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

2. 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

3. 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

4. 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

5. 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