SECTION III: INVESTMENT PRINCIPLES

Understanding Key Investment Principles

Registered Representatives must have an understanding of how investments work and how key investment principles will guide them along the way when selecting investments for their clients. Below are definitions to key investment principles that are used in discussions about investments:

RISK TOLERANCE

A person's ability to tolerate short-term declines in the value of their investments based on their personal investment time horizon. Different asset classes fluctuate more than others, so it is important that people invest in a portfolio with their own level of comfort. In other words, does the investment pass the "sleep test" where the client can sleep comfortably at night without worry over the fluctuations of his or her investments?

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