SINGLE
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RABBI MARC S. BLUMENTHAL
Service & Special Singles Oneg
Friday, Jan. 16, 1987 8:00 p.m.
TEMPLE BETH EL
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Birmingham, MI
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0 - e 1
-.Steven M. Zimberg, CFP
For singles, managing
money can be especially dif-
ficult because the financial de-
cision making is borne alone.
And, since the better quality
investments are not available
for very long, the ultimate de-
cision must be made quickly.
How can you determine
-
which investment oppor-
tunities, if any at all, are the
good ones, and which should
become part of your portfolio?
You must begin this selec-
tion process by first developing
a personal financial plan. This
plan should include your fi-
nancial wants, needs and go-
als. It must include available
capital, tax considerations and
risk parameters. Likewise, it
must weigh the preference for
cash flow, tax benefits and
asset appreciation. The actual
investment is secondary to
these criteria because without
a plan the best investment
could cause financial ruin.
Types of investments gener-
ally fall into two main
categories: marketable and
unmarketable securities. The
most common are marketable
securities such as the stocks,
bonds, annuities, and similar
> investments which you would
acquire through your broker or
licensed agent. These invest-
ments can generally be con-
verted into cash within a few
days. '
The less common investment
category is the unmarketable
security. This type of invest-
ment has no public market for
) easy selling and has less gov-
ernmental monitoring, and
therefore contains a greater
risk of financial loss. Natur-
ally, it is this area which is
most abused.
Now, especially with the
stringent new tax laws, in-
vestments must have economic
substance, or else there is a
good chance the investment
will be construed to be a fraud
or a sham by the IRS. There-
\_ fore, you can be pretty certain
that most every investment
will have a favorable legal and
tax opinion.
However, just because an in-
vestment is considered legal
and the numbers are accurate,
does not mean that the invest-
, ment is economically sound,
nor that it is suitable for your
unique financial situation.
The real problem today is
that often these investments
will offer a significant upfront
commission, and the selling
broker, or financial planner
will become influenced by this
L
1
Steven Zimberg is president of
Asset Advisory Services, Inc.
i n. Franklin.
attractive commission and
want to put everybody into the
investment without really ap-
praising the validity of the in-
vestment with those unique
goals and objectives of their
client.
How do you evaluate the
economics of an investment?
Much of it will be written in the
actual offerings memorandum.
Perhaps the best place to begin
is where it shows the amount
you are required to invest. If
this amount is out of your
league, then stop and find an-
other investment. Otherwise,
grab a pencil and proceed to the
next step which is to read all of
the bold print.
Use the pencil frequently.
Underline phrases, circle
paragraphs, make question
marks, and write questions in
the margins.
As you proceed through the
memorandum, carefully read
the subjects covering experi-
ence of management, conflicts
of interest, risk factors, suita-
bility factors, possible changes
in tax and other laws, alloca-
tion of income and expenses,
and similar economic details.
You must also read between
the lines. Feel free to call col-
lect to the investment manager
and ask questions. Be blunt,
ask things like, "have you ever
done this before?" and "tell me
about your track record."
The time value of money is a
critical factor in computing the
return from an investment.
Simply stated, a dollar earned
today is worth more than a dol-
lar earned tomorrow because
the dollar earned tomorrow is
illiquid, uncertain and may not
include interest. For example,
an investment which projects
to return your money after 30
years may not be as good as
money sitting in the bank
earning interest.
The ultimate profit potential
of the proposed investment
may be unnecessarily reduced
or eliminated going after just
taxes. Therefore, you will find
that you may be wise to accept
less tax shelter in favor of
higher economic return.
Likewise, investments which
have greater risks, should typ-
ically offer investors a higher
return. You should be both
conservative and flexible in
your projections.
If you are unable to review
the investment on your own
then a competent investment
adviser must be retained. After
you have determined that the
investment meets your eco-
nomic objectives, then the
legal and accounting profes-
sionals should complete the re-
Continued on next page
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89