lap: qs-041 investment selection factors objectives describe factors in selecting investments....
TRANSCRIPT
LAP: QS-041LAP: QS-041
Investment Selection FactorsInvestment Selection Factors
Objectives
Describe factors in selecting investments.Describe factors in selecting investments.
Discuss the effect of personal factors in selecting investments.Discuss the effect of personal factors in selecting investments.
Describe factors in selecting investments.Describe factors in selecting investments.
Objective
Researching Investment Choices
Very important! Very important!
Research the investment itself. Research the investment itself.
Research yourself. Research yourself.
Important Business Factors to Consider
• Current market value of company’s stock
• Company’s past performance in stock market
• Product mix
• Competition
• Management
• What’s happening in industry sector
• Current market value of company’s stock
• Company’s past performance in stock market
• Product mix
• Competition
• Management
• What’s happening in industry sector
Discuss the effect of personal factors in selecting investments.
Discuss the effect of personal factors in selecting investments.
ObjectiveObjective
Personal Factors to Consider
Risk toleranceRisk tolerance
Greater risk = greater potential gains
Greater risk = greater potential losses
Risk tolerance—how much risk you’re willing to accept in return for potentially high gains
Greater risk = greater potential gains
Greater risk = greater potential losses
Risk tolerance—how much risk you’re willing to accept in return for potentially high gains
Personal Factors to Consider
Risk ToleranceRisk Tolerance
“Aggressive” investors—high risk tolerance
“Moderate” investors—medium risk tolerance
“Conservative” investors—low risk tolerance
“Aggressive” investors—high risk tolerance
“Moderate” investors—medium risk tolerance
“Conservative” investors—low risk tolerance
Personal Factors to Consider
•Age and life phase•Age and life phase
• Getting started early—the magic of compounding
• Your current amount of income
• Getting started early—the magic of compounding
• Your current amount of income
• Marriage• Marriage and familyand family
Short term—less than 5 years
Intermediate term—5 to 15 years
Long term—15 years or longer
Short term—less than 5 years
Intermediate term—5 to 15 years
Long term—15 years or longer
Time horizonTime horizon
Personal Factors to Consider
Personal Factors to Consider
Need for LiquidityNeed for Liquidity
Money you may need soon must be liquid!
Money you may need soon must be liquid!
Converting investment dollars back into cash
Converting investment dollars back into cash
Personal Factors to Consider
Need for LiquidityNeed for Liquidity
• Liquid• Liquid • Not liquid• Not liquid
• Savings accounts• Savings accounts
• Money market accounts
• Money market accounts
• Stocks• Stocks
• CDs• CDs
• Bonds• Bonds
• Retirement accounts
• Retirement accounts
Personal Factors to Consider
Need to avoid feesNeed to avoid fees
“No load” mutual funds
DSPs—Direct Stock Purchase
DRIPs—Dividend Reinvestment Plan
Personal Factors to Consider
Never too early to think about retirement
Never too early to think about retirement
Retirement = financial independence
Retirement = financial independence
Need to minimize taxesNeed to minimize taxes
TAXESTAXES
Tax-minimizing retirement plansTax-minimizing retirement plans
Personal Factors to Consider
Need to minimize taxesNeed to minimize taxes
TAXESTAXES
Tax-deferred retirement plans Tax-deferred retirement plans
• 401(k)• 401(k)
• 403(b)• 403(b)
• 457• 457
• IRA (Individual Retirement Account) • IRA (Individual Retirement Account)
Non-tax-deferred retirement plans
Non-tax-deferred retirement plans• Roth IRA• Roth IRA
“Investor Types”“Investor Types”Quick Case
• Audacious = Income/Growth
• Ambitious = Growth
• Dynamic = Aggressive growth
• Audacious = Income/Growth
• Ambitious = Growth
• Dynamic = Aggressive growth
• Conservative = Capital preservation• Conservative = Capital preservation
• Moderate = Income• Moderate = Income
MarkED
Acknowledgments
Original DevelopersLelia Ventling and Sarah Bartlett Borich , MarkED
Version 1.0
Copyright 2007MarkED Resource Center
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