The Basics of Investing

18-045 Financial planning offered through Northeast Planning Associates, Inc. (NPA), a registered investment adviser (RIA).  Securities and advisory services offered through LPL Financial (LPL), an RIA and broker-dealer (BD), member FINRA/SIPC. Credit union is not an RIA or BD.  Insurance products offered through LPL or its licensed affiliates. LPL registered representatives offer products and services using MITFCU Investment & Retirement Planning. These products and services offered through NPA, LPL, or its affiliates, which are separate entities from, and not affiliates of the credit union, are:

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Who Am I?

•MIT Class of 2005

•CFP® & CFA®

•Independent Financial Planner

•Volunteer

How Do I Help?

•Financial Planning

•Implementation

Who am I? How Do I Help?

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•Expected return on your money

•Simple and Compound Interest

•Risk Free Rate

Interest

Government bonds are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.

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•Stock

•Bond

•Mutual Fund

Investing Building Blocks

Mutual funds, bonds, and ETFs will fluctuate in value and loss of principal is possible. Bond values have an inverse relationship with interest rates For example, when interest rates rise, bond values drop, and vice versa. If you were to sell your bond prior to maturity you may receive less principal that you invested. In additional to market volatility, mutual fund risk is based on the underlying securities in the fund.

An investment in Exchange Traded Funds (ETF) involves the risk of losing money and should be considered as part of an overall program, not a complete investment program. An investment in ETFs involves additional risks such as not being diversified, price volatility, competitive industry pressure, international political and economic developments, possible trading halts, and index tracking errors.

The payment of dividends is not guaranteed. Companies may reduce or eliminate the payment of dividends at any given time.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk..

•ETF

•Types of Mutual Funds & ETFs

•Which is Better?

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•Efficient Markets

•Modern Portfolio Theory

•Manual & Fund Level

Asset Allocation & Rebalancing

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•Expense Ratio

•Brokerage and Wrap

•Discretion

Other Investing Topics

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•12(b)1 fees

•A Share (Upfront)

•B Share (Back)

•C Share (Level)

•I Share (Wrap)

•No Load Share (DIY)

Mutual Fund Share Classes

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Stock Options, Restricted Stock and Employee Stock Purchase Plan

•What is a stock option?

•Incentive Stock Options (ISOs)

•Non Qualified Stock Options (NSOs)

•Restricted Stock

•83(t)

•Employee Stock Purchase Plan

•When to sell?

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Insurance contracts

Types

Fixed | Variable | Index

Benefits

•Tax Deferral

Drawbacks

•Income Taxes

•Surrender Periods

Annuities

•Complexity

•Cost

•Lifetime Income

Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value.

Riders are additional guarantee options that are available to an annuity or life insurance contract holder. While some riders are part of an existing contract, many others may carry additional fees, charges and restrictions, and the policy holder should review their contract carefully before purchasing.

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•Must be evaluated like any other investment

•Demand a higher rate of return

•Capitalization Rate

•Human Nature

Rental Real Estate

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•Save Early

•Get a Health Care Proxy and Durable Power of Attorney

•Permanent and Emergency Guardians for Children

•Stockpile cash before a home purchase

•You can finance an education, but not retirement

•Take your employer match

•Pay down your highest interest rate first

•Plan for the worst

•Write down your goal

•Understand what you are paying and who you are paying it to

•Buy low and sell high

•If you don’t understand it, don’t invest

Most Important Take Aways

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Content in this material is for general information only and not intended to provide specific tax, legal, or investment advice or recommendations for any individual. Consult a tax advisor or attorney for your specific tax or legal situation. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. No strategy assures success or protects against loss. Investing involves risk including loss of principal.

Wrap Up

•Comment Card

•Public Speaking

•Free Consultation

18-045 Financial planning offered through Northeast Planning Associates, Inc. (NPA), a registered investment adviser (RIA).  Securities and advisory services offered through LPL Financial (LPL), an RIA and broker-dealer (BD), member FINRA/SIPC. Credit union is not an RIA or BD.  Insurance products offered through LPL or its licensed affiliates. LPL registered representatives offer products and services using MITFCU Investment & Retirement Planning. These products and services offered through NPA, LPL, or its affiliates, which are separate entities from, and not affiliates of the credit union, are:

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