Investor Personality Profile: Jessica Brown

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Table of Contents

Investor Profile
Investment Goals
Asset Allocation Model
Investment Decisions
Risk and Risk Management
References

Investor Profile

Jessica Brown is a 35-year-old single mother of a 7-year-old boy, Nicholas. Ms. Brown works as a contracted English teacher and has an average income of $3,500 per month (“Salary Expectations for Teaching” par. 3). The client has $10,000 in her bank account, but she is expecting to spend it on living expenses, as she has just recently moved to the UAE. Jessica plans to stay in the UAE and understands the importance of education in the modern world. She wants to save money for her son’s post-secondary education at one of the reputable universities. She needs to ensure that her child has the required resources for the first year of studies.

Investment Goals

The approximate cost of education at the University of Sharjah is 50,000 AED ($13,000) annually (“University of Sharjah: Admissions” par. 2). The price for four years typically needed to earn a bachelor’s degree will be $52,000. This calculated sum of money is the required amount to be saved. In addition, the client wants to support her child for the first one or two years of education, which will require an additional $40,000 ($20,000 for housing and $20,000 for entertainment and food) (“University of Sharjah: Admissions” par. 2). As a consequence, the required amount to be saved is $92,000. Due to the son’s young age (7 years old), Ms. Brown has ten years to accrue the required resources. In this case, she has to save $9,200 annually, which is roughly $766 monthly, to meet her goal. These monthly savings will help accumulate the required financial resources without substantially restricting her budget, and assist in reaching her goal in time.

Asset Allocation Model

Based on the factors highlighted above, it is critical to propose an asset allocation model while dividing the investments into fixed income, equity, and cash. The majority of attention has to be paid to the cash and fixed income, and 50-70% has to be acquired from these investments. In this case, the fixed-income assets ensure saving a minimum amount per month and the stability of the deposits (Tuckman and Serrat 1994). In the meantime, using cash guarantees liquidity of the assets and implies that the funds could be retrieved in case of an emergency. At the same time, it requires a lot of time to accumulate the mentioned sum, but it is suitable in the context of the presented case due to the ten-year timespan.

As for the equity, Brown should not rely on it but should consider investing in the financial or stock market (15-20% out of $92,000). This investment will help build liquid cash within a short-term period but implies a high level of risk due to the likely changes in economic cycles. Lastly, variable income can be viewed as an opportunity to collect the rest of the money (10-15% of liquid assets) by focusing on turning a hobby into a business.

Investment Decisions

Based on the allocation mentioned above, the first form of investment is saving deposits. Using HSBC’s saving account, which has no fees and offers discounts at popular places in the UAE, is an option (“HSBC: Saving Account” par. 1). There are a plethora of choices in this area, as every bank offers this service, and the competition is intense. Thus, the primary reason for choosing this opportunity is the ability to change the initial currency of the account (“HSBC: Saving Account” par. 1). Another rationale for selecting this option for taking advantage of fixed income is low service fees (200 AED per month) and no limitations on the initial deposit (“HSBC: Saving Account” par. 1).

Investing in the currency exchange market will require the minimum price for the currency pair exchange ($1000), and the participation in the trade will be appropriate with the assistance of the leverage (Office of Investor Education and Advocacy par. 1). Thus, trading on the Forex market is risky, as the investor might lose the initial investment or more (Office of Investor Education and Advocacy par. 1). The operations will be completed with the assistance of a trader from Markets.com with an initial deposit of $100 (DailyForex par. 1). There is a diversity of choices since Forex is gaining popularity worldwide, but the selection of this trader pertains to favorable trading conditions, reputation, and quick return on investment. It could be said that the selection of this opportunity is less traditional, as it is not common for average citizens to participate in market speculations. Lastly, the client can consider a less traditional approach and invest in her own business. Depending on the business idea, the costs are estimated to be somewhere in the range of $1000.

Risk and Risk Management

Using cash and fixed income is associated with risks. These investment instruments are dependent on the currency exchange and inflation rates, and these economic fluctuations might lead to the devaluation of the cash deposit (Friedberg 230). Simultaneously, trading on the stock market will require paying substantial attention to the actions of the trader and economic lifecycles, while not disregarding the possibility of losing the initial investment (Office of Investor Education and Advocacy par. 1). As for investing in the business, the client will face similar risks to the ones mentioned above.

Nonetheless, there are several techniques to manage risks, and consulting professionals will help avoid losses and exclude inappropriate trading options (Office of Investor Education and Advocacy par. 1). Another alternative is to monitor the fluctuations in the market, and not perform any radical changes during any periods of economic recession. Simultaneously, the client should not be involved in illegal practices, such as fraud, in order to avoid legal suits. A combination of these strategies will help overcome difficulties and reach the client’s financial goals.

References

DailyForex: Top Rated Dubai Forex Brokers Review. 2016. Web.

Friedberg, Barbara. Personal Finance: An Encyclopedia of Modern Money Management. Santa Barbara: Greenwood Press, 2015. Print.

HSBC: Saving Account. 2016. Web.

Office of Investor Education and Advocacy. Investor Bulletin: Foreign Currency Exchange (Forex) Trading for Individual Investors.2011. Web.

Salary Expectations for Teaching in the United Arab Emirates. 2013. Web.

Tuckman, Bruce, and Angel Serrat. Fixed Income Securities: Tools for Today’s Market. Hoboken: John Wiley & Sons, 2011. Print.

University of Sharjah: Admissions. 2016. Web.

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