Investment Basics Course Outline

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Investment news can be found in many places. There is no shortage of investment discussions and differing opinions. As the world continues to be flooded with an abundance of data, it can be difficult to judge whether the data is information or noise. It is becoming increasingly important for individuals to not lose sight of investment basics. Warren Buffett (the legendary investor) has said investing is simple but not easy.

This course is an opportunity for individuals to efficiently begin to build the simple investment framework required to help decipher the signal vs. the noise. There is no single strategy for investing. However, with a proper understanding of investment basics, investors can hopefully build a suitable investment structure that they can understand and follow.

Understanding is important because investing is not a straight-line endeavor. Probabilistic thinking plays a large role in the investing world. For example, making the suitable long-term investment decision might not look like the best decision in the short run.

Because of these unknown outcomes, it becomes vitally important that investors understand the investment basics. Investors who view investments as too complicated are more apt to make the wrong decision at precisely the wrong moment. Conversely, individuals who understand the strategy are more likely to avoid big mistakes.

This session will help participants with various backgrounds build a basic investment framework with the goal of creating a better investment experience for participants and for those they interact with.

Day 1

  1. Investment Overview
    1. The language of investment basics
    2. Investment acronyms
  2. Time Value of Money Basics
    1. Dynamic power of money
    2. Compound growth
    3. Present value, future value
    4. Single sum, annuity
    5. Rate of return, number of years
    6. Learning activity
  3. Basics of Investing
    1. Risk/reward tradeoff
    2. Definition of risk
    3. Sources of risk
    4. Definition of return
    5. Sources of return
    6. Fixed vs. variable investments
    7. Understanding and assessing risk
    8. Building block of return/risk
    9. Additional areas of risk
    10. Learning activity
  4. Measures of Return 
    1. Total return
    2. S&P 500 returns
    3. 2008 and 2009 stock reversal
    4. Decade for equity performance
  5. Volatility
    1. Equity market daily volitility
    2. Equity market annual volitility
    3. Equity market long term resiliance
    4. Equity vs. treasury bond volatility
  6. Behavioral Economics
    1. Behavioral finance/psychology of investing
    2. Emotional investing curve
    3. DALBAR Study
    4. Fidelity Study
    5. Patient long-term investing
    6. Folly of market timing
  7. Diversification
    1. Single stock risk
    2. Sector risk
    3. Diversification rules of thumb
    4. Three primary asset classes
  8. Basics of Cash and Cash Equivalents
    1. Safety and stability of principal
    2. Liquid
    3. GICs/stable value
    4. CDs
  9. Basics of Bond Investing
    1. Characteristics of bonds
    2. Perils of interest rate risk
    3. Income from yield
    4. Types of bonds
    5. Downside of inflation
    6. Length of maturity
    7. Credit quality
    8. Yield curve
    9. Diversification
  10. Basics of Stock Investing
    1. Characteristics of stocks
    2. Superior return potential
    3. Volatile nature
    4. Types of stock
      1. Market capitalization
      2. Small, mid, large-cap
      3. Domestic, international, emerging
    5. Long-term nature of investment
    6. Dow Jones (DJIA)
    7. NASDAQ
    8. Value vs. Growth
    9. International
      1. Japan
    10. Single stock - Apple
  11. Alternative Investments
    1. Characteristics
    2. Commodities
    3. Real Estate
    4. Hedge funds
    5. Private Equity
  12. Basics of Mutual Fund Investing
    1. Characteristics of mutual funds
    2. Advantages of funds
    3. Evaluating funds
    4. Passive vs. active
    5. Cost structure
    6. Exchange-traded funds (ETFs)

Day 2

  1. Commonsense Investment Principles
    1. Successful investing—Keep it Simple
  2. Sources of Investment Information
    1. What to look for in financial websites for investing information
    2. Learning activity
  3. Portfolio Management and Asset Allocation
    1. Essence of successful investing
    2. Modern portfolio theory (MPT)
    3. Asset allocation
    4. Determinants of successful portfolios
    5. The benefits of diversification
    6. Diversification and volatility
    7. Asset allocation analysis
      1. Return expectations
      2. Risk parameters
      3. Worst case scenario
    8. The 60/40 balance solution
    9. Sampling of diversifiers
  4. Investment Policy Considerations
    1. Portfolio objective, design and benchmarks
    2. Evaluating and choosing money managers
    3. Investment policy statement (IPS)
    4. Tracking, monitoring and rebalancing
    1. Case Study
      In this case study, attendees will be asked to compare a myriad of investment alternatives. Tasks will include distinguishing investment characteristics, identifying risk, ranking investment options according to objectives and analyzing an investment portfolio. Attendees will then be asked to set an investment policy in line with objectives, construct a suitable investment portfolio and support all investment selections. The group will also discuss relevant investment issues.

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