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 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 basics of investing. 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. Pay Yourself First
    2. Savings vs Investing
    3. Time Value of Money
    4. Compound growth
    5. Present value, future value
    6. Rule of 72
    7. Rate of return, number of years
  3. Basics of Investing
    1. Benefits of Long-Term Investing
    2. Investing Made Easy
    3. 401k Savings Example
    4. Investing Fears
    5. Risk/Reward Tradeoff
    6. Investment Characteristics
    7. Sources of Return
    8. Fixed vs. Variable Investments
    9. Understanding and Assessing Risk
    10. Building Blocks of Return/Risk
    11. Additional Areas of Risk
  4. Measures of Return 
    1. Corrections, Bear and Bull Markets
    2. S&P 500 returns
    3. Return and Risk Ranking Activity
  5. Investment Types or Asset Classes
    1. Cash
    2. Bonds
    3. Stock (Equities)
    4. Risk and Rewards of Asset Classes
  6. Basics of Cash and Cash Equivalents
    1. Safety and stability of principal
    2. Liquid
    3. Stable value/ GICs
    4. CDs
  7. Basics of Bond Investing
    1. Bond Overview
    2. Characteristics of Bonds
    3. Credit Quality
    4. Maturity Length
    5. Yield Curve
    6. Treasury vs Corporate
    7. Rates in the News
  8. Basics of Stock Investing
    1. Stocks Overview
    2. Characteristics of Stocks
    3. Market capitalization
      1. Small, mid, large-cap
    4. Investment Style
    5. Domestic vs International
    6. Sectors
    7. Single Issue Risk
    8. Dow Jones (DJIA)
    9. NASDAQ
  9. Basics of Mutual Fund Investing
    1. Characteristics of mutual funds
    2. Types of mutual funds
    3. Passive vs. Active
  10. Stock Market Volatility
    1. Short-term Sharp Drops
    2. Short-term Sharp Recoveries
    3. Long-Term Performance

Day 2

  1. Behavioral Economics
    1. Behavioral finance/psychology of investing
    2. Emotional Investing Curve
    3. DALBAR Study
    4. Reacting Can Hurt Performance
    5. Timing Interest Rates is Difficult
    6. Fidelity Study
    7. Patient long-term investing
    8. Folly of market timing
    9. Diversification Role in Behavior Finance
    10. Diversification within Different Parts of Stock Market
    11. Diversification Globally
  2. Alternative Investments
    1. Characteristics
    2. Commodities
    3. Real Estate
    4. Hedge funds
    5. Private equity

    3.  

  3. Sources of Investment Information
    1. What to look for in financial websites for investing information
    2. Learning Activity

    4.  

  4. Portfolio Management and Asset Allocation
    1. Investment Policy Statements
    2. Modern portfolio theory (MPT)
    3. Asset allocation
    4. Determinants of successful portfolios
    5. Market Kaleidoscope
    6. The benefits of diversification
    7. Diversification and volatility
    8. Diversification and Average Investor
    9. Diversification - 60/40 Portfolio
    10. Levels of Diversification
    11. Individual Investor Behavior
    12. Institutional Investor Behavior
    13. Expected Return Targets
    14. Portfolio Management Metrics
    15. Portfolio Considerations

    5.  

  5. Investment Policy Considerations
    1. Portfolio objective, design and benchmarks
    2. Evaluatin and choosing money managers
    3. Tracking, monitoring and rebalancing
    4. New York State Pension Example
    5. CalPERS Pension Example

    6.  

  6. Case Study

    7. 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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