By Faith Okoko—
There is no better time to learn how to invest than now, not doing so can cost thousands if not millions in the future, and the Business Leadership Club Mutual Fund event was organized for that purpose. The information session was held on Thursday October 10th in the Hamilton Club at 1:30 pm and was attended by department Chair Professor Thomas Cox, Business Club advisor Professor Khloud Kourani, club members and other students of Passaic County Community College. The speaker was Professor Edwin Pagan.
The top takeaway was people who invest early benefit from their money working for them because of compound interest and women should take charge of their finances and not place themselves in the vulnerable position of letting men deal with all money matters in the household. Students were also reminded life is not fair but concentrating on this fact is futile.
The wise action is for individuals to work with what they have.
The number of companies providing pensions has dwindled, massively. Social security payments are meager at an average rate of $1,461 a month.
Moreover, the future of social security is fuzzy, and it is uncertain whether it will exist in thirty years’ time. This is the picture Professor Pagan formed for those in attendance to draw attention to the current unfavorable economic landscape.
In addition, everything costs money in this country and the temptation to spend, partly because of advertisements, is ever present and so is the difficulty of resisting it. Therefore, is it all doom and gloom? Not according to professor Pagan, who assured that those who plan can beat the system.
He said it all comes down to basics such as budgeting and cutting costs. Those who have awareness can easily choose between buying a $700 pair of shoes for a boyfriend or transferring a chunk of that money into a 401 K or an IRA account, which he described as baskets for instruments such as mutual funds. He also added that knowing to differentiate between short term and long-term goals is key.
Mutual funds are not the only way to invest money. However, they were the focus for this event. Professor Pagan advised that if the money is needed within a short time, five years or less, keeping it away from mutual funds is smart because there is always the risk of losing the money.
There was, again, emphasis on starting early because to reach a target of $1,000,000 by age 65 would require investing $157 a month for a twenty-year-old, $439 for a thirty-year-old, $1306 for a 40-year-old and $4842 for a fifty-year-old. Most people cannot afford to start investing late because working can be fun, but it is not fun having to work beyond age sixty-five.
The highlight of the event was the tips Professor Pagan gave those in attendance on how to pick a mutual fund. They were to select at least five mutual funds from five different peer groups— every mutual fund on the list must have at least a 10-year track record, each mutual fund must have earned at least 8% over the 10-year period and the cumulative return must also be at least 8%; there must be no sales load charged on any of the mutual funds, and the expense on each mutual fund must be 1% or less.
For those confused—a sales load is a commission on the returns. The different peer groups allow an investor to diversify and reduce or spread risk. His advice was not to make any changes if the average cumulative expected return, which he taught how to calculate (multiply percentages of the money invested with the 10-year average return and add the results up), is 10% or more and to expect ups and downs.
The event was empowering because students who had no idea what a mutual fund is left with basic knowledge about investing and budgeting.
For more information about the Business Leadership Club (BLC), contact club advisor Professor Kourani at: BLC@pccc.edu