Unit 3 Flashcards
Customer Information, Risk and Suitability, Product Information
Non-financial Investment Considerations
>Age >Marital Status >Number of ages of dependents >Employment >Employment of family members >Current family educational/health needs >Risk tolerance >Attitude towards investing >Tax status
Preservation of capital
Usually recommend: Money market securities Money market mutual funds Certificates of Deposit (CD) Government securities Principal-protected funds
Dividend Dates
Declaration, Ex-Dividend, Record, Payable
Regular way settlment
T+2
Capital Growth
Refers to an increase in an investments value over time.
Growth oriented investments are EQUITY ORIENTED.
Tax advantaged products for Investors
IRAS and annuities allow interest to accumulate tax deferred.
Muni-bonds offer tax free interest income (not suitable for retirement accounts)
Liquid investments - keep in mind this means sell quickly at close to current market value
Securities on exchange or NASDAQ
Mutual funds
ETF
REIT
Illiquid investments
Annuities - when investor is under 59.5 Real estate DPP Hedge fund Funds of hedge funds
Speculation investments
Higher risk / Higher return
>Options >High-yield >unlisted stocks or bonds >sector funds >precious metals >special situation funds
Recommendations for Preservations of Capital
CD MM Funds Fixed Annuities Govt Securities Investment Grade Bonds
Recommendations for Growth
Common stock / common stock mutual funds Blue chip stock Tech stock Sector stock Defensive stock
Recommendations for Income
Bonds REIT CMO Muni Bonds Below investment grade bonds Preferred stock
Recommendations for Liquidity
Securities on exchange
Bonds
Mutual funds
Public REITS
Recommendations for Diversification
Mutual funds Equity porfolios Domestic portfolios Bond portfolios Some foreign portfolios
Speculation
Options contracts DPP High yield bonds Unlisted stocks Sector funds Precious metals Commodities Futures
Capital risk
risk of losing all of your invested capital
Timing risk
buying or selling at wrong time
Interest rate risk
Sensitivity of investments price of value due to interest rates - usually associated with bonds. Shorter the tenor the less risky!!
Credit risk
Risk of default on bond
Investment grade bond
BBB or higher
Liquidity risk
not being able to convert investment into cash immediately at CMV
Advantages of Call feature to investor
> Refinance for lower interest rate
Reduce its debt at any time
Replace short term debt with long term
Force the conversion of convertibles
Asset allocation
the spreading of portfolio funds among different asset classes such as: Stocks Bonds Cash Can include RE and other asset classes
Strategic asset allocations
Refers to the proportion of various types of investments composing a long-term investment portfolio