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Con Ed - Saving & Investing


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74% of Americans age 65+ have incomes < ?
57% of Americans age 65+ have incomes < ?
How much debt do Americans have? (not including mortgages)
$1 trillion
Half of American households have accumulated less than ____ in net financial assets?
What are 6 things you cannot control?
1. social sercurity
2. employer
3. taxes
4. inflation
5. rising costs
6. risk of a single investment
What are 5 things you can control?
1. cash for retirement
2. alt. sources of income
3. ways to reduce taxes
4. maximizing your invesment potential
5. diversify
Why do people still retire in poverty?
they are still working for their money, they haven't figured out how to make their money work for them
Whats the average Social Security check?
Your income is importmant but what really matters is?
how much you save
take any 100 people from 25-65 and?
36 are dead
54 are broke
5 are working
4 are financially independent
1 wealthy
What % of Americans have credit cards?
What % of Americans have a credit card balance
Average credit card balance?
With what interest rate?
$9,000 w/ 18% interest
5 things to keep yourself poor
- lack of understanding about how money works
- no financial goals
- no financial plans
- overpaying for basic items
- procrastination
Social Security predicts that it will pay out more benfits than it collectes in?
2012 - as early as 2007
to save social security we can?
- raise taxes
- lower benefits
- privatize the system
social security wasn't meant as a full retirement only as a ___
one needs how much take home pay to retire on (%)
If one takaes social security at age 62, what will be cut
can't take from an IRA until age ?
must withdrawl by age? (traditional)
- 59.5
- 70.5
what percent of bankruptcies are Ch 7
what % of benefit managers say their companies offer 401k retiremetn accts
how many dont participate, contribute some, and contribute max?
- 57% - zero
- 24% - some
- 15% - max
half of all Americans ages __-__ haven't started saving for retirement?
half of all Americans ages __-__ haven't started saving?
what are the ingredients for making money?
time & consistency
inflation doubles every
20 years
what must beat what to make money
inflation and taxes!
what is saving?
putting your money aside for future use
what is investing?
putting your money to work
Why do people save?
- purchases
- emergencies
- additional income
how many months of saving do you need for an emergency
6 months
where do people usually put their money (to save)
- commercial banks
- savings banks
- savings & loans
- credit unions
what are commercial banks?
full service
most common
what are savings banks?
financial institutions owned by depositors
found in Northeast
what are savings & loans
- thrift
- pushed savings
what are credit unions?
- financial institutions that ofer memberships to people who share a commond bond
- savings and lending
what is redlining?
not lending money to people in poor or high crime areas because they argues that property values would go down
- laws have been passed to stop this practice (not successful)
what should you look for in savings?
- interest
- compound daily is best
- also compound interest is very important
what is interest
the return for letting others use you money
what are different savings accounts
- passbook
- certificate of deposit (FDIC)
- money market account (interest changes over time)
in general money market accounts pay more than ____ but less than ____?
- passbook
- CD's
the more kept in a money market...
the higher the rate (FDIC)
Principal is?
the money you deposit
what is simple interest
paid one time a year at the end of the year on the ave. balance in the account
what is compound interest?
is paid on the principal plus any previously earned int.
Interest rates are always quoted per?
what is the second most important factor
insurance protection if financial institution fail
what is the FDIC
Fed. Deposit Ins. Corp.
- insures depositors money up to $100,000 totally
what is the SAIF
Savings Association Ins. Fund
- insures S&L's
what is the NCUSIF
Nat. Cred. Union Share Ins. Fund
- Insures credit unions
- in best shape financially
some reports show that FDIC would be lucky to pay ___cents on the dollar
10 cents
What is the third most important factor of savings?
what is liquidity
- the case and speed with which savings can be converted into money
- passbook is most flexible
What entices depositors?
- free gifts
- grace days (method of figuring interest - look for int. that pays from day of deposit to day of withdrawl_
- convenience (location and free service)
- personal service
insurance should be based on how much you ____, not how much you can _____
one should have how many policies per person
when were stock mutual funds started?
Real rate of return that on should get from investment?
2% over and above inflation and taxes
there is no other ownership that keeps out running inflation except for
do not pay taxes on money that you are not
- Put you money in?
- tax defferals
inflation on the news? reality?
- 3-3.5
- 5%
4 ways to earin money from investing
- rent
- interest
- capital gains
- dividends
to have a chance to make more money on your investments, you must be able to accept more
general rule of investing
"the greater potential rate of return, the greater the risk"
helps reduce the risk of total loss
the right way to invest depends on
your personal financial situation
what is a bond
a printed promise to pay a definite amount of money with interest at a specified future date and time
when one buys a bond they are a ____? with stocks?
- loaner
- owner
you lend money to whom with a bond
every bond has what printed on it?
face value & interest rate to be paid
How often is interest paid
twice a year
bonds are considered safe why?
you are guaranteed a fixed interest
rate of return on bonds is highere than
reg. savings & CD's
do bond holders get paid first
what are government bonds?
one of the safest and most popular bonds, purchased through US savings banks
how much are government bonds?
where are government bonds sold
commercial banks, S&L's, credit unions, post office
What are the two common types of savings bonds
series EE, series HH
How much are series EE?
what is face value
amount printed on the bond, you pay half of face value
when is interest added
every 6 months
how long will the interest be figured on a bond
30 years, it cant be sold but cashed in at a bank
how much are series HH bonds
500- 10000
how do you purchase them
with series EE or other government investments
HH bonds are aquired for their
full face value
int rates are ____ and added every
fixed - 6 months
government gets money from
borrowing (bonds) & taxes
when can you sell a bond
government bonds are the safest investment why
they are backed by the government
corp. bonds
raise $$ by selling bonds
- can be sold to investors
what kind of amt on corp. bonds
fixed amt. paid off after a specified time
How can you tell if a bond is a good risk
-check the rate of return
- go to a bond rating service (Moody's, S&P)
whats safest/riskiest bond rating
Stocks represent?
a share is?
unit of ownership
stockholders are
investors in stock
how does one make a profit with stock
- dividends
- capital gains
what are dividends
earned when a company makes a profit and shares
what are capital gains
when stock is sold for more than its purchase price
you never gain or lose until
you sell
one should invest only what one can
afford to lose
to minimize risk some investors invest only in
blue-chip stock
blue chip stocks are sold by well-established coroporations that have?
- reputation for financial stability
- superior management
- record of growth and earnings
blue chips are low risk yet
cost more
blue chips value does not change rapidly and most return comes from
investors buy and sell in 2 ways
- stock exchanges
transactions are held by
brokerage firm
the person who handles the transaction is
firms charge fees, how much?
a % of the total value of the transaction
- traded in round or even lots
what are discount brokers
brokers who simply carry out the transaction
- offer no info or advice
largest stock exchange
- where?
New York Stock Exchange
- Wall Street, New York
what is the NASDAQ
National Association of Securties Dealers Automated Quotation system
what does the Nasdaq do?
electronically links brokerage firms
what are the 3 advantages of the nasdaq
- less expensive
- can trade more kinds of stock
- can operate for longer hours
price change according to what people
are willing to pay
stocks are bought and sold through what method
auction method
2 most common types of stock
common & preferred
what is preferred stock
- has preference of payment over common
- non-voting share
- pays a fixed dividend
what is common stock
- voting stock
- doesn't pay a fixed dividend
- dividends are set by the Board of Dir.
2 Classes of Stock
- blue chip
- growth stock
-blue chip income?
- growth stock income?
- dividends
- cap. gains
What if you dont have $ to invest? or don't want to invest in stocks and bonds?
Mutual Funds!!
what is a mutual fund
a group of investments owned by many investors - investors buy shares of fund and pool their $
what do you get from a mutual fund
diversification - personal management
what is the minimum investment for MF
your value of investment changes with
value of stocks & bonds purchased by the fund
your return from a MF is
share of the dividends or cap. gains the fund earns
all MF charge ?
annnual maintance fee for services
which funds perform the best
what is a load
a sales fee that you pay when you invest
what is a front end load
pay a sales charge when you buy shares
what is a back end load
pay a sales charge when you sell shares
a MF offers growth potential from
- appreciation
- dividends
- capital gains
- compounding
whats a no-load
do not charge a fee because they have no salespeople
- you invest directly with the fund
- buy fund from brokerage firm
MF are required to provide investors with a publication called what?
- what does it contain
- describe how the fund is operated
- its objective
- the fees it charges
what does FICO show
how you handle your DEBT!
MF must give your money in (time)
7 business days
most businesses that buy and sell stock for consumers are members of
NASD (nat. assoc. of Sec. Dealers)
NASD organized and runs
the nasdaq
NASD does what with the NASDAQ
- policies the behavior of its members
- certifies those who wish to become a stockholder
- maintains a listing of complaints that have been filed against registered brokers
what is the SEC
Securities and Exchange Committee
who created the SEC? when?
- after crash of '29
what is the SEC responsible for?
enforcing the laws concerning the trading of stock and bonds
what else does the SEC do
- licenses stock brokers & investment advisors
- reduces the number of dishonest investment offers made to consumers
- has power to shut down and prosecute
what is major job of SEC
prevent insider trading
what is insider trading
stock info not made available to general public
are pension plans good?
no, they are thing of the past
whats a 401k
-tax deffered
-offered by employer
-invested in stock market, MF
-some companies allowed to choose
-some employers match all or %
whats a IRA
- Individual Retirement account
- 3,000 for single, more for married couple
- traditional is tax defferd
whats a roth IRA
- you pay taxes before investing
- when you draw money is not taxed
- good choice for young people
- dont ever have to withdrawl
you can take money out of a roth IRA without penalty after how many years? for what reasons?
- 5 years
- home, education, medical emergency
what is real estate
any kind of property
what is the largest single investment Americans will ever make
their home
the law allows you earn how much in capital gains w/out paying income tax
You may also deduct what on income
interest and property tax
what are the advantages of owning property that is not used by you
income and capital gains
what is required to invest in rental
a large intial sume of $$
rent should always cover
what is the key to making money off real estate
what are 3 disadvantages of real estate
- bad choice
- need $$ to maintain
- property does not always increase in value
what are the 3 basic principles of investing
- seek diversification
- establish an investment goal to guide your investment
- revise investment when conditions change
every fee charges what to cover its operation and management fees
an annual fee
what is the average expense ratio for a managed stock fund
what do index funds charge for expense ration
front-end loads have what on the end of them? back ends?
A & B
what are the two major personality traits of a MF
the size of the stocks it owns & the investment philosophy of the manager
what are the three broad sizes of MF
large-cap, medium-cap, small-cap
what is a large-cap stock
a big established company
what is a small-cap stock
young kid, new company that has considerable room to grow
what performances figures should you pay attention to
3, 5, 10 year
your payment history makes up how much of your FICO

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