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Series 6 A

Investment Objectives

QuestionAnswer
Growth (Investment consideration) An increase in invested capital, primarily generated through dividends or interest payments.
Income, (Investment consideration) Regular production of cash from investments, through dividend or interest payments. .
Total return (growth & income), (Investment consideration) A combination of growth, capital growth and income, but less of each than an investment that focuses on just one of those objectives.
Total return (growth & income)(Investment Application) Dividend-producing stocks, such as blue chips, are one way to go after this objective. Another strategy is a portfolio including some growth securities and some income securities.
Preservation of capital (Investment consideration) Safety of principal is paramount, in return for which investor accepts lower returns.
Growth (Investment Application) Equity securities are usually used in pursuit of this goal.
Income, (Investment application) Bonds and preferred stocks are often used to produce income
Preservation of capital (Investment application) Money market instruments and money market mutual funds are the main tools in this area.
Tax reduction (Investment consideration) High-bracket investors facing a big tax bite on taxable investments may find tax-exempt vehicles produce a better after tax return
Tax reduction (Investment application) Municipal bonds are thy primary investment for tax reduction, although tax-deferral may also help these investors.
Speculation (Investment consideration) Some investors are willing and able to take considerable risks for the chance to hit a big financial home run.
Speculation (Investment application) Small-cap stocks and even penny stocks are aggressive growth vehicles.
Liquidity (Investment consideration) This is a primary need for those who may need cash quickly. It is the ability to easily turn an investment into cash without a big impact on the market for the security.
Liquidity (Investment application) Liquidity often goes hand-in- hand w/preservation of capital, but they aren't the same thing. example, 10 year T-notes are very liquid, but their prices are affected by interest rate swings, meaning they aren't the best vehicle for capital preservation
Liquidity (Investment application) cont An FDIC-insured long-term bank CD is very good at preserving capital, but the investor may lose some interest by liquidating early.
Created by: coderman on 2011-06-18



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