Benefits Flashcards
Common stock
Preferential tax
Hedge against Inflation
Capital appreciation
Potential income from dividends
Market risk
Business risk
Principal risk
Financial risk
Price volatility
Price not guaranteed risk
Growth objective
Some risk for potential of high return
Longer time
Income expectations from blue chip companies
Preferred stock
Fixed income from dividend
May qualify for
Less colitis to common stock
Prior claim in liquidations
Market risk Inflation risk Dividend not guaranteed May be callable Lower priority in liquidation to bonds
Fixed income objective
More conservative than common
More sophisticated investors
bonds
Fixed income
Lower volatility that equities
Tax advantage (muni, gov)
*Default risk Interest rate/market risk Reinvestment risk Call risk Inflation risk
Fixed income objective
Sophisticated
Near to or already in retirement
No risk
Corp bonds
High yield than muni and us gov
May be covertable
Senior to equities in liquidation
Fixed in objective
Willing to take on great risk
Zero coupon
Low initial investment
No reinvestment risk
Most volatile bond Taxed annually interest not received Default risk Interest rate risk Market risk Inflation
No need for current income
Want money for a life event in the future
Except volatility
If in pension plan or retirement account to defer tax on phantom income
Is gov bond
Fixed income
Safety of income
Liquidity
Interest rate risk
Reinvestment risk
Inflation risk
Fixed income objective
Lower yields for greater safety
Preservation of capital objective
Agency
Fixed income
Monthly with MBS
Safely of principal
Liquidity
Interest risk
Reinvement risn
Fixed income insecticide
High risk high yield than us gov bonds
CMOS
Monthly income
More predictable maturities
Wide range of available maturities and yields
Default risk
Prepayment and extension risk
Complex structure
Monthly income objective
Willing to take on slightly greater risk and higher yields than agency
Money markets in
Safely if principal
Preservation of capital
Liquid
Interest rate risk
Reinvestment risk
No risk investor
Institutional investors
Time of 1 year or less
Muni bonds
Fed tax and potentially triple
Benefit for investors in high tax
Safely of principal (go)
Interest rate
reinvestment
Limited liquidity
Fixed income objective
Lower yields for more safely
High tax bracket
Investors of all time frames
Options
Lower capital requirement (premium only)
Variety of investments
Liquidity
Unlimited risk for some
Can be complex
Carry many same risk as underlying investments
Requires continues capital (expire)
Wide variety of ibjectives
Complex and risk strategies th meet needs
Sophisticated investors
Mutual funds
Professional management
Lower cost
Liquify
Market risk
Ossociate dfers
Pricing not continuous
Fund available to meet all objectives
Less sophisticated
Less risk
ETF
Available for all market index’s Diversification Cost efficient Lower expense ratio than index mutual funds (No management) Tax efficient Intra day pricing Some leveraged ETF (2x, 3x) Inverse eft (opposite 2x, 3x)
Basket of securities that follow an index
Market risk
Less possibly can be less liquid
Commissions can reduce return if traded
Tracking error
Seek market returns
Sophisticated and active trader investor
Variable annuity
Type of insurance
Potential for life time income Tax deferred growth No limits on contribution death benefit Professional management
Income is
Not for short term investment
Possible surrender charge (cancel policy)
Locked in
Seeking supplicmental
Wealthy
Longer time horizon
REITs
Realizable dividend income
Low volatility
Lower liquidity risk
Hedge to equity market
Problem line can effect cash flow and capital gains
Seeking dividend income
