Investment Constraints

Investment Constraints - 2-1Investment...

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Unformatted text preview: 2-1Investment Constraints•Liquidity Needs–Vary between investors depending upon age, employment, tax status, etc.–Planned vacation expenses and house down payment are some of the liquidity needs.•Time Horizons–Influences liquidity needs and risk tolerance.–Longer investment horizons generally 2-2Investment Constraints•Tax Concerns–Capital gains or losses: Taxed differently from income–Unrealized capital gains: Reflect price appreciation of currently held assets that have not yet been sold–Realized capital gains: When the asset has been sold at a profit–Trade-off between taxes and diversification: Tax consequences of selling company stock for diversification purposes2-3Investment Constraints•Tax concerns (continued)–Interest on municipal bonds exempt from federal income tax and from state of issue–Interest on federal securities exempt from state income tax–Contributions to an IRA may qualify as deductible from taxable income–Tax deferral considerationsRate)Tax Marginal-(1YieldMunicipalYieldTaxableEquivalent=2-4...
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Investment Constraints - 2-1Investment...

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