Lapointe Productions Investment Basics

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Presentation transcript:

Lapointe Productions Investment Basics Describe how safety, risk, income, growth, and liquidity affect your investment program

Factors Affecting the Choice of Investments Safety and risk Risk = uncertainty about the outcome Investment Safety = minimal risk of loss Risk-Return Trade-Off The potential return on any investment should be directly related to the risk the investor assumes Speculative investments are high risk, made by those seeking a large profit in a short time

Components of the Risk Factor Inflation risk  during periods of high inflation your investment return may not keep pace with inflation Interest rate risk  the value of bonds or preferred stock may increase or decrease with changes in interest rates Business failure risk  affects stocks and corporate bonds Market risk  the risk of being in the market versus in a risk-free asset

Investment Income Investment Income A predictable source of income (dividends or interest) Most conservative = passbook savings, CDs and government securities Other choices: Municipal and corporate bonds Preferred stock Utility stocks Selected common stocks Selected Mutual funds Rental real estate

Investment Income, Growth and Liquidity Investment Growth Growth in value (price appreciation) Common stock usually offers the greatest potential for growth Mutual funds and real estate offer growth potential Investment Liquidity 2 dimensions Ability to buy or sell an investment quickly Without substantially affecting the investment’s value