Think Long Term

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					Financial Tip #3: Think long-term
Think long-term – invest for the future One of the biggest challenges in life is making your money last as long as you do – so start planning for your retirement today. Investing for the long-term may be the key to retiring with financial freedom. Investment Fundamentals • • Sooner is better. The sooner you start investing, the more time that your investments have to potentially grow. Playing “catch-up” later on in life can be difficult and expensive. Understand the relationship between risk and reward. Risk is an inherent part of participating in the market. In general, the higher the risk, the higher the reward, or rate of return. It is important to understand your tolerance for risk so that you make the choices that best fit your investment style. Diversify your portfolio. Select investments options from all parts of the risk and reward spectrum. In this way, you can benefit from the potentially higher rate of return that comes from higher risk investment options, while the lower risk investments may help protect your money during periods of market volatility. When you start investing young, chances are that you may be willing to tolerate higher risk investments than someone who starts investing when they are older. Diversification does not ensure a profit or protect against loss Ask a financial professional to help you determine your investment goals. The higher the risk – the higher the potential rate of return:



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Investment Options There are several types of investments to choose from and many investment options within each investment type. When you select both short- and long-term investments you are ensuring that you are ready for your short- and long-term financial goals and needs. Following is an overview of each investment type from low risk to high and the advantages and drawbacks of each type. • Cash Equivalents are the lowest risk investments. They offer predictable earnings, are highly liquid – meaning you can cash them out when you need them - and they pose a low risk to your principal. Cash equivalents are the lowest risk investments and provide the lowest rate of return:

Cash equivalent examples: Certificate of Deposit (CDs) Money market deposit accounts Money market mutual funds U.S. Treasury Bills (T-Bills

Cash Equivalent Features • • • Predictable lower earnings Highly liquid – you can cash them out when you need them Low risk to your principal / not affected by market volatility

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Bonds are slightly riskier investments than cash equivalents. They are essentially loans from an investor (you) to a government or a corporation. Interest rates are set in advance and are paid out at regular intervals.

Types of bonds include: U.S. government securities Agency bonds Municipal bonds Corporate bonds

Bond Features • • • • • Steady and predictable stream of income Rate of return is typically higher than cash equivalents Relatively lower risk when compared to stock options, for example Low correlation to the stock market means your money will not be affected by market volatility Subject to interest rate risk

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Stocks are generally higher risk investments than bonds, which means that they offer the potential of a higher rate of return. When you buy a company’s stock, you are purchasing a share of ownership in that business. The percentage of your ownership determines your share of loss and profit. Your shares of stock can be sold at a gain or a loss depending upon the value of the company’s stock.

Stock Features • • • • • Historically, stocks have provided the highest long-term returns. Past performance does not guarantee future results. When you purchase a company’s stock, you have ownership rights Stocks can provide regular income through dividends as well as capital appreciation Easy to buy and sell Value of stocks are affected by market volatility

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Mutual Funds The principle behind a mutual fund is quite simple. Your money is pooled, along with the money of other investors, into a fund, which then invests in certain securities according to a stated investment strategy. A fund manager, who reports to a board of directors, manages the fund. When you invest in the fund, you own a piece of the total portfolio of its securities – offering a convenient way to obtain professional money management and instant diversification that would be more difficult and expensive to do on your own. Every mutual fund publishes a prospectus. Always review a fund’s prospectus before investing. It provides a great deal of information that you'll want to know about the fund, such as the fund's investment objective and style, and the fund's expenses.

Mutual funds fall all across the risk / reward spectrum (e.g., balanced funds, international funds, etc.) Dollar Cost Averaging: Many mutual fund investors use an investment strategy called dollar cost averaging, which allows you to invest smaller amounts of money at regular intervals, regardless of market performance. The goal is to reduce the overall volatility of your portfolio by purchasing more shares when prices are low and fewer shares when prices are high. Dollar cost averaging does not ensure a profit and investors should consider their ability to continue purchases through periods of low price levels. Note: If you’re currently contributing regularly to a 401(k) plan at work, you’re likely already practicing dollar cost averaging.

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Dollar Cost Averaging Invest the same dollar amount at regular intervals over time You buy more shares when the price is low; fewer shares when the price is high Average cost of shares will be lower than average market price per share during your investment time period

Mutual Fund Features: • • • • • • Diversification among all risk levels Managed by a professional fund manager You can invest in small amounts Liquidity, depending on share type Value of shares can fluctuate daily Mutual fund fees and expenses

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The role of a financial professional The role of a financial professional cannot be understated – especially when you are just starting out. He or she can help you determine your short- and long-term investment goals, your timelines, and your risk tolerance. In addition, a financial professional can help you: • • • Create an asset allocation strategy so that you are diversifying your investments across the risk and reward spectrum Select specific investments for specific goals Manage, monitor, and modify your portfolio to help ensure continued growth potential and reduce the risk

Need more information about investing and different investment vehicles? Visit these Web sites to learn more: • •

Make wise decisions. Talk to your financial professional and ask about Allianz Life® products.

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