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2-3-4 Financial Concept

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Tassara Azad

on 2 September 2016

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Transcript of 2-3-4 Financial Concept

2-3-4 Financial Concept

3 Questions to ask yourself
Your strategy is determined based on your financial goals and deadlines
how much money you need to retire
in how many years (depends on the persons age)
Portfolio is deciding on the appropriate asset allocation

Risk Averse (dislikes risk)
lower returns

Risk Loving (Risk taker)
higher returns

The Three Buckets
The "Professional" Method
The "Common" Method
The Two Pyramids
Deciding which company to buy according to the asset allocation that best satisfy your needs
purchasing an investment product with the expectation of receiving a favorable return
What goals do you want to achieve?
When do you want to achieve your goals?
Will taxes impact when you can achieve your goals?

large cap
small cap
small cap
large cap
These financial goals are divided into 3 segments: short-term, intermediate term, and long term planning
depends on your needs & age
once 3 buckets are defined issues such as liquidity, product charges, investment flexibility, and taxation are essential when trying to fund different needs
The Four Boxes
How taxation influences various types of financial instruments when:
saving & accumulating
start distributing & spending accumulated funds
Hypothetical example of tax consequence:
invest in 10,000 annually
when is it taxable?
during the year or at distribution?
"when making an investment decision consider persons age and income tax brackets when there are changes in tax rates and tax treatment of investment earnings"

Option 1:
after tax contributions (paid taxes)
you get taxed throughout the year
after tax income your annual rate of return is 6%
you are not taxed at the end of distribution
Options 2:
after tax contributions (paid taxes)
not taxable during the year
you are taxed at the end of distribution
Option 3:
Pre-tax contributions (you did not pay any taxes on it) plus an after tax income distribution rate 6%
not taxable during the year
you are taxed at the end of distribution
Option 4:
after tax contributions (paid taxes)
not taxable during the year
not taxed at the end of distribution
Full transcript