- Investment Objectives – MOST IMPORTANT FACTORS
- Investment Policies
- Quality of Management
- Risk Factors
- Convenience and Services
- Special Features
- Minimum Purchase Requirements
- Sales and distribution charges
- Preservation of capital – keeping money safe by purchasing
high grade bonds and money market securities.
- Current income – investments that pay interest and dividends
(bonds, preferred stocks, high yielding common stocks, income funds, etc.)
- Growth of invested capital – buying stocks of growth companies that
reinvest money instead of paying dividends.
Performance Statics – examined may include:
- Total Return – gains and income
- Total Yield – income
- Diversification – Investors can minimize the risk that a particular security might decrease in value by diversifying investments (buying several different securities or funds at once).
NOTE: Diversification reduces business risk, but does not eliminate market risk or interest risk.
- Defensive Investment Strategy – investing a large portion of the portfolio in bonds and a small portion in equity securities.
- Aggressive Investment Strategy – investing a large portion of the portfolio in equity securities and a small portion in bonds.
- Yearly income
Expenses – Ex: mortgage, college expenses, insurance etc.
- Discretionary income – Income that is not needed for necessities (money that can be risked)
- Assets and liabilities – What the investor owns as compared to what he or she owes
Assets: cash, securities, cars, properties, etc.
Liabilities: rent, mortgage payments, taxes, car payments, bills, etc.
NOTE: Net worth = Assets – Liabilities
- Liquid assets – cash, liquid securities, etc.
- Insurance needs – Life, Health, etc.
- Participation in retirement programs – IRAs, Keogh, Pension Plans, etc.
- Tax status – Tax bracket. Does the investor have the need for additional write-offs?
- Short and long-term liquidity needs – Child going college, buying a house, retiring soon, etc.
- Fluctuations in value of invested capital – Can investors handle the ups and downs of the market?
- Income level changes – Expecting a raise, retiring soon, etc.
- Purchasing power of income and/or principal – Can investors handle inflation risk if keeping money safe?