INVESTMENT BASICS

Jim Froman, Financial Advisor

"What is the most important strategy for

investing money?"

A. Have a Plan

B. Time

C. Consistency

D. High Rate (or Rate of Return)

E. Compounding

F. All of the Above

F. All of the Above

Strategy 1. Have a Plan

Strategy 2. Time is on your side

Put time on your side

$4,000 a year, 10 percent return

AGE BILL TOM

25 to 34 0 40,000

35-44 40,000 0

Amount invested

40,000 40,000

VALUE at age 45

68,850 186,380

Start Saving NOWAge Monthly

contributionYears to age 65 ($1million)

25 $157 40

30 $261 35

35 $439 30

40 $747 25

45 $1,306 20

50 $2,393 15

55 $4,841 10

60 $12,807 5

*Assumes 10% annual Rate of Return

Strategy 2. Time is on your side

Strategy 3. Consistency and Compounding

6143,400

7,764

29,775

76,301

1 year 5 year 10 year 25 year 40 year

Save $50 a Month With a 5% Yield

Strategy 4. Rate of Return

The “Rule of 72”

• 72/Rate of Return = Years it takes to double your investment.

– Example

72/6% = 12 years to double

72/12% = 6 years to double

A $2,000 investment, with a return of 12%, will equal

$4,000 in 6 years.

There can be no guarantee that any investment will double in any period of time. The Rule of 72 is a mathematical concept and is not illustrative of any specific product offered by UVEST. It is important to note that the Rule of 72 does not guarantee investment results or function as a predictor of how your investment will perform. It is simply an approximation of the impact a targeted rate of return would have. Investments are subject to fluctuating returns and there can never be a guarantee that any investment will double in value.

Strategy 5. Investment Options

• Stocks

• Bonds

• Mutual Funds

Stocks: Sharing a Corporation

Stocks are pieces of the corporate pie. When you buy

stocks, or shares, you own a slice of the company.

Common Stock

•Owners share in

success when

company profits.

•Owners at risk if

company fails.

Preferred Stock

•Dividend payment

has priority over common

stock dividends.

•Dividends don’t increase

if company prospers.

Investor gets

par value at

maturity

Bonds: Financing the Future

Bonds are loans that investors make to corporations and

governments. The borrowers get the cash they need

while the lenders earn interest.

Investors

Willing to

Lend Money

Corporate Bonds

U.S. Treasury Bonds

Municipal Bonds

Bond

Matures

Mutual Funds:Putting It Together

A Mutual Fund is a collection of stocks, bonds, or other securities owned by a group of investors and managed by

a professional investment company.

How Mutual Funds Work?

Money Goes To The

Mutual Fund Company

Their Pooled Money Has

More Buying Power

Fund Manager Invests the Money

In a Collection of Stocks,

Bonds or Other Securities

A large number of people with money to invest,buy shares in a mutual fund.

Strategy 6. Understand Inflation

Strategy 6. Understand Inflation

Summary

• Time is on your side. The sooner you begin saving, the quicker you can make your dreams come true. No amount is too small to get started.

• Consistency is the key to building your savings.What you save isn't as important as the need to regularly sock something away. Always pay yourself first. A good habit is to save at least 10 percent of everything you earn.

• Don't put all your eggs in one basket. Think long term for your future goals--college, a home, retirement--and short term for other expenses. This way you won't be tempted to dip into your retirement fund for things like car repairs, clothes, or whatever else may come up.

It’s never too early to start!