SUPPLEMENTANCILLARYTITLE-UniversityofUtah.docVIP

13 INVESTING FUNDAMENTALS CHAPTER OVERVIEW This chapter is the first chapter in Part Five—Investing Your Financial Resources. We begin our discussion by stressing the importance of preparing for an investment program. Then, we provide an overview of how the factors of safety, risk, income, growth, and liquidity affect investment programs. Next, we examine asset allocation and the different investment alternatives available to individuals. We also study methods that investors can use to reduce investment risk. Included in this section on reducing risks is a discussion on the importance of the individual’s role in the investment process. Finally, we discuss sources of investment information which include the Internet, newspapers, news programs, business periodicals and government publications, corporate reports, investor services and newsletters. LEARNING OBJECTIVES CHAPTER SUMMARY After studying this chapter, students will be able to: Obj. 1 Describe why you should establish an investment program. Investment goals must be specific and measurable and should be classified as short term, intermediate, and long term. Before beginning an investment program, you must make sure your personal financial affairs are in order. This process begins with learning to live within your means and providing adequate insurance protection. The next step is the accumulation of an emergency fund equal to three to nine months’ living expenses. Then, and only then, is it time to save the money needed to establish an investment program. Because of the time value of money, even small investments can grow to substantial amounts over a long period of time. Obj. 2 Assess how safety, risk, income, growth, and liquidity affect your investment decisions. Although each investor may have specific individual reasons for investing, the factors of safety, risk, income, growth, and liquidity must be considered by all investors. Especially important is the relationship between safety and risk. Keep in m