Getting started - Choosing a Broker

• Full Service Broker– ex. AG Edwards, Meryll Lynch, Edward D. Jones

• Gives advice, makes trades, account maintenance

• Discount Broker-– ex. Charles Schwab, Fidelity Brokerage

• Provides some advice, account maintenance

• Deep Discount Broker– ex. E-Trade

• No advice, order execution via email or phone

5 steps to portfolio evaluation

• Assess your financial situation

• Define your goals

• Determine the amount of investment capital required to meet your goals

• Implement the changes necessary to achieve your objectives

• Monitor your portfolio

Reward/Risk Rule

Bigger the reward - higher the risk

Safer the money - less return

Mutual Funds

Pooling the investments of many small investors and putting that money to work in a a variety of ways

Why mutual funds?

•Managed by professional money managers

•Diversifies investments•Cost may be lower

Fundamentals of Mutual Fund Investing

•Talk to a professional•Invest for the long term•Invest on a regular basis•Diversify-

– Don’t put all your eggs in one basket

Dollar Cost Averaging

•Easiest/Safest method of investing• Invest a fixed amount in the same

investment•Buy more shares when the price is

low/fewer shares when price is high•Reduces errors

Factors to consider

• Performance

• Liquidity

• Safety

• Minimum deposit

• Convenience

• Charges

Factors to consider cont.

• Other services

• Fund objectives

• Expenses– Sales load

• No load funds

• Front end load funds

• Back end load funds

– Ongoing expenses• Management fee

• Rule 12b-1 fee

Mutual Fund Mistakes

• Does not know how much of investment will go toward the selling commission

• Does not know how much money will be invested

• Does not keep close account of the monthly statement

Mutual Fund Checklist

• NOT guaranteed or insured• AWLAYS carry investment risks• Higher rate of return involves higher risk

of loss• Past performance not a reliable indicator

of future performance• all mutual funds have costs that lower

investment returns• Can buy some mutual funds directly

IRA’s

• Traditional IRA - tax deferred• Roth IRA - tax free

IRA Contributions

Year Limit

2002-2004 $3,000

2005-2007 $4,000

2008 – 2010 $5,000

The 2001 Tax Law changed contribution amount