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Money Matters: How to choose the right investments


"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," writes Jeff Witz, CFP.

Jeff Witz, CFP

Jeff Witz, CFP

Determining how to invest money should be based primarily on the financial needs, temperament, and available resources of each individual or family. The best investment for 1 person is often far less suited for someone else. Advice given in the media or from others unfamiliar with your situation often adds to the confusion. The process of choosing the most appropriate investment can be made easier by carefully considering, and answering, the following questions:

What are your investment goals? One way to address this question is to ask yourself, “What do I want my money to do for me?” For example, a retired investor might need additional income to meet current living expenses. Goals for working individuals may be long-term, such as saving for retirement or a child’s education, financing a major purchase, or creating and maintaining an emergency fund.

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 long-term goals, such as retirement, generally do not need to be as liquid as those earmarked as emergency funds.

What is your risk tolerance? Can you afford to risk losing a portion or all your investment without it affecting how you live? 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. Understanding your risk tolerance can help you select the right mix of investments.

What is the impact of income taxes? Income taxes can have a significant negative impact on your investment results. To reduce the impact of taxes, many high-income individuals invest in municipal bonds because the interest from those 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 can be used to accumulate funds for retirement primarily because of their tax-advantaged nature.

What is the economic outlook? The state of the economy can cause investors to re-examine or change their desired mix of investments. For example, during periods of high inflation, tangible assets such as real estate and precious metals tend to produce positive results. During periods of stable or declining inflation, intangible assets such as stocks and bonds have generally done well. Keep in mind that although this has been the case in the past, there is no guarantee that history will repeat itself.

Do I have the skills and knowledge needed to manage the investment? An investor may not have the specialized skills and knowledge needed to properly evaluate, select, and manage an investment. In such instances, professional investment advice, or investments for which such advice is available, should be considered.

How much money is available to be invested? The investment tools available 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 to provide the needed diversification among many stocks. Many mutual funds and exchange traded funds, however, provide diversification without the need for a large investment.

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

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Investment advisory services offered through MEDIQUS Asset Advisors, Inc. Securities offered through Ausdal Financial Partners, Inc.Member FINRA/SIPC ∙ 5187 Utica Ridge Rd ∙ Davenport, IA 52807 ∙ 563-326-2064 ∙ MEDIQUS Asset Advisors and Ausdal Financial Partners, Inc. are independently owned and operated.

Effective June 21, 2005, newly issued Internal Revenue Service regulations require that certain types of written advice include a disclaimer. To the extent the preceding message contains written advice relating to a Federal tax issue, the written advice is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer, for the purposes of avoiding Federal tax penalties, and was not written to support the promotion or marketing of the transaction or matters discussed herein.

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.

MEDIQUS Asset Advisors, Inc. does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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