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FAC Webinar 5 (2.5]

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FAC Webinar 5 (2.5]

  1. 1.    The  Financial  Advisor  Challenge   (FAC)     Sponsored  by  the   California  Council  on     Economic  Educa>on   P R E S E N T E D   B Y     G R E G   F I S H E R   &   G L E N   F E R R A N D  
  2. 2. Table  of  Contents  —  Introduc>ons  —  Goals  of  the  Webinar  —  Basics  of  the  FAC  Contest  -­‐  Greg   ¡  What  is  the  FAC?   ¡  Objec>ves  &  State  Content  Standards   ¡  Who  Can  Par>cipate?   ¡  How  to  Get  to  the  Finals?   ¡  The  Essay   ¡  The  Finals   ¡  Resources   ¡  The  CFALA  Mentors   ¡  Deadlines   ¡  Things  to  Consider  —  Q  &  A  —  Fundamentals  of  Financial  Advising  -­‐  Glen   ¡  Role  of  a  Financial  Advisor   ¡  Fundamentals  of  Investment   ¡  Strategies  and  Approaches  to  Investor  Profile  Cases,  Asset  Alloca>on,  and  the  Essay.  —  Q  &  A  
  3. 3. Introduc>ons  —  Greg  Fisher   ¡  Narbonne  High  School  Economics  Teacher     ¡  CCEE  Board  member  —  Glen  Ferrand   ¡   CFP,  FRM,  CFA  with  Merrill  Lynch   ¡   CFALA  regular  member   ¡  FAC  Advisor  &  Mentor  
  4. 4. Teacher  Goals  of  this  Webinar?  —  What  do  you  want  to  accomplish  and  take  away  from  this   webinar?  Be  specific.  
  5. 5. Goals  of  the  FAC  contest  is  for  …  —  students  to  go  within  themselves  to   explore  and  invest  in  their  human  capital.  —  students  to  become  more  prepared  in   their  future  and  be  beWer  decision-­‐makers   when  it  comes  to  personal  finance.  —  teachers  to  add  an  invaluable  learning  tool   to  their  curriculum.  —  this  program  to  be  seen  as  a  vehicle  that   assists  our  students  become  beWer   investors  and  ci>zens  and  to  help  secure   their  own  future  in  tomorrows  changing   economic  landscape.  
  6. 6. What  is  the     Financial  Advisor  Challenge?  —  An  economics  and  personal  finance  contest  that   helps  students  learn  to  invest  in  their  own  human   capital  and  create  an  investment  porYolio  for  a   hypothe>cal  prospec>ve  investor.  —  A  self-­‐contained  program  with  a  curriculum  that   helps  teachers  by  providing  them  with  engaging   materials,  resources,  and  lessons.  —  All  student  teams  that  par>cipate  will  be  provided   with  a  CFALA  mentor  who  will  provide  support  with   their  professional  exper>se.    —  Cash  prizes  (includes  4  students  and  1  teacher)  will   go  to  the  winning  teams  in  each  division.   ¡  1st  place  -­‐  $2,500          2nd  place  -­‐  $1,500            3rd  place  -­‐  $750  
  7. 7. Why do it?—  Students will: ¡  learn how to create a professional investment portfolio for hypothetical investors. ¡  go beyond understanding how investments work and explore how to invest in themselves and their own human capital. ¡  compete with student teams across Southern California for prizes. ¡  develop 21st century skills and knowledge while learning economics and personal finance—  Teachers will: ¡  be adding a vital and dynamic learning tool to their teaching repertoire. ¡  offer their students an unforgettable learning experience. ¡  help their students apply their newfound skills and knowledge to themselves; students will become aware of important strategies for their own personal financial future. ¡  add rigor and relevance to their curriculum with the lessons and resources contained in the program—  Why every teacher of Economics, Math, Business, and Finance should participate in the FAC? ¡  The contest will energize your classroom, making it more experiential and dynamic. ¡  Many state content standards are realized in the curriculum. ¡  Students learn by doing. This contest puts students in charge of their own learning along with the teacher and provided mentor. ¡  There is no better program that exists than the FAC when it comes to helping students understand how to invest in their own human capital and become successful decision- makers in todays ever-changing economy.
  8. 8. Specific  Objec>ves  of  the  FAC  —  Students  will:   ¡  dis>nguish  between  saving  and  inves>ng   ¡  learn  specific  investment  terms   ¡  iden>fy  different  types  of  inves>ng  –  stocks,  bonds,  mutual  funds,  money  market  CD’s   ¡  dis>nguish  between  the  three  major  financial  markets  –  Dow  Jones,  NASDAQ,  Standard  and   Poor’s   ¡  consider  a  series  of  ques>ons  when  inves>ga>ng  investment  alterna>ves  –  investment  goals,   >me  horizon,  risk  aversion.   ¡  consider  the  power  of  compound  interest  when  evalua>ng  different  investment  strategies   ¡  consider  income,  growth,  growth  and  income,  aggressive  growth,  sector,  pro  cyclical  and  an>-­‐ cyclical  financial  instruments  in  construc>ng  a  porYolio   ¡  evaluate  how  the  business  cycle  affects  different  investment  instruments   ¡  be  able  to  iden>fy  the  right  type  of  investment  strategies  for  a  variety  of  investor  profiles.   ¡  create  a  stock  porYolio  and  track  the  equity  markets  over  a  10  week  period.   ¡  be  able  to  make  the  dis>nc>on  between  stocks  and  bonds  as  investment  instruments.   ¡  determine  the  factors  that  impact  the  equity  markets  and  understand  the  incen>ves  for   investors  to  trade  stocks.   ¡  gain  insight  into  the  role  of  a  financial  advisor.   ¡  apply  the  concepts  of  Market  Value  Timing,  Compound  Interest,  Asset  Alloca>on,  Market   Timing,  and  Leverage  to  their  own  human  capital  and  personal  financial  decision  making.  
  9. 9. California State Content Standards in Economics Covered 12.2  Students  analyze  the  elements  of  America’s  market  economy  in  a  global  —  seRng.   ¡  12.2.2  Discuss  the  effects  of  changes  in  supply  and/or  demand  on  the  rela>ve  scarcity,  price,  and  quan>ty   of  par>cular  products.     ¡  12.2.4.  Explain  how  n  rices  reflect  the  rela>ve  scarcity  of  goods  and  services  and  perform  the   p alloca>ve  func>on  i a  market  economy.   ¡  12.2.5.  Understand  the  process  by  which  compe>>on  among  buyers  and  sellers  determines  a   market  price.     ¡  12.2.9.  Describe  the  func>ons  of  the  financial  markets.  —  12.5  Students  analyze  the  aggregate  economic  behavior  of  the  U.S.  economy.  —  1.  Dis>nguish  between  nominal  and  real  data.  —  number  of  new  jobs  and  explain  the  significance  of  an  unemployment  rate,  the   f   2.  Define,  calculate,   created  monthly,  an  infla>on  or  defla>on  rate,  and  a  rate  o economic  growth.  —  3.  Dis>nguish  between  short-­‐term  and  long-­‐term  interest  rates  and  explain  their   rela>ve  significance.  —  12.6  Students  analyze  issues  of  internaVonal  trade  and  explain  how  the  U.S.   economy  affects,  and  is  affected  by,  economic  forces  beyond  the  United  States   borders.   ¡  12.6.4.  oxplain  foreign  exchange,  the  manner  in  which  exchange  rates  are  determined,  and  the   E effects   f  the dollar’s gaining (or losing) value relative to other currencies.
  10. 10. Who  can  par>cipate?  —  Open  to  all  Southern  California  high  school  students.  —  Designed  for  economics,  business  &  finance,  and  math   classes.   —  There  will  be  2  divisions:   Warren  Buffet  Division  -­‐  D1   Bears  &  Bulls  Division  –  D2     All  classes.   Open  only  to  regular  classes.  
  11. 11. How  to  Reach  the  Finals     for  the  Warren  Buffet  Division?  —  Register  to  par>cipate  at  least  one  class  in  the  contest.   ¡  To  sign  up,  go  to  hWp://econworks.org/signup.html   ¡  All  students  in  at  least  one  class  must  be  involved  in  all  of  the   following  criteria:   ÷  Online  FAC  pre  and  post-­‐tes>ng.   ÷  Register  one  or  more  classes  in  the  Wall  Street  Journal’s  ‘Market   Watch’  Stock  Market  Simula>on.  Its  URL  is    hWp:// www.marketwatch.com/game/  (5-­‐weeks  minimum  par>cipa>on).   ÷  Submit  one  team  (four  students)    Investment  PorYolio  (PowerPoint   and  Investment  Policy  Statement)  for  the  investor  profile  provided;   ¢  students  develop  a  strategy  for  an  investment  porYolio,  taking  into   account  their  goals/objec>ves,  risk  tolerance,  >me  horizon,  and   asset  alloca>on.     ÷  An  essay  not  to  exceed  1,000  words:  
  12. 12. The  prompt  for  the  ESSAY  ÷  If  you  were  your  own  financial  advisor,  define  and   elaborate  the  posi>ve  strategies  of  Time  Value  of   Money,  Compounding  Interest,  and  Asset   Alloca:on  and  explain  how  to  avoid  the  common   piYalls  such  as  market  :ming  and  excess  leverage.   Provide  examples  for  each.  ÷  What  are  the  pre-­‐requisites  for  you  becoming  a   financial  investor?  Include  personal  quali>es,   educa>onal  background,  and  all  relevant  human   capital.  
  13. 13. The  Final’s  for  Division  1  —  A  panel  comprised  of  members  from  CCEE  and  CFALA   judges  will  evaluate  all  qualified  student  submissions  and   determine  the  6  teams  that  will  be  invited  to  ‘The  Finals’.  —  Six  teams  will  be  invited  to  the  Finals  which  will  take  place   on  May  22,  2013  at  the  Los  Angeles  Branch  of  the  San   Francisco  Federal  Reserve.  Transporta>on  expenses  are  not   covered.    —  The  judges  will  use  a  rubric  to  score  each  team’s  porYolio   (and  all  other  submission  requirements).  The  rubric  will  be   provided  to  all  par>cipa>ng  teachers.  
  14. 14. Division  1  Finals  cont.  —  2  Rounds:   ¡  Round  1  (All  6  of  the  invited  teams):   ÷  Students  make  a  PowerPoint  presenta>on  of  their   investment  porYolio  and  accompanying  strategy  (9  minutes   maximum).   ÷  Students  respond  to  a  panel  of  judges  ques>ons   ¡  Round  2  (The  top  3  scoring  teams  from  Round  1  will   par>cipate):   ÷  Students  develop  an  investment  porYolio  for  a  given   poten>al  investor;  In  addi>on,  students  must  place  an   added  emphasis  on  how  their  human  capital  >es  into  the   role  of  a  financial  advisor  (45  minutes).   ÷  Students  make  a  PPT.  presenta>on  on  their  investment   porYolio  and  accompanying  strategy  (9  minutes  maximum).   ÷  Students  respond  to  judges  ques>ons.  
  15. 15. Getting to the Finals for Bears & Bulls Division—  All teams participating register in the National Finance Challenge online at http://www.financechallenge.org/index.html?s=26&l=12—  Go to the California FinanceChallenge site at http://www.financechallenge.org/index.html?s=5&l=1—  Teachers and students use VISA Football or Soccer and selected lessons from Learning, Earning, and Investing to prepare for the National Finance Challenge.—  The team that goes on to the regional contest is the one with the highest score.—  The next 8 teams with the highest scores who are not in AP, IB, honors classes will be selected as finalists for the FAC Division 2 and are invited to the California Finals at the Los Angeles Branch of the San Francisco  Federal Reserve Bank on May 22nd, 2013.—  Those 8 teams will compete in three rounds. In Round 1, 8 teams compete, then four, then two. In each round, the questions become slightly more difficult.
  16. 16. Timeline for the National Finance Challenge—  March 18 - 27, 2013- Spring Online Competition - Top 5 teams  will be invited to the regional competitions. (online)—  April 20, 2013- Regional Competitions . Prizes —  May 2, 2013 - National Competition in St. Louis, Missouri.
  17. 17. Curriculum  and  Resources  for     Teachers  &  Students  —  All  of  the  following  will  be  easily  accessed  on   the  CCEE  website  (Econworks.org):   ¡  Learning,  Earning,  and  Inves>ng     ¡  PowerPoints   ¡  Apps.  for  mobile  devices   ¡  YouTube  Videos   ¡  websites   ¡  Lessons   ¡  Market  Watch  Stock  Market  Simula>on  (hWp:// www.marketwatch.com/game/)  
  18. 18. The  Mentors  —  CFALA  provides  mentors  to  teach  up  to  three  lessons  (but   may  exceed)  on  financial  markets  and  financial  planning   basics.  —  All  invited  teams  to  ‘The  Finals’  will  work  with  a  mentor   on  a  more  frequent  basis  to  assist  in  the  prepara>on  of   their  Finals  performance.  —  No  financial  products  will  be  marketed  to  teachers  or   students.  —  The  mentors  will  provide  professional  skills  and  exper>se.  —  Mentors  will  explain  what  are  the  pre-­‐requisites  for   becoming  a  financial  advisor  (i.e.,  skills  and  knowledge,   specific  training,  educa>on,  background,  etc.).
  19. 19. WHEN  are  the  deadlines  for  the  FAC?  —  Deadlines:   ¡  Teacher  registers  their  class(es)  online  or  by  emailing  Megan   Terasaki  at  ccee.org  no  later  than  March  1,  2013.     ¡  Pre/Post  Tes>ng  is  administered  online  at  Econworks.org   ÷  Pre-­‐Test  completed  by  March  8,  2013  at  5  pm.   ÷  Post-­‐Test  completed  by  May  9,  2013  at  5  pm.   ¡  Stock  Market  Simula>on  to  be  played  for  a  minimum  dura>on  of  5   weeks  between  March  1,  2013  and  May  9,  2013.     ¡  Submission  of  Investment  PorYolio  and  Essay  no  later  than  May  10,   2013  at  5  pm.     ¡  All  teams  invited  to  the  finals  will  be  no>fied  by  May  15,  2013   ¡  The  Finals  will  take  place  on  May  22,  2012  at  the  Bank  of  India  in   downtown  Los  Angeles.  
  20. 20. Things  to  Consider  —  Teachers  dont  have  to  have  a  strong  knowledge  base  of   financial  investments  to  par>cipate.  The  curriculum  provided   and  the  mentors  are  the  resources  to  help  you  and  your   students.  —  If  a  team  does  not  get  invited  to  the  finals,  op>ons  for  con>nued   use  include:   ¡  in-­‐class  and/or  inter-­‐class,  inter-­‐school  compe>>ons.   ¡  presenta>ons  to  other  classes,  school  faculty  members,  and  parent  groups.  —  Feel  free  to  solicit  other  teachers  at  your  school  to  par>cipate.   ¡  Individual  teachers  at  every  school  may  register  their  classes.   ¡  Bring  in  teachers  from  other  departments  to  help  with  any  aspect  of  the   contest  (i.e.,  math  analysis,  essay  wri>ng,  ppt.  presenta>on,  etc.)  
  21. 21. Ques>ons?  —  Write your questions in the chat area.
  22. 22. The  Financial  AdvisorPresented by Glen Ferrand, CFP, FRM, CFA
  23. 23.  Financial  Investment  Fundamentals  —  Advise  and  be  advised  —  Risk  fundamentals  —  Understanding  alloca>on  —  Market  >ming,  myth  or  reality?  —  Compounding,  the  8th  wonder  of  the  world  —  Leverage  and  the  price  for  it  
  24. 24. Risk vs. Reward
  25. 25. Financial Advisor Process
  26. 26. Asset Allocation & Diversification L L L
  27. 27. Size & Style Matrix for Equities60% VALUE BLEND GROWTH Utilities LARGE Core Holdings Technology Financials Low P/E Health Care Less Hi P?E Etc…. Volatile MEDIUM 30% Etc… RISK SMALL 10% More Volatile
  28. 28. Interest & Credit Risk Matrix for Bonds SHORT INTERM. LONGHIGH 1 year T-BillMEDIUM Interest Rate RiskLOW Credit Risk 20 years BB- corporate
  29. 29. Timing the Market
  30. 30. Compounding and Time Value
  31. 31. TVM and CompoundingMagic  Penny  assumes  a  100%  return  every  day  which  is  highly  unlikely,  but  the  principle  of  compounding  holds  true  for  even  smaller  returns,  this  is  why  compounding  is  a  core  aspect  of  good  personal  finance.  When  you  are  young,  you  have  an  asset  money  cannot  buy:  TIME.  Start  saving  now  and  turn  pocket  change  into  riches.  Compound  interest  has  been  called  the  eight  wonder  of  the  world.  And  with  good  reason.  It  magically  turns  a  liWle  bit  of  money,  invested  wisely,  into  a  whole  lot  more.  Even  Albert  Einstein  is  said  to  have  called  it  one  of  the  greatest  mathema>cal  concepts  of  our  >me.     Compound Interest FormulaP = principal amount (the initial amount you borrow or deposit)r = annual rate of interest (as a decimal)t = number of years the amount is deposited or borrowed for.A = amount of money accumulated after n years, including interest.n = number of times the interest is compounded per year
  32. 32. Leveraging
  33. 33. The Risks of Excess Leverage
  34. 34. Questions?—  Write you questions in the chat area.
  35. 35. Contact  Informa>on  —  Greg  Fisher  –  Economics  Teacher   ¡  gfisher@lausd.net  —  Glen  Ferrand  –  FAC  Advisor  &  Mentor   ¡  glen_ferrand@ml.com  —  Megan  Terasaki  –  Teacher  Rela>ons  Support   ¡  meganterasaki@gmail.com