To Be Proactive And Knowledgeable About Investing,
PRINCIPLE NO. 6
TALE OF THE TAPE: STOCKS VS. MUTUAL FUNDS
Trying to figure out where to invest your money? The table below will help you decide whether individual
stocks or mutual funds are the better investment. Depending on your risk tolerance, you may want to
build a portfolio of equities, mutual funds, or both.
24
DIVERSIFICATION
INITIAL PURCHASE
TAXES
MANAGEMENT
FEES
RISKS
RETURNS
STOCKS
Less diversification
Usually purchased in a round lot,
or 100 shares of stock
You can control when to realize
capital gains or losses, depending
on when you decide to sell.
None
No additional costs after purchase
Risk is concentrated to the number
of individual stocks held in your
portfolio.
Possibility of huge annual returns. In
recent market, more than 300 stocks
have had returns of 200% or more.
MUTUAL FUNDS
Instant diversification
Usually investors purchase fund
at its minimum initial investment
level, which can range from $250
to $10,000.
Investors can’t control timing of
capital gain distributions or taxes
on those distributions.
Run by professional money
manager
Funds can be either load—
which requires a payment of an
up-front fee—or no-load.
Operational expenses, including
marketing and management fees,
range from 0.1% to 4.5%.
Diversification reduces risk.
In many cases, consistent returns.
Only one fund has had a return of
200% or more.
Invest in mutual funds
Probably the best way to gain diversified holdings, as well as professional management,
is by placing your money in mutual funds. There are a variety of funds to suit your invest-ment
philosophy, sector preference, and risk tolerance. Before you place your hard-earned
dollars in a mutual fund, find out if you’re getting your money’s worth. Know the differ-ence
between a load fund—one with an up-front sales charge that ranges from 4% to
8%—and no-loads, which are purchased directly from the fund company (see glossary).
For more information on mutual funds, contact the Investment Company Institute (see
Resource Box).
Declaration of Financial Empowerment

PRINCIPLE no.6 Money Management And Consumer Issues
calculations When Will My Investment
Double In Value?
To find out, use the rule of 72. Divide the number 72 by the compound
annual rate (expressed as a whole number) of your investment.
A $1,000 investment with a compound annual rate of 9% would double
in eight years.
Example:
72 ÷ 9 = 8
Today, I commit to:
1
2
3
4
25

eing a smart consumer is just as important as being a savvy investor. That doesn’t just mean
knowing how to shop for bargains, but also being cautious and avoiding scams. You are the
watchdog of your money so you should know your rights as a consumer and demand that
the businesses and services you deal with be accountable. The worst sources of consumer complaints can
be traced to five kinds of businesses: retail stores, home improvement and remodeling companies, general
service firms, auto repair shops, and mail-order services. When dealing with these services, remember the
age-old phrase, caveat emptor—let the buyer beware.
Here are some steps for you to take:
Don’t try to keep up with the Joneses
You should closely examine your motives for making a purchase. You should never purchase
a product to bolster your self-esteem or because you want to compete with someone else. Your
purchases should be based on your own preferences and what makes sense within your partic-ular
lifestyle and income.
Do your homework
The more money you plan to spend, the more you need to research the product or service ahead
of time. Check out the company or vendor that makes the product and the place where you intend
to buy it. Understand all warranties and return policies before you make a purchase. Also, know
your rights as a consumer when it comes to customer service or using credit.
Shop off-season
Shopping around and purchasing products at the right time can save you huge amounts of
money. Winter necessities, for example, can typically be had 40% to 60% off from January
through March. When shopping, focus on the final price not the percent at which it’s
discounted. Make sure to get price quotes from at least three retailers.
Avoid impulse purchases
Half of all sales are impulse purchases, but you should only purchase items that you have
budgeted for. If you come across an item that you want, put it on another list.
Verify that it’s a reputable business
If you are dealing with a service company, check its licenses and call issuing agencies for
verification. Your local Better Business Bureau, state attorney general’s office, and other
local government agencies keep files of complaints against offending companies and service
organizations.
Before making a purchase, figure out whether you can afford it
Make sure that the item you are purchasing is factored into your budget. Always shop for bar-gains,
whether it’s online, at outlet malls and price clubs, or wholesale. Read publications that
offer tips on buying quality name-brand merchandise for below wholesale prices.
To Be Proactive and Knowledgeable About Investing,
PRINCIPLE NO. 6
CONSUMER CREDIT PROTECTION ACT
(Known as Truth in Lending Act)
This Act states the following:
■Interest must be stated in APR (annual percentage rate)
■Credit cards cannot be issued to consumers who have not requested them
■Protection will be provided for unauthorized credit card use
■Advertising is regulated
■Credit terms must be disclosed to consumer
26
B
Declaration of Financial Empowerment
steps

resources
PRINCIPLE no.6 Money Management and Consumer Issues
Websites:
www.thestreet.com
www.quicken.com
www.fool.com (The Motley Fool)
www.morningstar.com
www.stocksense.com
www.investoreducation.org (Alliance for Investor
Education)
www.pueblo.gsa.gov (Federal Citizen Information
Center)
www.fraud.org (National Fraud Information Center)
www.nclnet.org (National Consumers League)
www.financiallearning.com (GE Center for Financial
Learning)
Books:
Black Enterprise Guide to Investing
by James Anderson
Getting Started in Stocks
by Alvin D. Hall
Investing for Dummies by Eric Tyson
Morningstar’s Guide To Mutual Funds:
5-Star Strategies for Success
by Christine Benz, Peter Di Teresa & Russel Kinnel
The Consumer Bible: 1001 Ways to Shop Smart
by Mark Green with Nancy Youman
Fly Cheap! by Kelly Monaghan
The 5 Keys to Value Investing
by J. Dennis Jean-Jacques
Investing Success: How to Conquer 30 Costly Mistakes
& Multiply Your Wealth! by Lynnette Khalfani
Today, I commit to:
1
2
3
4
5
6
27
Take advantage of all of your perks
Sign up for loyalty programs that will give you discounts and upgrades on travel, hotels, and
car rentals.
Make sure you read and understand any contract you’re required to sign
When dealing with vendors, your contract should include any verbal promises made by the
seller, substitutions, and any amendments that were agreed upon. You should also ensure that
you understand the seller’s refund or return policy and get the specifics in writing.
Avoid store payment plans that charge interest or finance charges for purchases on layaway.
Voice your complaints
Register your complaint as soon as there is a problem. Keep your receipts and the original
packing materials for at least six weeks if possible or find some creative way to document
the claim. Go in to a store determined that you will be satisfied—whether it’s a refund, a store
credit, or a replacement item. Above all, be persistent.
Organizations:
American Association of Individual Investors, 800-428-2244; www.aaii.org/invbas
Investment Company Institute, 202-326-5800; www.ici.org
National Association of Securities Dealers, 301-590-6500; www.nasd.com
National Association of Investors Corp., 877-275-6242; www.better-investing.org
Council of Better Business Bureaus, 703-276-0100; www.bbb.org
National Association of Attorneys General, 202-326-6000; www.naag.org