Investment Preparation

Step 4: Investment Decisions

The investment pyramid in Step 3 shows there are many different investments possible within each asset allocation category. York Financial Group will assist you and recommend the ideal asset allocation to meet your portfolio objectives.

Mutual funds are included in all categories because there are a variety of different kinds of mutual funds, each with its own liquidity and risk level. Mutual funds offer diversification across industrial sectors and over various international markets. Thus the small investor can reduce the risk inherent in the ownership of a small number of stocks.

In a mutual fund, a professional money manager decides how to invest your money and that of others. Each fund has its own investment objectives and invests in some combination of bonds, cash or stocks.

On purchasing a mutual fund, the investor receives exchange units or shares of that fund. A mutual fund's unit value is described as the net asset value per share (NAVPS). The NAVPS is calculated by taking the total value of the fund if everything were sold on that day, less any outstanding debts it owes, and dividing by the number of units held by all the fund's investors. For example, if a fund is worth $10 million (value less what it owes) and has one million units outstanding, the NAVPS will be $10. If you own 10 units your investment is worth $100.

There are also a variety of alternatives to mutual funds, such as: index-linked GICs, royalty trusts and REITs.

REITs - (Real Estate Investment Trust) is a company that owns and sometimes operates income-producing real estate (i.e., apartments, malls, offices, and industrial parks).

GICs - (Guaranteed Investment Certificates) are certificates offered by banks, trust companies and credit unions, which offer a form of principal and interest guaranteed for the term of the certificate.

Royalty Trusts - Investments that tend to be energy-related, focusing on fossil and synthetic fuels.