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 / Investments / Portfolio Management
Portfolio Management

The Principles of Investing

Begin by identifying your investment objective.

  • What is your time horizon for needing the money?

  • What are your attitudes toward risk?

  • How actively involved do you want to be in everyday investment decisions?

The Three Main Asset Classes:


  • Checking Account
  • Savings Account
  • Money Market
  • CDs
Why do we buy them?
Stability of Principal

Is our money always safe?
No. We could be outside NCUA/FDIC coverage limits and we could face the loss of purchasing power as inflation outpaces our cash interest rates.


How do they work?
You lend money to a government entity or a corporation (The Issuer) and the issuer gives you a binding promise (A Bond) to pay interest (Coupon Rate) for a specific time which ends on the bond’s Maturity date.

Why do we buy them?
  • For the income they pay
  • To reduce risk in our overall portfolio
  • For the possibility of capital gains

Stocks: Growth

  • When you purchase a share of stock you own part of the company.
  • You participate in the ups and downs of the company.
Why do we buy them?
For the dividends they pay and possible appreciation in the stock price

Managing investment risk using diversification
  • Diversify risk by holding stocks from different industries
  • Diversify risk further by including bonds and cash
  • Further diversify risk by using the Three-Bucket Retirement Plan:
  1. Long-term growth
  2. Near-term income
  3. Short-term cash   
             - Funds monthly withdrawal needs in retirement
Do you want to make your own investment decisions?
  • Do you do your own research?
  • Do you want to decide when to buy and sell?
  • Can you read a prospectus without falling asleep?
  • Are you experienced with handling losses?
  • Can you create retirement income?
  • Do you know if you will outlive your money?
  • If you are married, does your spouse share these skills?
Four investment expenses you should know about:
A mutual fund’s expense ratio
  • Expense ratios include 12b-1 and management fees.
  • Fee is not directly deducted from your account.
  • Fee is subtracted from the fund’s return.
  • Sales loads or transaction costs are not included in the expense ratio.
  • Exchange-traded funds generally have lower expense ratios than mutual funds.
  • Expense ratios can be compared at
A mutual fund’s sales load
  • Front-end loads are charged at the time of purchase.
  • Back-end loads are charged at time of redemption.
  • Level loads are used for accounts with short durations.
  • “No Load” Funds can charge both purchase and redemption fees.
Fees for a managed account                
  • Fee is typically a percentage of assets managed.
  • Transaction costs are usually included in the fee.
  • There is more opportunity for tax planning.
Fees and expenses for an annuity
  • Investment-management fees and administrative charges are deducted from your account.
  • Mortality and expense fees are also deducted.
  • A surrender charge is imposed if a withdrawal is made from an annuity in excess of the “free amount.”
How does a managed account differ from a mutual fund?
Mutual funds
  • Your money is combined with other investors and you own shares of a mutual fund.
  • The fund manager provides professional money management for the collective shareholders.
  • Purchases are made according to the prospectus and fund’s investment policy statement.
  • Price is determined only at the market close.
  • A mutual fund can distribute capital gains but never losses.
  • Fees are paid out of earnings of the fund and are not easily tracked.
  • You may pay an upfront charge or there may be a redemption charge when you need to take money out.
Managed account
  • Managed accounts are actively managed.
  • Professional money manager invests the money according to your personal risk tolerance and personal investment policy statement.
  • The manager moves the money from one asset class to another depending upon market conditions.
  • Price moves during trading day.
  • You own the Exchange Traded Funds (ETF) in your account so your gains and losses can be managed for your benefit.
  • Fees are subtracted on a quarterly or monthly basis and are transparent.
  • There are no upfront or redemption charges.
Are you letting your emotions direct your investment strategy?
The psychology of investing
  • Fear of the unknown
  • Investors tend to follow the herd
  • We get emotional and do the wrong thing at the wrong time
  • We get attached to company stock or inherited stock
  • We never want to take a loss

*Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with the financial institution to make securities available to members.
Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. FR021206-5090


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