Derivatives o Securities that derive their value from underlying asset o

Derivatives o securities that derive their value from

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-Derivatives:oSecurities that derive their value from underlying asset.oOptions: Securities that give the investor an opportunity to sell or buy another security at a specified price over a given period of time.oFutures:Legally binding obligations stipulating that the seller of the futures contract will make delivery and the buyer of the contract will take delivery of an asset at a specified date and at a price agreed on at the time the contract is sold.-Other Popular Investments:oTax-advantaged Investments: Investments that provide higher after-tax returns by reducing the amount of taxes that investors must pay. (Ex. Municipal bonds)oReal estate:Assets such as residential homes, raw land, and income property. (Warehouses, office and apartment buildings, and condominiums.)Potential returns in the form of rental income, tax write-offs, and capital gains.oTangibles: Investment assets, other than real estate, that can be seen or touched. Purchased in anticipation of price increases.Gold or other precious metals.Collectibles.
Writing an Investment Policy Statement1)Summarize your current situationa.List all the assets owned.b.Current income and spending habits.c.Define the investment horizon2)Specify investment goalsa.Investment Goals: Financial Objectives you wish to achieve by investing.3)Articulate your investment philosophya.Risk tolerance4)Set investment selection guidelines5)Assign responsibility for selecting and monitoring investments.-Considering Personal Taxes:oBasic sources of taxationFederal, state, and local.Income, sales, and propertyoTypes of IncomeActive Income:Income from working (wages, salaries, pensions)Portfolio Income:Income from investments (interest, dividends, capital gains)Passive Income:Income from special investments. (rents from real estate, royalties, limited partnerships.)oCapital Asset: Property owned and used by taxpayer, including securities and personal residence.oCapital Gain:Amount by which the proceeds from the sale of capital asset are more than its original purchase price.

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