Annuities (advanced)

Important Factors

• Investment Objectives – MOST IMPORTANT FACTORS
• Investment Policies
• Quality of Management
• Risk Factors
• Convenience and Services
• Special Features
• Minimum Purchase Requirements
• Sales and distribution charges

Investment Objectives

• Preservation of capital – keeping money safe by purchasing
  high grade bonds and money market securities.
• Current income – investments that pay interest and dividends
  (bonds, preferred stocks, high yielding common stocks, income funds, etc.)
• Growth of invested capital – buying stocks of growth companies that
  reinvest money instead of paying dividends.

Performance Statics – examined may include:

• Total Return – gains and income
• Total Yield – income

Investment Strategies

• Diversification – Investors can minimize the risk that a particular security might decrease in value by diversifying investments (buying several different securities or funds at once).
  NOTE: Diversification reduces business risk, but does not eliminate market risk or interest risk.
• Defensive Investment Strategy – investing a large portion of the portfolio in bonds and a small portion in equity securities.
• Aggressive Investment Strategy – investing a large portion of the portfolio in equity securities and a small portion in bonds.

Financial Status

• Yearly income
  Expenses – Ex: mortgage, college expenses, insurance etc.
• Discretionary income – Income that is not needed for necessities (money that can be risked)
• Assets and liabilities – What the investor owns as compared to what he or she owes
  Assets: cash, securities, cars, properties, etc.
  Liabilities: rent, mortgage payments, taxes, car payments, bills, etc.
  NOTE: Net worth = Assets – Liabilities
• Liquid assets – cash, liquid securities, etc.
• Insurance needs – Life, Health, etc.
• Participation in retirement programs – IRAs, Keogh, Pension Plans, etc.
• Tax status – Tax bracket. Does the investor have the need for additional write-offs?

Risk Tolerance

• Short and long-term liquidity needs – Child going college, buying a house, retiring soon, etc.
• Fluctuations in value of invested capital – Can investors handle the ups and downs of the market?
• Income level changes – Expecting a raise, retiring soon, etc.
• Purchasing power of income and/or principal – Can investors handle inflation risk if keeping money safe?