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Financial Planning Competency Handbook, 2nd Edition by CFP Board

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CHAPTER 38 Investment Strategies

Dave Yeske, DBA, CFP®

Golden Gate University

CONNECTIONS DIAGRAM

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Various investment strategies will have different income tax considerations that must be accounted for depending on the tax status of the investor and/or the type of account that holds the assets (tax planning). Different investment strategies may be indicated when investing for retirement (retirement saving and income planning).

INTRODUCTION

While financial planners will generally choose from a limited number of investment strategies when developing investment recommendations for clients, it is important that the planner possess an understanding of the full range of strategies that are available. The reasons that such breadth of understanding is important are twofold: First, a given client may possess unique circumstances that call for a specialized investment strategy, and second, clients may have questions regarding investment strategies not used or recommended by the planner, who in turn needs to be able to explain why such strategies are or are not appropriate for that client. An example of the former would be the client who holds a large, undiversified position in restricted employer stock, for whom the use of a derivatives-based strategy may be an appropriate way to mitigate downside risk, since traditional diversification techniques are not possible. An example of the ...

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