Personal finance and portfolio management strategies

1. Personal Finance and Portfolio Management Strategies

4. Lecture Outline Personal Finance and Portfolio Management Strategies 1. Introduction: Personal Finance Planning Budgeting and Cash – flow Management Money Management Strategy Credit and Debt Management Tax Planning 2. Providers of Financial Services and availability of Funds Banking Services and Savings Plan Mortgage and Tangible Assets Financing Interest Rate Fundamentals Stocks, Bonds and Mutual Fund Quotations Insurance Services and Hedging Strategies 3. Investment Decisions Understanding the Relationship between Personal Finance and Investment Using the IEM to make Rational Investment Decisions Trading and Tracking Stocks using the IEM Predicting Future Trades Based on Historical Trends Understanding Risk and Return 4. Summary

5. Lecture Notes Personal Finance and Portfolio Management Strategies

13. Example of the Future Value Interest Factor for an Annuity The future value interest factor for a one-dollar annuity discounted at i percent for n periods of $1000 to be received at the end of three year at an 6% interest rate is: FVIFA 6%,3 = (1+.06) 2 + (1+.06) 1 + (1+.06) 0 1.1236 + 1.06 + 1 = 3.1836 FV of the Annuity = PMT(FVIFA i,n )= $1,000 x 3.184 = $3,184

14. Example of the Present Value Interest Factor for an Annuity The present value interest factor for a one-dollar annuity discounted at i percent for n periods of $1000 to be received at the end of three year at an 6% interest rate is: PVIFA 6%,3 = ___1___ + __1__ + ___1___ (1+.06) 1 (1+.06) 2 (1+.06) 3 .9433 + .88999 + .83961 = 2.673 PV of the Annuity = PMT(PVIFA i,n ) = $1,000 x 2.673 = $2,673

15. Budgeting and Cash Flow Management

26. Credit and Debt Management

27. Develop a Debt Management Plan to Control Credit Usage Develop a plan to manage debt. The major sources of consumer credit are financial institutions such as commercial banks, building and loan associations, licensed lenders, credit unions, credit card banks, risk managers, and insurers. Other sources of credit are non-financial, including governmental agencies, families, friends, and community-based organizations. Debt management is the ability to meet debt obligations in both the short term and the long term.

31. Tax Planning Tax Planning Strategy is the ability of an individual to effectively reduce, defer, or eliminate some taxes. Tax planning can influence an individual’s spending, savings, borrowing, and investment decisions. An understanding of the tax laws and maintenance of appropriate records can assist an individual to take advantage of some tax shelters. To successfully achieve this goal, it is essential to determine one’s current tax liability and the impact of the liability on financial transactions. Personal income tax is assessed on taxable income and the objective is to legally pay your fair share of taxes while taking advantage of the tax benefits appropriate to your personal financial situation.

34. Tax Rate Table

44. Providers of Financial Services and Availability of Funds

47. Mortgage and Tangible Asset Financing

59. Stocks, Bonds, and Mutual Funds

68. Insurance Services and Hedging Strategies

89. Investment Decisions

98. Fed Policy Contract Description Note: Contracts will be designated using a ticker symbol and a letter denoting up, down, or the same and the month of contract liquidation. The contracts traded in this market for liquidation will have a unique date denoted by month “MM” and year “YY”.

101. Trading and Tracking Stocks using the IEM

106. Predicting Future Trades Based on Historical Trends

109. Computer Industry Returns Contract Description