FIRST MIDWEST FINANCIAL NETWORK - INVESTMENTS
First Midwest Financial Network1 offers a global perspective with strong local knowledge to help you seek financial balance. Together with today’s leading providers, we have access to a wide array of products and services. Whether you’re an experienced investor or a relative newcomer, your Financial Consultant will help you consider factors such as:
- Establishment of Goals
- Time Horizon
- Risk Tolerance
- Liquidity Needs
- Asset Allocation
Additionally, we have access to a wide array of products and services, including:
- - Mutual Funds
- - Individual Equities
- - Preferred/Restricted Stock
- - Exchange Traded Funds (ETFs)
- - Investment Advisory Services
- - Annuities (Fixed and Variable)
- - Alternative Investments
- - Managed Futures and Commodities
- - Index Linked CDs and Notes
- - Bonds (Taxable and Tax-Advantaged)
Your Financial Consultant will help you manage your investments so you can continue to pursue your hopes, plans and dreams.
Investment Options and Vehicles
A mutual fund pools the assets of multiple investors and purchases securities in accordance with a common predefined goal. With its pooled assets, a mutual fund provides advantages that an individual investor would not be able to manage alone.
First Midwest Financial Network has access to strategic relationships with some of the top mutual fund providers and offers access to over 1,000 funds — covering almost every investment objective and style, every sector and industry, and every investment class. Whether you are looking for large-cap growth or small-cap value, sector funds or socially conscious management, the First Midwest Financial Network offers access to a family of mutual fund partners who can address an investor's needs.
Why Mutual Funds?
- Affordability - Most mutual funds have a low minimum investment amount and offer automatic investment plans, allowing the investor to add to the fund in small increments. Individual investors would most likely find it cost-prohibitive to purchase such a wide variety of securities on their own. Because the fund buys and sells many securities at a time, the result is often lower brokerage costs to the individual shareholder.
- Liquidity - Mutual funds are easily converted to cash on any business day and can be sent to the shareholder in the form of a check or deposited directly into the shareholder's bank account.
- Diversification - Mutual funds hold many different investments in their portfolios, generally stocks, bonds and money market instruments. Because of the variety of securities within the portfolio, poor results from one investment may not have a dramatic effect on the mutual fund as a whole because they may be offset by positive results from other investments in the portfolio.2
- Professional Management - Experienced investment professionals research, select, and invest in securities they believe will achieve the fund's specific investment objective.
- Managing Risk - Investing in mutual funds involves risk, including possible loss or principal. Investments in specialized industry sectors carry additional risk, which are outlined in the prospectus. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not ensure against market risk. Selling the shares of funds may result in a taxable event, in addition to surrender and/or sales charges. Consult your tax advisor before engaging in a strategy where selling shares may occur often.
What Else Should I Know About Mutual Funds?
Investors should consider the objectives, risks, charges, and expenses of the mutual fund investment company carefully before investing which they can find in the prospectus, along with other information about the investment company. You can obtain a prospectus from your financial representative. Read carefully before investing.3
Annuities, usually tax-deferred investment vehicles, are contracts between an insurance company and the investor, the individual purchasing the annuity. These contracts, in theory, are typically simple. In return for a sum of money, generally referred to as the premium, the insurance company makes guarantees to the investor. Examples of these guarantees are:
- Guaranteed4 interest rates for guaranteed periods of time;
- Guaranteed4 return of principal, meaning that the investor will receive at least as much as they invested, regardless of circumstance; and
- Guarantees4 that the investor will never receive less than a minimum interest rate while the money is invested with the insurance company, regardless of how low interest rates may go.
Many features are determined by insurance law and may tend to be similar from one contract to the next. Other contract features will be determined at the discretion of the insurance company offering the product, so they may differ from one annuity to another.
First Midwest Financial Network offers access to a wide range of annuities from a variety of carefully selected providers. Call 800-241-1749 to get connected with a Financial Consultant to determine if an annuity is the appropriate investment for you.
Annuities in Everyday Life
Annuities are all around us, although their existence may not be immediately obvious. When prizes are awarded for state lottery drawings, such as a $1 million prize paid over 20 years, the payment vehicle is an annuity. The state lottery commission makes a single payment to an insurance company in return for the insurance company making ongoing annuity payments.
When people retire and begin receiving their pensions, corporations purchase annuities to fund the pension payments. When large court settlements are awarded, such as to a child who was severely injured in an accident, the awards are usually made as annuities, referred to as structured settlements. As you can see, annuities are already in widespread use and have been for many years.
Types of Annuities
The distinguishing characteristics of different types of annuities generally fall into three categories:
- When the annuity income payouts begin: immediate or deferred.
- Whether additional investments can be made to the same contract: single premium or flexible premium.
- How the money is invested and grows in value: fixed or variable.
It should be noted that all annuities combine these features in some manner.
A tax-deferred annuity is a non-negotiable interest-bearing contract offered by an insurance company. Tax-deferred annuities have two distinct phases: the accumulation phase, and the payout phase, which is also called "annuitization."
During the accumulation phase, interest earnings are retained in the account so the account balance grows. During the payout or annuitization phase, proceeds from the account are paid out or distributed in one of many ways.
Immediate Annuities vs. Deferred Annuities
Payments from an immediate annuity begin from one to three months after it is purchased. Most payments are made monthly, but many insurers also allow quarterly, semiannual or annual payments. Immediate annuities are most appropriate for individuals who are in immediate need of a stream of regular income. Deferred annuity plans delay payments until some point in the future, with an accumulation period during which the annuity grows in value.
Single-Premium Annuities vs. Flexible-Premium Annuities
A single-premium annuity is purchased with one lump-sum payment. There are no subsequent premium payments. Immediate annuities must be purchased in this way. A flexible-premium annuity is purchased through an initial minimum payment, after which additional payments of a certain minimum amount may be made at the option of the contract holder. This flexible premium payment plan is attractive to investors who want to gradually accumulate increasing value in an annuity.
Fixed Annuities vs. Variable Annuities
A fixed annuity guarantees a minimum fixed rate of return. A fixed annuity also may guarantee a higher rate of return for a certain period. At the expiration of that period, the contract may guarantee a different rate of return for another defined period. Fixed annuities are guaranteed contracts – the insurance company guarantees that it will fulfill its obligations to the annuity owners. This guarantee is backed by the full faith and credit of the insurance company offering the annuity (however, there is no government guarantee, such as the FDIC, associated with annuities). Fixed annuities are not considered securities and are not regulated by the SEC.
In contrast, with variable annuities, investors can choose where to invest the money they put into the annuity, from a range of different underlying investment options, typically called sub-accounts. This means the rate of return and the amount of the periodic payments investors eventually receive will vary, depending on the performance of the underlying investment options selected. Variable annuities are securities and are regulated by the SEC.
Variable and fixed annuities are long-term, tax-deferred investment vehicles designed for retirement purposes, but the variable annuities contain both an investment and insurance component and carry insurance-related charges. Variable annuities are sold only by prospectus. Guarantees are based on claims paying ability of the issuer. Withdrawals made prior to age 59 1/2 are subject to a 10% IRS penalty tax and surrender charges may apply. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. The investment returns and principal value of the available subaccount portfolios will fluctuate so that the value of an investor's unit, when redeemed, may be worth more or less than their original value.
Investors should consider the investment objectives, risks, charges and expenses of the variable insurance contract and subaccounts carefully before investing. The prospectus contains this and other information about the variable insurance contract and sub-accounts. You can obtain contract and underlying subaccount prospectuses from your financial representative. Read the prospectuses carefully before investing.
In the investment world, a share of stock represents an equity share of ownership in a corporation. Stock typically takes the form of shares of either common stock or preferred stock. As a unit of ownership, common stock typically carries voting rights that can be exercised in corporate decisions. Preferred stock differs from common stock in that it typically does not carry voting rights but is legally entitled to receive a certain level of dividend payments before any dividends can be issued to other shareholders. Convertible preferred stock is preferred stock that includes an option for the holder to convert the preferred shares to a fixed number of common shares, usually anytime after a predetermined date. Shares of such stock are called "convertible preferred shares."
Although there is a great deal of commonality between the Equities of different companies, each new equity issue can have legal clauses attached to it that make it dynamically different from the more general cases. Some shares of common stock may be issued without the typical voting rights being included; for instance, or some shares may have special rights unique to them and issued only to certain parties. Note that not all equity shares are the same. Preferred stock may have preference in the payment of dividends over common stock and also have preference at the time of liquidation over common stock.
Generally, fixed income investments6 are used in a portfolio to provide income and can be contrasted by equity securities that have no obligation to pay income.
First Midwest Financial Network provides access to a comprehensive range of fixed income securities and related services. These include corporate bonds, municipal bonds, government securities, brokered and structured CDs, collateralized mortgage obligations (CMOs) and a full range of packaged products that includes closed-end funds and unit investment trusts.7 We can offer access to products that should address virtually all your fixed income needs.
Exchange-Traded Funds (ETFs) offer public investors an undivided interest in a pool of securities and other assets. Shares in an ETF can be bought and sold throughout the day on a securities exchange through a broker-dealer, such as LPL Financial. ETFs do not sell or redeem their individual shares at net asset value. Instead, financial institutions purchase and redeem ETF shares directly from the ETF, but only in large blocks, varying in size by ETF from 25,000 to 200,000 shares, called "creation units." Individual purchasers trade them on the markets in which they are available.
ETFs generally provide diversification2. Because ETFs can be acquired, held, and disposed of, some investors invest in ETF shares as a long-term investment for asset allocation purposes.
What Else Should I Know About ETFs?
- ETF Details - ETFs offer shares that trade in the secondary market. Because ETFs are listed on exchanges, individual ETF shares can be bought and sold throughout the trading day at the current market price. The general level of stock or bond prices may decline, thus affecting the value of an equity or fixed income exchange traded fund respectively.
Moreover, the overall depth and liquidity of the secondary market may also fluctuate. Therefore, value of the shares, when redeemed, may be worth more or less than their original cost. Due to market conditions, ETF shares trading on the exchange may be available for purchase at a premium or discount to NAV.
- Principal Risk - An investment in an ETF structured as a mutual fund or unit investment trust involves the risk of losing money and should be considered as part of an overall program, not a complete investment program. An investment in ETFs involves additional risks: not diversified, the risks of price volatility, competitive industry pressure, international political and economic developments, possible trading halts, and index tracking errors. Although ETFs are designed to provide investment results that generally correspond to the price and yield of their respective underlying indexes, the trusts may not be able to exactly replicate the performance of the indexes because of trust expenses and other factors.
Advisory Services are fee-based solutions established so that investors work more closely with their advisor on broader investment planning goals rather than on a transaction by-transaction basis. Advisory services may be on a discretionary basis, which means you don’t need to direct your advisor to make trades, rebalance your portfolio, or make other investment decisions for your account, giving your Financial Consultant the ability to react on your behalf to changes in economic conditions.
Clients in fee-based relationships gain:
- Increased access to and flexibility through a variety of fee-based platforms, which means clients are not restricted by fund family or surrender charges
- Access to a Financial Consultant who will serve as a fiduciary under the Investment Advisers Act of 1940
- Access to institutional strategists and managers
- Increased service offering and a heightened relationship with you
- A custom-designed portfolio to potentially achieve an optimal blend of investments tailored to your personal goals, time horizon, and risk profile
A fee-based account may not be appropriate for every investor—for example, clients who don’t want to pay for ongoing advice, who want to make their own investment decisions, or who want to follow a buy-and-hold strategy. Investors should note that the deductions of advisory fees will impact overall account returns.