Investing Crossword Puzzles: Investment Objectives

When evaluating what investment strategy is best for you, consider the objectives discussed below.

Capital Preservation is a conservative strategy of investing in fixed income investments or insured investments that attempts to avoid loss and protect the initial investment. Depending on age and limited time available to recoup losses, preservation of capital is an important goal for investors.

An investment with a tax advantage offers a tax benefit. These benefits could be a tax exemption or a tax deferment. Examples include municipal bonds, partnerships, unit investments, and annuities.

A tax-sheltered income is income that is not taxable due to a non-cash deduction, such as depreciation (for example, a 403(b) plan, which is a tax-sheltered annuity plan).

A growth objective is an investment strategy that focuses on capital appreciation. The goal of this type of fund is to increase the value, so the fund is focused on investments that will increase in value, though this is often combined with higher risk.

Investing on speculation means trading in an asset or conducting a financial transaction that has a significant risk of losing most or all of the initial investment, with the expectation of a substantial gain. The expectation of substantial gains acts as an incentive that more than offsets the risk of loss.

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Wednesday’s Word: Viatical Settlements

Ben Dell’Orto Fall 2018 IAC Student Intern

Even in the cutthroat world of investing, it doesn’t get much more morbid than “betting on death.”

A viatical settlement, also called a life settlement, is an investment where the purchaser buys a person’s life insurance policy. The insured individual needs money, frequently for a medical treatment, and accepts a sum less than the value of the policy from the investor. The investor also doesn’t necessarily have to purchase the whole policy, as brokers often split the policy among multiple investors, allowing investors to minimize risk by purchasing a smaller portion of several policies. Continue reading

Shafiq (J.D. ’18) Honored for Helping Aggrieved Investors

Each year, the Center for Clinical Programs makes a difficult decision to identify one student out of many exceptional clinical students to receive the Clinical Legal Education Association (CLEA) Outstanding Student Award. For the 2017-2018 school year, the Investor Advocacy Clinic (IAC) selected Qudsia Shafiq (J.D. ’18) as the recipient.

IAC clients are everyday people like hairdressers, teachers, retirees, and tradespersons – who have saved money a majority of their lives. Losing their nest egg results in housing instability, bankruptcy, inability to purchase necessary medications, or as one of Shafiq’s clients put it, “having to choose between buying dog food or toilet paper.”

IAC clients are reluctant when they come to us.  They had previously placed trust in a financial adviser who broke a promise to provide investment advice consistent with the client’s goals. Building a relationship with a client who has already been wronged by a professional is even more challenging than the securities law students must master to resolve what the industry calls “small claims.” Shafiq excelled at developing relationships with her clients and helping them rebuild trust.  She did this through compassionate listening and by going above and beyond in her representation.  As one client shared in a thank you note about a case on which Shafiq worked, “Thank you for all the hours (100s of them) put in on my behalf!  Amazing to see all of you in action.”

Shafiq’s work included decoding thousands of pages of brokerage statements and explaining to clients why they lost money. She helped her clients recover their losses and ensure their future financial stability. Shafiq’s work with the IAC did not end when she met her weekly hours. She took ownership of her clients’ cases and exceeded the minimum requirements. Shafiq continued her work after the semester formally ended and looked for additional ways to volunteer and help her clients.

In addition, she is committed to ensuring that those in need are represented in discussions about how financial regulation impacts them.  As a clinic II student, Shafiq testified before the U.S. Securities & Exchange Commission’s Dodd-Frank Investor Advisory Committee in October of 2017.  In her testimony, available here, she discussed how small investors need lawyers to help them solve securities issues and the enormous justice gap between the wealthy investor and the typical American trying to make ends meet in retirement.  Her testimony was praised because of her passion for her clients and her ability to communicate why a $5,000 investment loss is devastating for our retiree clients.

Shafiq’s advocacy continues beyond law school. She has worked with the IAC’s director to share her clients’ stories with key policy makers, regulators, and industry leaders. Due to her compelling testimony and dedication, she was invited to join a discussion of financial services policymakers on the problem of regular investors with “small” losses.

Regular investors have a strong ally and friend who will continue to be on their side throughout this Georgia State Law grad’s legal practice.

Investment Crossword Puzzles: Pyramid Schemes

If a program primarily focuses on recruiting others to join for a fee, it’s likely a pyramid scheme. Pay attention to where the money is coming from; if it mostly pays through recruiting, rather than sales of a product, it’s probably illegitimate.

Pyramids schemes do not sell genuine products or services. Promises of high returns in the form of fast cash might imply that those returns are created by the people buying into the scheme rather than legitimate success. These schemes are frequently masquerading as multilevel marketing, or MLM. These are investments in which individual sales people sell real products. Before investing in an MLM, ask to see documents such as financial statements. These statements should be audited to be sure that the investment makes its money through legitimate means, rather than through a scheme.

The eight ball model is demonstrated when each person in the scheme is responsible for recruiting two people into the scheme. These people must pay an investment to enter the scheme called a “gift sum”. The person at the top receives the gift money from eight people before exiting the scheme. The remaining people move up the scheme and the pattern continues as more people are recruited.

In the matrix model, people are required to pay for a product beforehand and wait behind others to enter the scheme. After an investor recruits enough people, he or she gets a product such as a TV or a gaming system, but it’s not worth the value of the initial investment.

Pyramid schemes can go on for a long time. But eventually, nobody else will want to invest, and the people still in the pyramid will be left with nothing, and the scheme will collapse.

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1          Check these documents to make sure the funds generated are real. (Two words)

2          In this type of scheme, a person receives a gift after recruiting enough people, but the gift’s value is far less than the amount paid.

  1. If a program primarily focuses on ____others to join the program for a fee, it is likely a pyramid scheme. Be skeptical if you will receive more compensation for recruiting others than for product sales.
  2. In this type of scheme, each person must recruit two people. Eventually, a person can receive the “gift sums” of eight other participants before exiting the scheme. (Three words)
  3. Promises of ____ _____ in the form of fast cash might imply that those returns are created by the people buying into the scheme rather than legitimate success. (Two words)
  4. Pyramids schemes make money off investors rather than by selling actual ________.

Across

A _____, unlike a pyramid scheme, has actual salespeople selling products. (Two words)

If it Looks too Good to be True…

By Lynn Mckeel, Fall 2018 IAC Student Intern

Fraudsters go to meticulous lengths to steal your money. According to FINRA, a new scam has taken investors by surprise. Somewhere in the world there is an individual, or a group of individuals, counterfeiting FINRA documents and impersonating FINRA employees in an effort to steal money from individuals all over the world. FINRA warns that investors report receiving convincing and detailed packages with the FINRA name and the names of FINRA’s top employees. Though FINRA says most of these scams are seen in the United Kingdom and Australia, it’s a lesson for all of us.  Continue reading

Alert! Watch out for that Unicorn!

By Matthew Haan, Fall 2018 IAC Student Intern

Bulls, and kitties, and bears, oh my! I seriously doubt that Dorothy had any kind of financial plan for her arrival in the Emerald City, but it is hard to blame her for this oversight. How is someone supposed to focus on financial well-being when faced with witches, singing munchkins, and talking scarecrows? There is a lot to keep up with out there, and if Dorothy followed this blog, she would have known the importance of watching out for those bulls, and kitties, and bears (in addition to the lions, and tigers, and other bears).

This week we are adding to our financial farm by letting you know about unicorns. That’s right—unicorns. In the business and investment world, a unicorn is a privately held company with an on-paper valuation of at least $1 billion. Like that Pokémon you found in the park, unicorns can evolve into decacorns ($10 billion) and even hectocorns ($100 billion). Despite the assumption you have likely made about the rarity of financial unicorns, they actually have become quite prevalent. Companies like Uber and Airbnb were once on the list of unicorns, and this year the food delivery service DoorDash joined the list. Continue reading

Investment Crossword Puzzles: Suitability

Not every investment is suitable for every investor. Brokers have a duty to ensure their clients are invested in goal-appropriate holdings. For example, some investors may not be suitable for high risk investments.

When recommending an investment portfolio, FINRA’s suitability rule states that firms and their associated persons “must have a reasonable basis to believe” that a transaction or investment strategy involving securities they recommend is suitable for the customer. The firm or associated person must base this reasonable belief on information obtained through reasonable diligence in ascertaining the customer’s investment profile.

It is part of the broker’s duty to their client to recommend investments that are suitable for the individual needs and circumstances of their client.

Recommendations must be based on the facts and circumstances of each individual investor. Some considerations include age, investment history, financial status, tax status, investment objectives, investment time horizon, and education, among others.

Now try our puzzle!

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