Team 7 Personal InvestmentObjectivesScenarioStocksStock AnalysisStock SensitivityStock Sensitivity Cont.Roth IRARoth IRA AnalysisRoth IRA SensitivitySummaryReferencesTeam 7 Personal InvestmentMichael DellosaAndrew NimrodObjectives•Scenario•Stocks•Roth IRA•Summary & Assumptions•ReferencesScenario•You are a 23 year old college graduate that has just started a job paying $55,000 dollars a year and want to invest 10% of your yearly salary in the market ,but is not sure on which route to go. So you decide to look at investing your money into stocks or a Roth IRA for a 10 year period in hopes that you will be able to make enough for a nice down payment on a house.Stocks•Basics–A stock is a share in the ownership of a company. –Stock represents a claim on the company's assets and earnings. –Investment in stocks has historically had an average return of around 10%-12% –Two types of stock common and preferredwww.investopedia.comStock Analysis% Sal. Inc.5.50%Tax BracketYear Salary raise/yrSalary (post taxes)Investment amount./yrInvestment % of Salary/yrFuture Value (XOM)Future Value (CVX)Invested amnt./stock-yr0.25 0 55000 3025 41250.00 4125.00 0.10 5507.27 5607.93 2062.500.28 1 58025.00 3191.38 41778.00 4177.80 5055.99 5139.08 2088.900.28 2 61216.38 3366.90 44075.79 4407.58 4835.09 4905.66 2203.790.28 3 64583.28 3552.08 46499.96 4650.00 4623.84 4682.83 2325.000.28 4 68135.36 3747.44 49057.46 4905.75 4421.81 4470.13 2452.870.28 5 71882.80 3953.55 51755.62 5175.56 4228.62 4267.09 2587.780.28 6 75836.35 4171.00 54602.18 5460.22 4043.87 4073.27 2730.110.28 7 80007.35 4400.40 57605.29 5760.53 3867.19 3888.26 2880.260.28 8 84407.76 4642.43 60773.59 6077.36 3698.23 3711.65 3038.680.28 9 89050.19 4897.76 64116.13 6411.61 3536.65 3543.06 3205.8143818.54 44288.96XOM No. of Shares $/share YearPurchase 29 70.97 0Purchase 26 79.14 1Purchase 25 87.32 2Purchase 24 95.49 3Purchase 24 103.67 4Purchase 23 111.84 5Purchase 24 120.01 6Purchase 24 128.19 7Purchase 22 136.36 8Purchase 22 144.54 9Sell 244 152.71 end of 9thDividends quarterly $.50/shSell 10 yrs $152.71/sh$ inc./yr 8.17Common Stock *Assume similar 10yr change of: 50%CVX DataXOM Data1-Jan-061-Jan-061-Jan-161-Jan-162.77%2.77%$67.21$72.27$141.89$152.71 4400Formula Formula10.52%10.32%CVX No. of Shares $/share YearPurchase 31 67.21 0Purchase 28 74.68 1Purchase 27 82.15 2Purchase 26 89.61 3Purchase 25 97.08 4Purchase 25 104.55 5Purchase 26 112.02 6Purchase 25 119.48 7Purchase 24 126.95 8Purchase 24 134.42 9Sell 260 141.89 end of 9thDividends quarterly $.50/shSell 10 yrs $141.89/sh$ inc./yr 7.47Common Stock *Assume similar 10yr change of: 50%Stock SensitivityStock Sensitivity Cont.Roth IRA•Roth IRA Basics–Can invest up to $4000 a year by using an after tax paycheck–Collect tax free compound interest on growth on whatever you decide to invest in•Limitation in this project–First 5 years contributions will not be penalized, but the last 5 years will be penalized 10%Roth IRA AnalysisAcutual YearYearSalary (post taxes)Amount ContributedDo Nothing 2% Future Value of Do Nothing10% Future Value gain with IraSum of 5 YearsLast 5 Years with 10% PenaltyProfit2007 0 $4,125.00 4000 $125.00 $152.37 $10,374.972008 1 $4,177.80 4000 $177.80 $212.49 $9,431.792009 2 $4,407.58 4407.58 ($0.00) ($0.00) $9,448.042010 3 $4,650.00 4650 ($0.00) ($0.00) $9,061.532011 4 $4,905.75 4905.75 ($0.00) ($0.00) $8,690.84 $47,007.172012 5 $5,175.56 5000 $175.56 $193.83 $8,052.552013 6 $5,460.22 5000 $460.22 $498.15 $7,320.502014 7 $5,760.53 5000 $760.53 $807.08 $6,655.002015 8 $6,077.36 5000 $1,077.36 $1,120.88 $6,050.002016 9 $6,411.61 5000 $1,411.61 $1,439.85 $5,500.00 $30,220.25Totals$4,424.65 $47,007.17 $30,220.25 $81,652.06Roth IRA SensitivitySummary Assumptions•Market value always went up•Constant salary increase•Same employer for the 10 yr. periodWinnerStock IRA Do NothingTarget Down Payment$750000 House$79,923.34 $81,652.06 $51,151.40 $75,000.00Combined RORROR20.84% 10.00%References1. www.investopedia.com2. http://www.fool.com/money/allaboutiras/allaboutiras12.htm3. http://personal.fidelity.com/products/retirement/getstart/aboutira.shtml.cvsr?banner=12493134&immid=00045&psite=google&crtype=search&kw=Roth_IRA4.
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