Stocks and BondsStocks and Bonds

The Key to RetirementThe Key to Retirement

(and maybe getting rich)(and maybe getting rich)

The Stock MarketThe Stock Market

Stocks are a Stocks are a great tool for great tool for long-termlong-term investments.investments.

Don’t “day Don’t “day trade.”trade.”

Buying and Buying and selling the same selling the same trading daytrading day

Stocks are too Stocks are too volatile (change volatile (change too much within too much within a day)a day)

Historical Stock TrendsHistorical Stock Trends

You’re practically guaranteed to You’re practically guaranteed to make money (long-term).make money (long-term).

There has never been a 10-year There has never been a 10-year period where stocks were less period where stocks were less valuable at the end of the 10 years.valuable at the end of the 10 years.

Even 1925 to 1935 (The Great Even 1925 to 1935 (The Great Depression) saw a gain!Depression) saw a gain!

The Four-Year Stock CycleThe Four-Year Stock Cycle Bull and Bear MarketsBull and Bear Markets

Stock Market Cycles: 1890 - 1920Stock Market Cycles: 1890 - 1920

Stock Market Cycles: 1920 - 1940Stock Market Cycles: 1920 - 1940

Stock Market Cycles: 1940 - 1960Stock Market Cycles: 1940 - 1960

Stock Market Cycles: 1960 - 1980Stock Market Cycles: 1960 - 1980

Stock Market Cycles: 1980 - 2008Stock Market Cycles: 1980 - 2008

Signs of a Stock Market CrashSigns of a Stock Market Crash

Good times signal upcoming Good times signal upcoming bad times:bad times: Rising stock dividends and pricesRising stock dividends and prices Increase in personal savingsIncrease in personal savings Relatively easy money policyRelatively easy money policy Company investment in new Company investment in new

productionproduction Lack of stock market regulationLack of stock market regulation Psychology of consumptionPsychology of consumption

The SecretThe Secret

Think long-term (At least 10 years)Think long-term (At least 10 years) DiversifyDiversify

Different companies and different Different companies and different industries.industries.

Value InvestingValue Investing Buy about 20-30 different stocks.Buy about 20-30 different stocks. More than 30 won’t help much.More than 30 won’t help much.

Warren Buffet has only 25-30 at a time Warren Buffet has only 25-30 at a time (2008 (2008 ForbesForbes Richest Man in the World - Richest Man in the World - $68 Billion).$68 Billion).

Costly transaction fees and research Costly transaction fees and research requirements.requirements.

The Bad NewsThe Bad News

Investing in stock is expensiveInvesting in stock is expensive E.g. $25/share x 100 shares = E.g. $25/share x 100 shares =

$62,500 (That’s a lot of $62,500 (That’s a lot of money!)money!)

The stock market is the riskiest The stock market is the riskiest form of investmentform of investment

UnpredictableUnpredictable UnstableUnstable

So how can I raise the money?So how can I raise the money?

Buy a few big name stocks and Buy a few big name stocks and some bondssome bonds

Stocks – Higher gains, but higher riskStocks – Higher gains, but higher risk Bonds – Lower gains, but lower riskBonds – Lower gains, but lower risk

What to look for:What to look for: The ones you hear about on the news The ones you hear about on the news

(not the ones under investigation).(not the ones under investigation). Blue chip stocks – big names with Blue chip stocks – big names with

little risk and steady growth (very little risk and steady growth (very reliable and safe)reliable and safe)

Have a combination of nice, stable Have a combination of nice, stable bonds.bonds.

Research the stocks and where they Research the stocks and where they are exchanged.are exchanged.

Junk BondsJunk Bonds

Officially known as “high yield Officially known as “high yield bonds.”bonds.”

Used to pay out corporate debt and Used to pay out corporate debt and sub-prime mortgage loanssub-prime mortgage loans

Be careful! They offer extremely Be careful! They offer extremely attractive interest rates.attractive interest rates.

Very high risk with little financial Very high risk with little financial backing.backing.

Can be lucrative.Can be lucrative.