Annuities

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?