA Social SecuritySocial Security

Monitoring InvestmentsMonitoring Investments

Set Attainable Goals and ObjectivesSet Attainable Goals and Objectives Periodically AssessPeriodically Assess Be Prepared to Change CourseBe Prepared to Change Course Do Not ProcrastinateDo Not Procrastinate Seek AssistanceSeek Assistance

Financial literacy isn’t just a matter of knowing what you

have and knowing your options. It is a matter of planning for

life’s milestones.

Financial literacy isn’t just a matter of knowing what you

have and knowing your options. It is a matter of planning for

life’s milestones.

Thank You!Thank You!

National Association of Black National Association of Black Accountants, Inc.Accountants, Inc.

M ney $enseM ney $ense

For more information visit www.nabainc.orgFor more information visit www.nabainc.org

360 Degrees of Financial 360 Degrees of Financial LiteracyLiteracy

360 Degrees of Financial Literacy is a national 360 Degrees of Financial Literacy is a national effort of the CPA profession to improve the effort of the CPA profession to improve the financial understanding of Americans. It financial understanding of Americans. It provides a comprehensive approach to financial provides a comprehensive approach to financial education, focusing on the information education, focusing on the information Americans need at every life stage, from Americans need at every life stage, from childhood to retirement. CPAs volunteer their childhood to retirement. CPAs volunteer their time and expertise to educate members of their time and expertise to educate members of their communities about financial issues.communities about financial issues.

Visit Visit www.360financialliteracy.orgwww.360financialliteracy.org for tools to for tools to help you make sound financial decisions.help you make sound financial decisions.