Investment Constraints

Investment Constraints - 2-1Investment ConstraintsLiquidity...

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Unformatted text preview: 2-1Investment ConstraintsLiquidity NeedsVary between investors depending upon age, employment, tax status, etc.Planned vacation expenses and house down payment are some of the liquidity needs.Time HorizonsInfluences liquidity needs and risk tolerance.Longer investment horizons generally 2-2Investment ConstraintsTax ConcernsCapital gains or losses: Taxed differently from incomeUnrealized capital gains: Reflect price appreciation of currently held assets that have not yet been soldRealized capital gains: When the asset has been sold at a profitTrade-off between taxes and diversification: Tax consequences of selling company stock for diversification purposes2-3Investment ConstraintsTax concerns (continued)Interest on municipal bonds exempt from federal income tax and from state of issueInterest on federal securities exempt from state income taxContributions to an IRA may qualify as deductible from taxable incomeTax deferral considerationsRate)Tax Marginal-(1YieldMunicipalYieldTaxableEquivalent=2-4...
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Investment Constraints - 2-1Investment ConstraintsLiquidity...

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