Shellington Associates



250 West Lancaster Avenue
Suite 275
Paoli, PA 19301





The Perfect Investment

Once an individual or family has reached the stage in life where there is enough income to easily pay the monthly bills, there is often a desire to put the excess monthly cash flow to work. For some, an inheritance, a large bonus, or a distribution from a qualified plan can provide an investable, lump sum of money. For most people, the key question is, "How do I put this money to work?" In a perfect world, the answer would be an investment that has certain, ideal characteristics:

High rate of return: A total return high enough to out perform inflation and taxes, and still meet the investment goal.

Complete safety: There would be no concern that any part of the investment could ever be lost.

Always liquid: An investor would be able to redeem the investment, and receive cash, at any time of day or night, every day of the year without any penalty or loss of principal.

No income taxes: There would never be any income taxes due on the investment's yield or growth. The investor keeps everything earned.

No skill or knowledge required: No special skill or knowledge would be required to manage the investment. One could just forget about the investment and enjoy life.

The Real World

Such a "perfect investment" does not exist, of course.  In the real world, individual investors must choose from a confusing range of investment tools, each with different characteristics and uses.  The process of selecting the best investment for a particular need or situation is made easier by clearly answering the following questions:

Why are you investing?  Do you need income for current expenses or are you accumulating money for a future need?

When will the money be needed?  At any moment?  A year from now?  At retirement, 25 years from now?

How much risk are you willing to undertake?  Can you afford to lose all or a part of the investment, and not have the loss affect how you live?

Are income taxes a concern?  If the investment is currently taxable, to what extent will the additional tax reduce investment growth or push you into a higher tax bracket?

What is the economic outlook?  Investment opportunities will vary depending on whether the economy is growing or shrinking.

Do you have the skill and knowledge needed to manage your investment?  Is professional investment management needed? 

How much money is there available to invest?  Are smaller amounts available periodically, or is there currently a larger, lump sum of money?