What is a…. Mutual Fund Personal Trust Pension Fund

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Presentation transcript:

What is a…. Mutual Fund Personal Trust Pension Fund Defined contribution Defined benefit Life Insurance Company Term insurance Whole-life insurance Endowment Fund

Investment Process Specify Objectives Identify Constraints Liquidity Investment Horizon Regulations Tax bracket Risk tolerance Risk aversion Wealth Job prospects Uncertainties Unique circumstances Formulate Policy Monitor and update the portfolio as needed

Formulate a Policy … in other words, look at “Asset Allocation” Money Market assets Fixed-Income securities (bonds) Stocks Non-U.S. stocks and Bonds Real Estate Precious metals and other commodities Goal: Maximize gains while minimizing risks.

Risk vs. Reward High Risk Speculative Stocks High-Yield Bonds Moderate Risk Growth Stocks Low-Rated Corporate Bonds International Investments Limited Risk Blue Chip Stocks High-rated corporate bonds High-rated municipal bonds Balanced Mutual Funds Low Risk Treasury Bonds and Bills Money Market Funds Bank CDs

Asset Allocation

Asset Allocation

Rebalancing????

W W W Links http://cgi.money.cnn.com/tools/assetallocwizard/assetallocwizard.html http://www.smartmoney.com/investing/basics/investors-allocate-assets-balance-portfolios-at-smartmoneycom-12958/