Finding the Right Investment: 7 Questions You Should Be Asking

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  • April 21, 2017

Jeff Witz, CFP®
David Zemon
MEDIQUS Asset Advisors, Inc.
“Results.  One client at a time.” (sm)

While the current economic environment may seem different, there has historically been uncertainty in most, if not all, time periods.  The key to determining what to invest in should be based primarily on the needs, temperament, and available resources of each individual or family.  The best investment for one person is often far less suited for someone else.  Advice given in the media or from others unfamiliar with your particular situation often times adds to the confusion.  The process of choosing the most appropriate investment for your own specific situation can be made easier by carefully considering, and answering, the following questions:

  1. What are your investment goals? One way to look at this common question is to ask yourself, “What do I want my money to do for me?”  For example, the investor who is a retiree might have a need for additional income to meet current living expenses.  Goals for working individuals may be longer term, such as saving for retirement, a child’s education, financing a major purchase, or the creation and maintenance of an emergency fund.
  2. How liquid does the investment need to be? The term “liquidity” refers to how quickly an investment can be turned into cash, without losing any of the invested dollars, or principal.  Investments designed to meet longer term goals such as retirement generally do not need to be as liquid as those earmarked as emergency funds.
  3. What is your risk tolerance? Can you afford to risk losing a portion or all of your investment without it affecting how you live?  What would be the impact of a loss on your investment goals?  In general, risk is related to return:  the higher the risk, the higher the potential return; the lower the risk, the lower the potential return.
  4. What is the impact of income taxes? Income taxes can have a significant, negative impact on your investment results.  For example, many high income individuals invest in municipal bonds because the interest from such bonds is generally exempt from federal income tax, and in some instances the interest is also exempt from state income tax.  Qualified retirement plans, life insurance policies and annuity contracts are used to accumulate funds for retirement primarily because of their tax-advantaged nature.
  5. What is the economic outlook? The state of the economy as a whole can cause investors to re-examine or change the mix of desired investments.  For example, during periods of high inflation, tangible assets such as real estate and precious metals have tended to produce nice results.  During periods of stable or declining inflation, intangible assets such as stocks and bonds have done generally well.  But keep in mind; while this has been the case historically, there is no guarantee that history will repeat itself.
  6. Is the skill and knowledge needed to manage the investment available? An investor may not have the specialized skills and knowledge needed to properly select or manage an investment.  In such instances professional investment advice, or investments where such advice is available, should be considered.
  7. How much money is available for investment? The investment tools open to an investor can vary, depending on the amount of money available.  For example, direct investment in the stock market can require a relatively large investment in order to provide needed diversification among a large number of stocks.  Many mutual funds and exchange traded funds (ETFs), however, provide diversification without the need for a large initial

These questions are simply the starting point in developing an investment plan.  By focusing on your own specific needs, goals and objectives, you can establish and maintain an efficient investment plan, even in periods of economic uncertainty.

Jeff Witz, CFP® and David Zemon welcome readers’ questions.  They can be reached at 800-883-8555 or at witz@mediqus.com or zemon@mediqus.com.

200 North LaSalle Street – Suite 1650 – Chicago, Illinois 60601
312-419-3733 – Toll Free 800-883-8555 – Fax 312-332-4908 – www.mediqus.com
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220 North Main Street, Suite 400, Davenport, IA 52801 563-326-2064
MEDIQUS Asset Advisors and Ausdal Financial Partners, Inc. are independently owned and operated.

The information contained in this report is for informational purposes only. Any calculations have been made using techniques we consider reliable but are not guaranteed. Please contact your tax advisor to review this information and to consult with them regarding any questions you may have with respect to this communication.

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