HDMG - Module Review

Module Review

Government security refers to any debt instrument issued by the federal, state, or local government. Government securities are safe because they are backed by the taxing power of the government. However, because they are low risk, they also tend to offer a low return. Some government securities offer income by paying interest semi-annually, while others sell at a discount and earn interest until they reach face value.

Stocks or equity investments offer a better opportunity for growth, but with a higher risk of loss of your investment. An investor makes money on stock through the price of the stock going up and by selling it at a profit and by receiving part of the company's profit through dividends.

Life insurance is designed to protect the dependents of an individual in the event of the individual's death. Most people who don't have dependents don't need life insurance. For some investors, however, life insurance is an investment that can protect their heirs from estate taxes. Annuities are another insurance product used by investors. Annuities provide a steady flow of income to an investor, either immediately or sometime in the future.

Asset allocation changes with an investor's stage of life, risk tolerance, and length of time until money is needed. As an investor's stage of life changes or as their portfolio grows, assets will need to be rebalanced to reflect either the new stage of life or to bring the asset back to the target balance.

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