It's important to determine your investment objectives to ensure your advisor makes the most suitable recommendations based on your goals, your tolerance of risk, and the immediacy of your financial needs.
Your advisor will ask questions to get a clearer understanding of your financial situation and goals. You may be asked to complete a survey or questionnaire that will provide more insights. Always be honest.
Investment portfolios generally fall into one of the following categories:
- Income with Capital Preservation — Designed as a longer-term accumulation account, “Income with Capital Preservation” is generally considered the most conservative investment objective. Its emphasis is on generating current income and a minimal risk of capital loss. Lowering the risk generally means lowering the potential income and overall return.
- Income with Moderate Growth — The primary goal of this type of investment portfolio is generating current income with a secondary focus on moderate capital growth.
- Growth with Income — This investment portfolio category focuses on modest capital growth in addition to generating current income.
- Growth — Achieving high long-term growth and capital appreciation are the drivers for this type of investment portfolio. There’s little emphasis on generating current income.
- Aggressive Growth — As its name suggests, this investment portfolio category places emphasis on aggressive growth and maximum capital appreciation. There’s no focus on current income generation. It has a very high level of risk and is for investors with a longer time horizon.
- Trading — With this type of investment portfolio, the emphasis is on speculative transaction activity. It requires acceptance of an extremely high level of risk.
There is no assurance that the investment portfolios listed are suitable for all investors or will meet their stated objectives. Keep in mind that the purchase of certain securities may be required to effect some of the strategies. Investing involves risks including possible loss of principal.
Every investment carries some degree of risk. The following are some of the things you should know about investment risk:
- The higher the expected rate of return, the greater the risk.
- No legitimate investment offers high returns with little or no risk.
- The past success of a particular investment is no guarantee of future performance.
- Some investments can’t be easily sold or converted to cash. Check to see if there is a penalty or charge if you must sell an investment quickly or before its maturity date.
- Investments in securities issued by a company with little or no operating history or published information may involve greater risk.
- Securities investments, including mutual funds, aren’t federally insured against a loss in market value.
- Although capital markets are regulated, market reaction to events and news are part of the normal course of a trading day. You should be familiar with what may occur during periods in which markets are more volatile. You can learn about market volatility here.
If you have questions, talk to your advisor.
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