Current Status
Before you can begin to help clients meet their goals, you must have a good grasp of their current financial situation. It can be useful to create worksheets to capture the following information:

  • Income
  • Expenses
  • Assets
  • Liabilities
  • Tax issues

Financial Goals
"Financial goals" 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.

  • 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.

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

  • Speculation - 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.


Exam Tips and Tricks
Consider this sample exam question:

  1. Each of the mutual funds below might be suitable for an investor primarily seeking income investments EXCEPT:
    1. Government bond fund
    2. Balanced fund
    3. Sector fund
    4. Money market fund

The correct answer is "c", since sector funds contain only stock investments and are primarily growth-oriented.



Capital and Current Investments

Related Articles
  1. Financial Advisor

    Is Your Financial Advisor Picking the Right Mutual Funds?

    Learn about the different types of mutual funds and how to know if your financial advisor is choosing the right funds for you based on your investment goals.
  2. Retirement

    The Best Way To Build Your Retirement Portfolio

    Retirement means changing your investment goals from growing assets to generating income. Here's how.
  3. Managing Wealth

    Using Time Horizons In Investing

    Time-horizon investing is all about planning. You need to think about your goals and select investments based on the amount of time you have until the goal must be funded.
  4. Financial Advisor

    Top 5 American Funds for Retirement Diversification in 2016

    Discover five mutual funds from industry leader American Funds with high yields that are perfect for retirement savings diversification.
  5. Financial Advisor

    Advising FAs: Explaining Mutual Funds to a Client

    More than 80 million people, or half of the households in America, invest in mutual funds. No matter what type of investor you are, there is bound to be a mutual fund that fits your style.
  6. Investing

    Digging Deeper: The Mutual Fund Prospectus

    The legal jargon of this document can be daunting. Find out how to get to the important stuff.
  7. Investing

    Can You Become Rich Investing in Mutual Funds?

    Find out how you can use mutual fund investments to get rich, including which types of funds are best suited for rapid wealth creation.
  8. Retirement

    Top 5 Oppenheimer Funds for Retirement Diversification in 2016

    Discover the top five Oppenheimer Funds for diversifying your retirement savings. Learn how to balance your portfolio for maximum safety and return.
Frequently Asked Questions
  1. What are the Differences Between Affiliate, Associate and Subsidiary Companies?

    All three of these terms refer to the degree of ownership that a parent company holds in another company. Read on to find ...
  2. What Does it Mean if the Correlation Coefficient is Positive, Negative, or Zero?

    Learn what the correlation coefficient between two variables is and what positive, negative and zero correlation coefficients ...
  3. What's the Difference Between a Market Economy and a Command Economy?

    Set by supply and demand, a market economy operates through a price system; in a command economy, governments control the ...
  4. What Factors Cause Shifts in Aggregate Demand?

    Find out how aggregate demand is calculated in macroeconomic models. See what kinds of factors can cause the aggregate demand ...
Trading Center