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Name: Investing: Part III Date:1 ETF’s 1. What are ETF’s? 2. What is the difference between an ETF and a Mutual Fund?3. Who would purchase an ETF? Why?2 Stock Investing Without Too Much RiskRead this article about millennials and their investment patterns. You only need to read through Tip #4. Why do you think millennials may not be investing at the higher rates of older generations?Which of the first 4 tips do you feel prepared to do (once you have steady income)? Which, if any, are still confusing to you?3The Power of DiversificationNow, watch this video which describes how to diversify on two different levels. What is meant by “asset allocation?” Once you’ve done asset allocation, what’s the next level of diversification you should do among each asset class? How does diversification protect investors? 4Vanguard Portfolio Allocation ModelsThis resource page from Vanguard, an investment management company, shows 9 base models of asset allocations and how they’ve performed, on average, since 1926. Answer the questions to the right based on the data. These allocation models are divided into 3 classes -- income, balanced, and growth. Which of the three is riskiest? How do you know?Why do you think the data includes the number of years with a loss for each asset allocation model? Why might an investor care about that number?What is the relationship between risk and average annual return? 5Why Young People Shouldn’t Hesitate to InvestJust as compound interest on a savings account is most valuable over a long time period, investing as early as possible in life is your best option for a comfortable retirement. Read this article on investing in your 20s. How does the advice in this article compare with what know about investing? What are the key takeaways?6Jean Chatzky: Bad month for the market?Skim through this article, in which Jean Chatzky shares several pieces of advice on investing. Then answer the following questions. Summarize her number one piece of investing advice.Why might this be the perfect advice for beginning investors? What might be one challenge to following Jean’s advice? 7The Psychology of InvestingNow, watch this video, which describes some of the psychological factors that impact investor’s decision making. What does Ackman mean when he says you must avoid “following the herd?” How does human emotion impact investors’ decision making?What’s one of Ackman’s strategies for preventing emotional mistakes?8Entrusting Portfolios to Robo Advisors ANDCan Robo Advisors Win Control?Robo advising, a new all-electronic alternative to a stockbroker, addresses many of the concerns mentioned in the previous resources.Watch these two videos and then answer the questions at right. What are at least 3 advantages to using a robo advisor over a traditional financial advisor? Which types of investors might be interested in using a robo advisor? Who might not be interested?Why do the two different videos have such varying opinions on the usefulness of robo advisors? What’s your impression of robo advisors? 9PROJECT: Build Your Portfolio - Resources:Fidelity Fund Portfolios - funds to match your risk toleranceMotif Investing - portfolios based on themes or industriesSchwab Target Funds - funds to match investment goals for your age rangeVanguard Select Funds - index, stock, bond, money market, balanced, and international fundsYahoo! Finance - look up individual stock prices, historical and current1. Review these resources on investing for young people.How to Use Passive Index Investing - article -- 20 Something FinanceLebron James Hits Up Buffett for Investment Ideas - video - CNBCStock Investing Without Too Much Risk - article - ForbesThe Power of Diversification - video - E*TradeVanguard Portfolio Allocation Models - data - Vanguard2.? Build a Portfolio: How would you invest $200/month? Be specific and state why you made these choices. You can use any combination of stocks, bonds, index funds, mutual funds, or even investment ideas you didn’t learn about in class.10Risk Profile QuizTake this quiz regarding financial risk. At the end, it will give you a score measuring what your risk tolerance is. Then, answer the following: What score did you receive? What level does this fall into (e.g. average/moderate tolerance for risk?) Do you agree with your score? Why or why not? Scroll to the bottom of the page your score is listed and click on the "Click here to view a list of investments grouped by their potential risk and reward." What kinds of investments does the chart recommend? Do you agree with these recommendations? Why or why not? Does your level of financial risk match the level of risk you take in other areas of your life? How is it similar or different? Key TakeawaysDiversify your portfolio in order to minimize the effect of any one specific downturn.Overcome the emotional urge to sell your shares when the market is down or buy when values are high.Your primary strategy should be to invest regularly and leave the investments in place long-term, so you benefit from overall market growth. ................
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