The above is a simple chart of Investment categories by risk and reward. It is in the shape of a pyramid. With Investments at the top of the pyramid an individual can expect the greatest returns but because of the risk associated with these investments an individual can also experience the greatest risk of loss. Volatility is the key. If you knew exactly when to invest in high risk areas and exactly when to sell, then you should experience the highest returns. Consequently, with the investments at the bottom of the pyramid you would expect low returns with little risk of loss of investment. The placement of investment vehicles on the pyramid is subjective and opinions as to their placement could vary.
The foundation for investing starts with proper financial planning; setting goals, establishing a budget, gathering financial records and knowing your net worth. The financial planning process starts with gathering information. For the financial planner to do his or her job, that person must know your present financial structure, your goals and risk tolerance. The more knowledge that can be obtained the better the financial planner can do his or her job. It is suggested you print and complete the client questionnaire then fax or mail it to our office.
A Mutual Fund
is a company that combines the investment funds of many people with similar investment goals and invests the funds for these people in a wide variety of securities. The individual receives shares of stock in the mutual fund and through the mutual fund are able to enjoy much wider investment diversity than they could otherwise receive. Each shareholder, in effect, owns a part of a diversified portfolio that has been acquired with the pooled money. As the securities held by the fund move up or down in price, the market value of the mutual fund shares moves accordingly. When dividend and interest payments are received by the fund, they are passed on to the mutual fund shareholders and distributed on the basis of prorated ownership.