2. LAP: QS-041 Investment Selection Factors

3. Objectives Describe factors in selecting investments. Discuss the effect of personal factors in selecting investments.

4. Describe factors in selecting investments. Objective

5. Researching Investment Choices  Very important!  Research the investment itself.  Research yourself.

6. 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

7. Discuss the effect of personal factors in selecting investments. Objective

8. Personal Factors to Consider Risk 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

9. Personal Factors to Consider Risk 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

10. Personal Factors to Consider 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 and family

11.  Short term —l ess than 5 years  Intermediate term — 5 to 15 years  Long term — 15 years or longer  Short term —l ess than 5 years  Intermediate term — 5 to 15 years  Long term — 15 years or longer Time horizon Personal Factors to Consider

12. Need for Liquidity Money you may need soon must be liquid! Converting investment dollars back into cash

13. Personal Factors to Consider Need for Liquidity Liquid Not liquid Savings accounts Money market accounts Stocks CDs Bonds Retirement accounts

14. Personal Factors to Consider Need to avoid fees  “ No load ” mutual funds  DSP s—Direct Stock Purchase  DRIP s—Dividend Reinvestment Plan

15. Personal Factors to Consider Never too early to think about retirement Retirement = financial independence Need to minimize taxes TAXES Tax-minimizing retirement plans

16. Personal Factors to Consider Need to minimize taxes TAXES  Tax-deferred retirement plans 401(k) 403(b) 457 IRA (Individual Retirement Account)  Non-tax-deferred retirement plans Roth IRA

17. “ Investor Types ” Quick Case Audacious = Income/Growth Ambitious = Growth Dynamic = Aggressive growth Audacious = Income/Growth Ambitious = Growth Dynamic = Aggressive growth Conservative = Capital preservation Moderate = Income

18. MarkED Acknowledgments Original Developers Lelia Ventling and Sarah Bartlett Borich, MarkED Version 1.0 Copyright  2007 MarkED Resource Center

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