How to Build an Investment Portfolio

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  • 1. Finding Your Way Through the Mazeof InvestingHow To Build Your Portfolio: Insights into Amway RSP Stock Funds

2. How To Build Your PortfolioOur goal is to provide youwith an understanding ofhow to manage portfoliorisks the most importantaspect of an effectiveportfolio. 3. How To Build Your PortfolioPortfolio:a collection of investmentsheld by an institution or a Mutualprivate individual Fund CMutualFund BMutualFund A 4. How To Build Your Portfolio RISK: the potential that a chosen action oractivity (including the choice of inaction) willlead to a loss (an undesirable outcome). 5. How To Build Your Portfolio RISK: the potential that a chosen action oractivity (including the choice of inaction) willlead to a loss (an undesirable outcome). All investments are risky Combining different investments can increase ordecrease overall risk You cannot manage returns; you CAN managerisk 6. How To Build Your PortfolioCorrelation: The measure of how two securitiesmove in relation to each other. 0-1Negative Positive +1 7. How To Build Your PortfolioCorrelation:The measure of howtwo securities movein relation to eachother. 8. How To Build Your PortfolioAsset Class: Asset ClassesA group of securities that exhibitsimilar characteristics, behavesimilarly in the marketplace, andare subject to the same laws and Cash Stocksregulations. Stocks BondsBonds Cash 9. How To Build Your PortfolioAsset Classes Asset Allocation acrossthe asset classes willreduce positivecorrelation Cash Stocks Bonds 10. How To Build Your Portfolio Systematic Risk Market Risk Cannot be eliminated Eg. Recession, war, elections Unsystematic Risk Specific risk Can be reduced/eliminated Eg. Workerstrike, bankruptcy, supplychain interruption 11. How to Build Your PortfolioAsset Classes have Categories Stocks Domestic Large Cap Domestic Intl Stocks Stocks Mid Cap Cash Small Cap International ChocolateUS Large CapTreasuryCorpBonds Emerging Nations Bonds Bonds US Treasury Bonds other 10 year 30 year TIPSDiversification: US Corporate BondsMix a variety of investments across the Asset Investment GradeClass Categories to eliminate unsystematic risk High Yield International Bonds 12. How To Build Your Portfolio70%20%10% 13. How To Build Your Portfolio 14. How To Build Your PortfolioValueBlendGrowth Spartan 500MainstayLarge Cap Alps/WMC Vanguard T Rowe Price Health CareNew Era Vanguard MidMorgan Cap IndexHotchkis &StanleyMid Cap Wiley American Century RealBaron Growth Estate VanguardNeuberger Small CapBermanSmall CapIndexGenesis 15. How To Build Your PortfolioPortfolioconstruction:Methods At one extreme isthereturns chaser 16. How To Build Your Portfolio At other extreme is theprofessional investmentmanager 17. How To Build Your Portfolio Your method should be in-between 18. How To Build Your Portfolio Create and follow a Asset Classespersonal asset allocationpolicy eg. Stocks : 45-65%Cash Stocks Bonds : 30-50% Cash : 5-15% Bonds 19. How To Build Your Portfolio Identify your personal risk profile: howsensitive are you to losing money?20%60% 100% ConservativeAggressiveModeratehttps://personal.vanguard.com/us/FundsInvQuestionnaire 20. How To Build Your PortfolioAnd decide how much risk you can accept for your assets Conservative Investors Best Returns Worst Returns (20% Stock) One Month4.29%One Month-4.91% Three Months 6.73%Three Months -3.37% One Year 13.85% One Year -3.06% Moderate Investors Best Returns Worst Returns (60% Stock) One Month8.24%One Month-13.63% Three Months 14.23% Three Months -12.71% One Year 27.18% One Year -24.75% Aggressive Investors Best Returns Worst Returns(100% Stock) One Month14.25% One Month-22.51% Three Months 23.34% Three Months -24.05% One Year 41.27% One Year -40.69% 21. How To Build Your Portfolio Create and follow a Asset Classespersonal asset allocationpolicy Identify Asset Allocationtriggers (see MonitoringCash Stocksthe Market seminar) Bonds 22. How to Build Your Portfolio Create and follow apersonal assetDomesticIntl Stocksallocation policy StocksCash Identify Asset US ChocolateAllocation triggersCorp Treasury Bonds(see Monitoring theBondsMarket seminar)other ReduceDiversification:unsystematic risk Mix a variety of investments across the AssetClass Categories to eliminate unsystematic riskthroughdiversification 23. How To Build Your Portfolio ValueBlendGrowthSpartan 500Mainstay 70% Large Cap Alps/WMCVanguardHealth Care T Rowe Price New EraVanguard Mid MorganCap Index Hotchkis &Stanley 20% Mid Cap WileyAmericanCentury Real Baron GrowthEstateVanguardNeuberger 10% Small CapSmall CapIndex Berman Genesis 24. How To Build Your Portfolio 25. How To Build Your Portfolio 26. How To Build Your Portfolio 27. How To Build Your Portfolio Summary Match your personal risk preferences Conservative, Moderate, Aggressive Manage risk exposure by combination of investments Asset Allocation Diversification Closet indexing investing the size and styles as they arerepresented in market; mimicking the market Know each funds risk and how it will effect the portfolio Max & Min return swing Monitor - Triggers for adjusting allocation 28. How To Build Your PortfolioNEVER forget your focus! Retirement is your end- game Retirement goals Focus on longer term Investment horizon Stick with your Basic Plan An Investment PolicyStatement helps youremember 29. Thank YouSchedule your personal consultation now! Visit http://amway.bemanaged.comContact us at (616) 871-0751 or (888) 738-8780 Large Cap Mid Cap Small Cap 30. How To Build Your PortfolioPortfolio construction Wait. Why aportfolio? Why notjust 1 great fund? 31. How To Build Your PortfolioCommon sense tells us that your likelihood of experiencingloss is greater if you are invested in just 1 fund. 32. How To Build Your PortfolioLarge CapMid CapSmall Cap

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