section 1 - The American College Online Learning Center

(2) Markets(a) Emerging markets(b) Developed markets(3) Correlations are not static(a) A benefit of investing in uncorrelated markets is how it will evenout over time.(b) Picking up yield and reducing risk(4) The market cap, value, growth, and other attributes apply to internationalequity investing, as well as domestic investing, but investing ininternational equities has other considerations for the U.S. investor. Note:www.sec.gov/pdf/ininvest.pdf(a) Market transparency(b) Liquidity(c) Taxation(d) Foreign exchange rates(e) Legal remedies that are not U.S. law(f) Political risks(5) Alternative ways to invest internationally(a) American Depository Receipts (ADRs)(a) Foreign shares trading in U.S. markets as ADRs. Thesesettle and clear in U.S. dollars(b) Stock mutual funds focused on international investments(c) U.S. multinational corporations2. Investing in stocks as part of a retirement income plana. Investment horizon in the retirement income portfolio can match investmenthorizon in the accumulation portfolio.(1) Avoiding the asset class in a retirement income portfolio is not the answer.The advisor has to work with the client to balance income needs with risktolerance.b. Total return stock investing(1) Total return = dividend yield + capital gains yieldc. Higher expected returns(a) Advisors need to get clients to the point where it is okay to touchprincipal. A discussion with the client about total return investingcan help them understand that retirement income does not have tocome from just dividend checks and coupon interest payments.(1) Stocks as an asset class should, based on established risk premiums,earn a higher return over time than bonds or cash. Higher returns meanhigher potential rates of return.d. What type of account holds the shares?(1) Taxable account7.5