Chapter Two

Distribution of investors wealth among different countries and asset classes for investment purposes.

The group of securities that have similar characteristics, attributes and risk/return relationships.

Based on investors ability and willingness to take risk

Risk tolerance depends on investors current net worth, income expectations and age.

Stated as an absolute or a relative % return

Capital preservation (minimise real losses)

Capital appreciation (portfolio growth)

Current income (focus on generating income rather than capital gains)

Total return (increase portfolio value by capital gains and reinvesting current income with moderate risk exposure)

Liquidity needs

Time horizons

Tax concerns

Regular IRA

Roth IRA

Cash Value Life Insurance

Tax Sheltered Annuities

Employer's 401(k) and 403(b) Plans

What asset classes to consider

What policy weights to assign to each eligible class

What allocation ranges are allowed based on policy weights

What specific securities to purchase for the portfolio