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Series 6 A
Investment Objectives
| Question | Answer |
|---|---|
| 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
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