Suitability

Investments suitable for income objective, but with high-yield income

Corporate bonds corporate bond funds

Ladders

Income strategy the investor purchases bonds all at once that mature at different times

Bullets

Income strategy the investor purchases bonds at different times that all mature at the same time

Barbells

Income strategy the investor purchases bonds maturing in one or two years and an equal amount maturing in 10 or more years with no bonds in between.

Modern portfolio theory

Mathematical framework for assembling a portfolio of assets such that the expected return is maximized for a given level of risk, defined as variance. Its key insight is that an asset's risk and return should not be assessed by itself, but by how it contributes to a portfolio's overall risk and return.

Investments suitable for liquidity objective

Money market funds

Investments suitable for income objective, but with tax-free income

Municipal bonds municipal bond funds

Investments suitable for income objective, but from a stock portfolio

Preferred stock utility stock

Monte Carlo simulation

The statistical method used to determine the return profile of a security or portfolio that recreates potential outcomes by generating random values based on the risk and return characteristics of the securities themselves

Capital Asset Pricing Model (CAPM)

Theory that attempts to derive the expected return on an asset on the basis of the asset's systematic risk

Investments suitable for income objective, but with greatest safety

U.S. Government bonds

Investments suitable for preservation of capital objective

insured bank CDs money market instruments or funds T-bills

Investments suitable for balanced/moderate growth objective

large-cap stocks defensive stocks

Capital Market Line (CML)

provides an expected return based on the level of risk by using: -Expected rate of return of the portfolio -risk-free rate -return on the market -standard deviation of the market -standard deviation of the portfolio

Strategic asset location

refers to the proportion of various types of investments composing a long-term investment portfolio

Tactical asset allocation

short-term portfolio adjustments that adjust the portfolio mix between asset classes in consideration of current market conditions

Investments suitable for aggressive growth objective

technology stocks sector funds cyclical stocks

Investments suitable for speculation

volatile stocks high-yield bonds stock/index options