Evaluation of Customers - Investment Objectives

This section refers to general investment objectives, not the client's specific needs such as retirement at a certain age or college plans for his/her children (see the next section on capital needs). However, there is certainly a correlation between the two, and it is useful to know the characteristics of each of these investment goals:

  • Preservation of capital - the investor is more concerned with safety than return. Treasury bills and money market funds may be most appropriate.

  • Current income- the investor needs a portfolio that produces steady income for current living expenses. Bonds, annuities, and stocks with high dividends (such as utility stocks) may be appropriate.

  • Tax-exempt income - the investor's

  • Growth and income - the investor is looking for a portfolio that generates some amount of income, but he/she is looking for capital appreciation as well (often for protection against inflation). Appropriate investments could include a mix of bonds and stocks.

  • Capital appreciation - the investor's goal is likely retirement or another event in the future, where growth is required and current income is not needed. A diversified stock or mutual fund portfolio is appropriate.

  • Aggressive growth - the investor is looking for high-risk investments with a potential for very large returns. This is rarely the goal for an entire portfolio, but rather for a specific portion of assets. Aggressive growth funds and small-cap issues may be most appropriate.
FINRA Conduct Rule 2310
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