COLLECTING THE BASIC DATA:
Initially, the portfolio manager has to devote a great deal of attention to basic consideration such as pension plans, life insurance and educational funds for children. Usually, the basic needs must be satisfied before making an investment programme. Every individual investor has a priority of expenditures. The following list of priority expenditure is probably representative.
- Food, clothing, housing and transportation.
- Life insurance
- Pension plan
- Savings for emergency
Investments in securities can be considered only after basic family needs are satisfied. The type of data that can be collected about the investor includes the following items:
- Stated purpose for the portfolio
- Age and health of the family.
- Marital status and responsibilities.
- Approximate income, sources and expected duration.
- Saving habits.
- Property ownership.
- Current security holdings.
If all priority expenditures have been satisfied, the portfolio manager has a great freedom to purpose a more aggressive policy.