Getting Started in Financial Planning

  1. What are the 3 principal steps in the investment planning process?
    • 1. defining the investment parameters
    • 2. managing client expectaions
    • 3. selecting appropriate investment vehicles
  2. What are the 6 overall investment parameters for the client?
    Risk tolerance

    Time horizon



    Income Tax considerations

  3. What is the average return for the assets classes since 1925?
    Small Cap stocks- 12%

    Large Cap stocks-10%

    Long term gov't bonds- 5%

    T-Bills- 3.5%

    Inflation- 3%
  4. What are the 3 rates of return that need to be discussed with the client?
    The expected return

    The minimum rate of return for the client 

    The actual return
  5. What are cyclical stocks and what are examples of them?
    They are companies that tend to prosper in growing economies and do poorly during down cycles. These are companies like steel, airlines, automobiles.
  6. What are defensive stocks?
    Industries that are relatively unaffected by general fluctuations in the economy because their companies produce necessities: eat'em, drink-'em, smoke-'em. Like groceries,   beverages, and tobacco. 
  7. What are interest-sensitive stocks?
    Stocks that rise and fall with changes in interest rates, like housing and banking industries. 
  8. When planning for education, what is the order for the solutions parents should look into?
    Parents should look into grants and scholarships first, followed by financial aid, then loans, and lastly their own personal resources.
  9. Once all options have been looked into, what is the last option that clients can look to to help fund their kids education? 
    Another approach is to look to grandparents who are trying to liquidate their estates. Direct gifts covering tuition payments to schools, colleges, and universities can be made without interfering with the annual gift-tax exclusion.
Card Set
Getting Started in Financial Planning
Rattiner's book