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You Can Do It! It's Easier Than You Think.

No one is born knowing how to save or to invest. Every successful investor starts with the basics-the information in this brochure.

A few people may stumble into financial security-a wealthy relative may die, or a business may take off. But for most people, the only way to attain financial security is to save and invest over a long period of time.

Time after time, people of even modest means who begin the journey reach financial security and all that it promises: buying a home, educational opportunities for their children, and a comfortable retirement. If they can do it, so can you!

The wonderful thing about savings and investing is it not only enriches you and your family, but your investment dollars help businesses and our country's economy to grow stronger. And that helps everyone.



Keys to financial success

1.  Make money.
2.  Don't spend it all.
3.  Start saving and
     investing today.

What Are Your Thoughts on Saving and Investing?

"I have plenty of time to think about that later."

"If I had only known that years ago."

"What will my life be like when I retire? Where will the money come from?"

"I live from paycheck to paycheck. I'd invest if I had the money."

"I'll marry someone with money."

"I'll work till I drop dead."

"My kids will take care of me."

"I don't know how to save or to invest."

"Won't I lose money? Isn't investing risky?"


What's stopping you from saving or investing now? List your reasons.




Tip About 401k

According to Southern California-based (401k) Enginuity (www.401kenginuity.com), twenty-year veteran in developing and running 401(k) administration and 401(k) software and recordkeeping systems, the Internet will be the primary delivery system for 401(k)s by 2007. Many web-based 401(k) plans will run on administration and recordkeeping platforms that plan providers will outsource to 401k specialists and 401k Application Service Providers (ASP).

The advantages of web-based online 401(k) plans are obvious to today's workers, and include use conveniences, real-time monitoring and reporting, and instant re-allocation of their retirement assets. The internet has also dramatically reduce the cost of 401(k) plan administration, saving plan sponsor 50% or more in ongoing fees and costs when compared to the older traditional labor-intensive plans. Outsourcing of 401(k) functions by plan providers will extend the trend towards lower cost, high-quality 401(k) products.

401(k) plan providers of all types, financial institutions including banks, insurance companies, brokerages, mutual fund companies, credit unions, and third-party administrators, are now actively outsourcing 401(k) administration and recordkeeping tasks to 401(k) ASPs --- vendors such as 401k Enginuity, whose sole function is to maintain, updated and supervise software-based 401(k) administration and recordkeeping systems on behalf of plan providers. 401(k) ASP vendors are responsible for all routine day-to-day 401(k) recordkeeping and administration functions, thus allowing the plan providers to reduce internal staff, eliminate the expense and complications of licensing, housing and running hardware and 401(k) administration software in-house. Plan providers can refocus and concentrate their efforts on to the needs of their plan sponsors and plan participants, and rely upon the outsourced ASP 401(k) vendor for the recordkeeping and technical "backbone" supporting providers' Internet-based plans. It is inevitable that some of this 401(k) outsourcing to ASPs will include secondary outsourcing of certain non-critical low-level routine day-to-day tasks to non-US locations, where labor costs are less yet the expertise is abundant.

Imagine what you could accomplish if you had these thoughts running through your head instead --

"I know that I will have a far better chance of having more money in the future if I start setting goals and planning now."

"I can start small and watch my money grow. After all, even the tallest tree starts growing from a seed I can hold in the palm of my hand."

So, let's get started. By the end of this brochure, you'll be on your way to reaching your financial goals.

Your First Step-Making a Financial Plan

What are the things you want to save and invest for?

  • a home
  • a car
  • an education
  • a comfortable retirement
  • medical or other emergencies
  • periods of unemployment
  • caring for parents

Make your own list and then think about which goals are the most important to you. List your most important goals first.

Decide how many years you have to meet each specific goal, because when you save or invest you'll need to find a savings or investment option that fits your time frame for meeting each goal.

Many tools exist to help you put your financial plan together. For example, the Ballpark Estimate, a single-page worksheet created by the American Savings Education Council, can help you calculate what you'll need to save each year for retirement. And The Consumer's Almanac, published by the American Financial Services Association Education Foundation, guides you step-by-step as you organize your finances, plan for the future, and learn to manage your credit.

You can get these publications-and many more-by calling us toll-free at (800) SEC-0330 and ordering a free "Financial Facts Tool Kit."


If you don't know where you are going, you may end up somewhere you don't want to be.

To end up where you want to be, you'll need a roadmap, a financial plan.

Step 1

What do you want to save or invest for?
spacingby when?
1. __________  _____
2. __________  _____
3. __________  _____
4. __________  _____
5. __________  _____

Know Your Current Financial Situation

Sit down and take an honest look at your entire financial situation. You can never take a journey without knowing where you're starting from, and a journey to financial security is no different.

You'll need to figure out on paper your current situation-what you own and what you owe.

You'll be creating a "net worth statement." On one page, list what you own. These are your "assets." And on the other side list what you owe other people, your "liabilities" or debts.

Your Net Worth Statement



checking account


cash value of life insurance

retirement accounts

real estate




personal property





mortgage balance

credit cards

bank loans

car loans

personal loans





Subtract your liabilities from your assets. If your assets are larger than your liabilities, you have a "positive" net worth. If your liabilities are greater than your assets, you have a "negative" net worth.

You'll want to update your "net worth statement" every year to keep track of how you are doing. Don't be discouraged if you have a negative net worth. If you follow a plan to get into a positive position, you're doing the right thing.


I'm starting from here

do nothing



savings investing

A comfortable retirement!

Step 2
Know your net worth

Know Your Income and Expenses

The next step is to keep track of your income and your expenses for every month. Write down what you and others in your family earn, and then your monthly expenses.

Pay Yourself or Your Family First

Include a category for saving and investing. What are you paying yourself every month? Many people get into the habit of saving and investing by following this advice: Always pay yourself or your family first. Many people find it easier to pay themselves first if they allow their bank to automatically remove money from their paycheck and deposit it into a savings or investment account. That way they are never tempted to spend the money before they pay themselves first.

"But I Spend Everything I Make!"

Finding Money to Save or Invest

If you are spending all your income, and never have money to save or invest, you'll need to look for ways to cut back on your expenses. When you watch where you spend your money, you will be surprised how little everyday expenses that you can do without add up over a year.

Additional non-profit website that includes relevant unbiased information about 401k plans:  www.no-load-401k.com 



Step 3

Know Your Income and What You Spend

Monthly Income and Expenses

Income _______


Savings _______
Investments ____

  rent or
  mortgage _____
  electricity _____
  gas/oil ________
  telephone _____
  property tax____
  furniture _______
Food __________
Loans _________
Insurance ______
Education ______
Recreation _____
Health care _____
Gifts __________
Other _________

Total __________

Small Savings Add Up to Big Money

How much does a cup of coffee cost you?

Would you believe $465.84?

If you buy a cup of coffee every day at $1.00, that adds up to $365.00 a year. If you saved that $365.00 for just one year, and put it into a savings account or investment that earns 5% a year, it would grow to $465.84 by the end of 5 years, and by the end of 30 years, to $1,577.50.

That's the power of "compounding." With compound interest, you earn interest on the money you save and on the interest that money earns. Over time, even a small amount saved can add up to big money.

If you are willing to watch what you spend and look for little ways to save on a regular schedule, you can make money grow. You just did it with one cup of coffee.

If a small cup of coffee can make such a huge difference, start looking at how you could make your money grow if you decided to spend less on other things and save those extra dollars.

If you buy on impulse, make a rule that you'll always wait 24 hours to buy anything. You may lose your desire to buy it after a day. And try saving your spare change at the end of each day. You'll be surprised how quickly those nickels and dimes add up!

Now, once you have set aside some money to save and invest, what are your choices?


Making Money Grow

The Two Ways to Make Money

There are basically two ways to make money.

1. You work for money.

Someone pays you to work for them or you have your own business.

2. Your money works for you.

You take your money and you save or invest it.

Your money can work for you in two ways:

Your money earns money. When your money goes to work, it may earn a steady paycheck. Someone pays you to use your money for a period of time. When you get your money back, you get it back plus "interest." Or, if you buy stock in a company that pays "dividends," the company may pay you a portion of its earnings on a regular basis. Your money can make an "income," just like you. You can make more money when you and your money work.

You buy something with your money that could increase in value. You become an owner of something that you hope increases in value over time. When you need your money back, you sell it, hoping someone else will pay you more for it. For instance, you buy a piece of land thinking it will increase in value as more businesses or people move into your town. You expect to sell the land in five, ten, or twenty years when someone will buy it from you for a lot more money than you paid.

And sometimes, your money can do both at the same time-earn a steady paycheck and increase in value.


Products that earn interest:

  • savings accounts
  • some checking accounts
  • bonds
  • Products that could increase or decrease in value:

  • stocks
  • mutual funds
  • bonds, if you sell them before they are due
  • Products that could do both:

  • stocks that earn dividends
  • mutual funds
  • bonds
  • The Differences Between Saving and Investing


    Your "savings" are usually put into the safest places, or products, that allow you access to your money at any time. Savings products include saving accounts, checking accounts, and certificates of deposit. At some banks and savings & loan associations your deposits may be insured by the Federal Deposit Insurance Corporation (FDIC). But there's a tradeoff for security and ready availability. Your money is paid a low wage as it works for you.

    Most smart investors put enough money in a savings product to cover an emergency, like sudden unemployment. Some make sure they have up to 6 months of their income in savings so that they know it will absolutely be there for them when they need it.

    But how "safe" is a savings account if you leave all of your money there for a long time, and the interest it earns doesn't keep up with inflation? What if you save a dollar when it can buy a loaf of bread, but years later when you withdraw that dollar plus the interest you earned on it, it can only buy half a loaf? This is why many people put some of their money in savings, but look to investing so they can earn more over long periods of time, say three years or longer.


    The Basic Types of Products?


    • saving accounts
    • certificates of deposit
    • checking accounts


    • Bonds
    • stocks
    • mutual funds
    • real estate
    • commodities (like gold or silver)


    When you "invest," you have a greater chance of losing your money than when you "save." Unlike FDIC-insured deposits, the money you invest in securities, mutual funds, and other similar investments is not federally insured. You could lose your "principal"-the amount you've invested. But you also have the opportunity to earn more money.

    What about risk?

    Investors protect themselves against risk by spreading their money among various investments, hoping that if one investment loses money, the other investments will more than make up for those losses. This strategy, called "diversification," can be neatly summed up as, "Don't put all your eggs in one basket."

    Once you've saved money for investing, consider carefully all your options and think about what diversification strategy makes sense for you. While the SEC cannot recommend any particular investment product, you should know that a vast array of investment products exists-including stocks and stock mutual funds, corporate and municipal bonds, bond mutual funds, certificates of deposits, money market funds, and U.S. Treasury securities.

    Diversification can't guarantee that your investments won't suffer if the market drops. But it can help you balance risk.

    What are the best investments for me?

    The answer depends on when you will need the money, your goals, and if you will be able to sleep at night if you purchase a risky investment where you could lose your principal.

    For instance, if you are saving for retirement, and you have 35 years before you retire, you may want to invest in riskier investment products, knowing that if you stick to only the "savings" products or to less risky investment products, your money will grow too slowly-or, given inflation and taxes, you may lose the purchasing power of your money. A frequent mistake people make is putting money they will not need for a very long time in investments that pay a low amount of interest.

    On the other hand, if you are saving for a short term goal, you don't want to choose risky investments, because when it's time to sell, you may have to take a loss. Since investments often move up and down in value rapidly, you want to make sure that you can wait and sell at the best possible time.

    What are investments all about?

    When you make an investment, you are giving your money to a company or enterprise, hoping that it will be successful and pay you back with even more money.

    Stocks and bonds

    Many companies offer investors the opportunity to buy either stocks or bonds. The following example shows you how stocks and bonds differ.

    Let's say you believe that a company that makes automobiles may be a good investment. Everyone you know is buying one of its cars. Plus your friends report that the company's cars rarely break down and run well for years. You either have an investment professional investigate the company and read as much as possible about it, or you do it yourself. After your research, you're convinced it's a solid company that will sell many more cars in the years ahead.

    The automobile company offers both stocks and bonds. With the bonds, the company agrees to pay you back your initial investment in ten years, plus pay you interest twice a year at the rate of 8% a year.

    If you buy the stock, you take on the risk of potentially losing a portion or all of your initial investment if the company does poorly or the stock market drops in value. But you may also see the stock increase in value beyond what you could earn from the bonds. If you buy the stock, you become an "owner" of the company. You'll only make money, if the company makes profits.

    You wrestle with the decision. If you buy the bonds, you will get your money back plus the 8% interest a year. And you think the company will be able to honor its promise to you on the bonds because it has been in business for many years and doesn't look like it could go bankrupt. The company has a long history of making cars and you know that its stock has gone up in price by 12% a year, plus it typically paid stockholders a dividend of 4% from its profits each year.

    You take your time and make a careful decision. Only time will tell if you made the right choice. You'll keep a close eye on the company and keep the stock as long as the company keeps selling a quality car that consumers want to drive.


    The main differences between stocks and bonds


    The company promises to return money plus interest.

    Risk: If the company goes bankrupt, your money may be lost. But if there is any money left, you will be paid before stockholders.


    If the company profits, its stock may go up in value and pay dividends. You may make more money than from the bonds.

    Risk: The company may do poorly, and you'll lose a portion or all of your investment.

    Why Some Investments Make Money and Others Don't

    You can make money in an investment if:

    • The company performs better than its competitors.
    • Other investors recognize it's a good company. So that when it comes time to sell your investment, others want to buy it.
    • The company makes profits, meaning they make enough money to pay you interest for your bond, or maybe dividends on your stock.
    • The people who run the business are honest, hardworking, and talented.

    You can lose money if:

    • The company's competitors are better than it is.
    • >Consumers don't want to buy the company's products.
    • The company's officers fail at managing the business well, they spend too much money, and their expenses are larger than their profits.
    • Other investors that you would need to sell to think the company's stock is too expensive given its performance and future outlook.
    • The people running the company are dishonest. They use your money to buy homes, clothes, and vacations, instead of using your money on the business.
    • They lie about any aspect of the business: claim past or future profits that do not exist, claim it has contracts to sell its products when it doesn't, or make up fake numbers on their finances to dupe investors.
    • The brokers who sell the company's stock manipulate the price so that it doesn't reflect the true value of the company. After they pump up the price, these brokers dump the stock, the price falls, and investors lose their money.
    • For whatever reason, you have to sell your investment when the market is down.



    Before You Invest Always Check with the SEC and Your State's Securities Regulator:

    • Is the investment registered with securities regulators?

    • Have investors complained about the investment in the past?

    • Have the people who own or manage the investment been in trouble in the past?
    • Is the person selling me this investment licensed in my state?

    • Has that person been in trouble with the SEC, my state, or other investors in the past?

    Mutual Funds-A Product the Professionals Manage

    Because it is sometimes hard for investors to become experts on various businesses-for example, what are the best steel, automobile, or telephone companies-investors often depend on professionals who are trained to investigate companies and recommend companies that are likely to succeed.

    Since it takes work to pick the stocks or bonds of the companies that have the best chances to do well in the future, many investors choose to invest in mutual funds.

    What is a mutual fund?

    A mutual fund is a pool of money run by a professional or group of professionals. After investigating the prospects of many companies, these professionals pick the stocks or bonds of companies and put them into a fund. Investors can buy shares of the fund, and their shares rise or fall in value as the values of the stocks and bonds in the fund rise and fall.

    Investors may typically pay a fee when they buy or sell their shares in the fund, and those fees in part pay the salaries and expenses of the professionals who manage the fund.

    Even small fees can add up, so you need to look carefully at how much a fund costs and think about how much it will cost you over the amount of time you plan to own its shares. If two funds are similar in every way except one charges a higher fee than the other, you'll make more money by choosing the fund with the lower cost.

    Mutual funds appeal to investors because:

    • You can invest with a small amount of money.
    • Some mutual funds spread their investments over a large number of companies so your investment is diversified. You haven't put all your eggs in one basket. If you have a small amount of money to invest, investing in mutual funds may be the only way you can diversify your investments.
    • The professionals who run the fund choose the investments and monitor them continuously.

    Do I Need An Investment Professional?

    Are you the type of person who will read as much as possible about potential investments and ask questions about them? If so, maybe you don't need investment advice. But if you're busy with your job, your children, or other responsibilities, or feel you don't know enough about investing on your own, then you may need professional investment advice.

    Investment professionals offer a variety of services at a variety of prices. It pays to comparison shop. You can get investment advice from most financial institutions that sell investments, including brokerages, banks, mutual funds, and insurance companies. You can also hire a broker, an investment adviser, an accountant, a financial planner, or other professional to help you make investment decisions.

    Some financial planners and investment advisers offer a complete financial plan, assessing every aspect of your financial life and developing a detailed strategy for meeting your financial goals. They may charge you a fee for a plan, a percentage of your assets that they manage, or receive commissions from the companies whose products you buy, or a combination of these. You should know exactly what services you are getting, how much they will cost, and how your investment professional gets paid.

    In contrast to investment advisers, brokers make recommendations about specific investments like stocks, bonds, or mutual funds. While taking into account your overall financial goals, most brokers do not give you a detailed financial plan. Brokers are generally paid commissions when you buy or sell securities through them.

    Brokerages vary widely in the quantity and quality of the services they provide for customers. Some have large research staffs. Others specialize in particular types of companies, for example, companies that are new and have never been in business before.

    A discount brokerage charges lower fees and commissions for its services than what you'd pay at a full-service brokerage. But generally you have to research and choose investments by yourself.

    A full-service brokerage generally costs more, but the higher fees and commissions pay for a broker's investment advice based on the firm's research.

    The best way to choose an investment professional is to know what type of services you need. Once you know that, ask your friends and colleagues who they recommend. Try to get several recommendations, then arrange a face-to-face meeting. Make sure you get along. Make sure you understand each other. After all, it's your money.

    Ask Questions!

    You can never ask a dumb question about your investments and the people who help you choose them.

    Here are some questions you should ask when choosing an investment professional:

    • What training and experience do you have? How long have you been in business?
    • What is your investment philosophy? Do you take a lot of risks or are you more concerned about the safety of my money?
    • Describe your typical client. Can you provide me with references, the names of people who have invested with you for a long time?
    • How do you get paid? By commission? Amount of assets you manage? Another method? Do you get paid more for selling your own firm's products?
    • How much will it cost me in total to do business with you?

    Your investment professional should understand your investment goals, whether you're saving to buy a home, paying for your children's education, or enjoying a comfortable retirement.

    Your investment professional should also understand your tolerance for risk. That is, how much money can you afford to lose if the value of one of your investments declines.

    An investment professional has a duty to make sure that he or she only recommends investments that are suitable for you. That is, that the investment makes sense for you based on your other securities holdings, your financial situation, your means, and any other information that your investment professional thinks is important.

    The best investment professional is one who fully understands your objectives and matches investment recommendations to your goals. You'll want someone you can understand, because your investment professional should teach you about investing and investment products.



    Steer Clear of Trouble


    Broker not registered with state or SEC


    Promises of quick profits

    Watch Out:

    Pressure to invest


    Broker has been in trouble before


    Important Phone Numbers:

    1. _____________
    2. _____________
    3. _____________

    How Should I Monitor My Investments?

    Investing makes it possible for your money to work for you. In a sense, your money has become your employee, and that makes you the boss. You'll want to keep a close watch on how your employee, your money, is doing.

    Some people like to look at the stock quotations every day to see how their investments have done. That's probably too often. You may get too caught up in the ups and downs of the "trading" value of your investment, and sell when its value goes down temporarily-even though the performance of the company is still stellar. Remember, you're in for the long haul.

    Some people prefer to see how they're doing once a year. That's probably not often enough. What's best for you will most likely be somewhere in between, based on your goals and your investments.

    But it's not enough to simply check an investment's performance. You should compare that performance against an index of similar investments over the same period of time. You should also compare the fees and commissions that you're paying to what other investment professionals charge.

    While you should monitor performance regularly, you should pay close attention every time you send your money somewhere else to work.

    Every time you buy or sell an investment you will receive a confirmation slip from your broker. Make sure each trade was completed according to your instructions. Make sure the buying or selling price was what your broker quoted. And make sure the commissions or fees are what your broker said they would be.

    Watch out for "unauthorized" trades in your account. If you get a confirmation slip for a transaction that you didn't approve beforehand, call your broker. It may have been a mistake. If it happens more than once, or if your broker refuses to correct it, call the SEC or your state securities regulator.

    Remember, too, that if you rely on your investment professional for advice, he or she has an obligation to recommend investments that match your investment goals and tolerance for risk. Your investment professional should not be recommending trades simply to generate commissions. That's called "churning," and it's illegal.

    How Can I Avoid Problems?

    Choosing someone to help you with your investments is one of the most important investment decisions you will ever make.

    While most investment professionals are honest and hardworking, you must watch out for those few unscrupulous individuals. They can make your life's savings disappear in an instant.

    Securities regulators and law enforcement officials can and do catch these wrongdoers. But catching them doesn't always get your money back. Too often, the money is gone.

    The good news is you can avoid potential problems by protecting yourself.

    Let's say you've already met with several investment professionals based on recommendations from friends and others you trust, and you've found someone who clearly understands your investment objectives. Before you hire this person, you still have more homework.

    Make sure the investment professional and her firm are registered with the SEC and licensed to do business in your state. And find out from your state's securities regulator whether the investment professional or the firm have ever been disciplined or have any complaints against them. You can get that number by calling the North American Securities Administrators Association (NASAA) toll-free at (888) 84-NASAA.

    You should also find out as much as you can about any investments that your investment professional recommends. First, make sure the investments are registered. Sometimes a simple phone call to your securities regulator can prevent a lot of heartache.

    Be wary of promises of quick profits, offers to share "inside information," and pressure to invest before you have an opportunity to investigate. These are all warning signs of fraud.

    Ask your investment professional for written materials and prospectuses, and read them before you invest. If you have questions, now is the time to ask.

    • How will the investment make money?
    • How is this investment consistent with my investment goals?
    • What must happen for the investment to increase in value?
    • What are the risks?
    • Where can I get more information?

    Finally, it's always a good idea to write down everything your investment professional tells you. Accurate notes will come in handy if ever there's a problem.


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