Investing and Saving
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Transcript of Investing and Saving
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Investing and Saving
Making it work for you
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Personal Finance Workshops
A. Budgeting and Debt
Reduction
B. Saving and Investing
C. Personal Financial
Management
D. Stewardship
E. Charitable Giving
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Our mission today
• Rent vs own
• Growing my money
• Types of funds
• Where to go for help
The wise man saves for the future but the foolish man spends whatever he gets.” Proverbs 21:20
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Define terms
• Savings
• Investments
• Trading
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Savings, Investments, TradingWhat’s the difference?
Interest – Rent Capital Gains – Buy/Own
X
X X
X
Usually guaranteed interest and time period
Risk and volatility
This graphic is conceptual only
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Risk Tolerance
Picture Source: http://images.google.ca/imgres?imgurl=http://confluence.engin.umich.edu/download/attachments/3958/
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Volatility vs. Risk
• What is YOUR comfort with risk?
• Select investments you will feel comfortable with
• Stops “pulling out” of existing investments
• Properly plan based on your individual comfort and needs
• Allows you to sleep at night
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Income Tax Treatment
What is my:
– effective tax rate?
– marginal tax rate?
Are all investments taxed the same?
– Interest
– Capital gains
– Capital losses
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Income tax advantaged strategies
• RSP – Spousal RSP– New home buyer – RRIF
• RESP
• TFSA
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Interest
• What is Compound interest?
• Rule of 72– 72 divided by interest
rate earned
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Rule of 72Assume age 21 and you save $1,000 per year
Age Interest at 6%
21 $ 1,00033 $ 2,00045 $ 4,00057 $ 8,00069 $16,000
Age Interest at 9%
21 $ 1,00029 $ 2,00037 $ 4,00045 $ 8,00053 $16,00061 $32,00069 $64,000
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Investment FundsCompare investment funds vs interest payments
1970 1990
Rat
e of
ret
urn
GIC 5 yr interest
Avg rate 7-8%
TSE 300 Index
Avg rate 10-12%
This graphic is conceptual only
Compare to present: GIC avg 4-5%, TSX avg 10-12%
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What is an investment fund?
• Define
• History
• Prospectus
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Dollar Cost Averaging
Option 1: $1,000 @ $10 per unit = 100 units
Option 2: invest $100 per month over a 10 month period
This graphic is conceptual only
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Do not put all your eggs in one basket = Diversification
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Diversification vs Diffusion
This graphic is conceptual only
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Types of products and funds
Interest – GICs– Annuities– Bonds
Funds– Income– Balanced– Equity
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Fund Managers
• Top down
• Bottom up
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Mutual Funds / Segregated Funds
• Provided by
• Guarantees
• Your estate
• Creditor protection
• Beneficiary
• Costs…..
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Costs
• Loads– Front end– Back end / DSC– No load
• Management Fees
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Remember
1. Stay Invested – Don’t panic
2. The Power of Compounding/Rule of 72
3. Dollar Cost Averaging – Invest regularly and Do not time the market
““The way of a fool is right in his own eyes, The way of a fool is right in his own eyes, but a wise man is he who listens to but a wise man is he who listens to counsel” ”
Proverbs 12:15Proverbs 12:15
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Want to go deeper?
To review or start your plan
– consider FaithLife Financial
Go Green - www.faithlifefinancial.ca
– download financial tools
– view seminars
– calculators
– great financial articles