Do you need this or any other assignment done for you from scratch?
We have qualified writers to help you.
We assure you a quality paper that is 100% free from plagiarism and AI.
You can choose either format of your choice ( Apa, Mla, Havard, Chicago, or any other)
NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.
NB: All your data is kept safe from the public.
Investment Prerequisites
The investor will decide to invest based on a carefully planned framework to provide concepts, tools, and techniques necessary to achieve financial and investment goals. Out of the available capital, I will clearly define and meet the investment prerequisites needed to take care of the basics of life such as mortgage, food, transportation, taxes, clothing, and emergencies.
Investment Goals
The next step is to move into the establishment of investment goals that I plan to achieve over a specified period. Here I will categorize the different goals I have under each investment time horizon so that the goals set for the immediate short term will lead me into the intermediate and long run goals. For instance, under my current goals, I might plan to have my income enhanced by investing in extra hours of work, starting an extra sales business on side, or simply working to gain extra skills. The investor can obtain the latter by enrolling in short management-training courses. Additionally, in the meantime, I could imagine accumulating dividends or interests from mid-term investments such as cash deposits. Specifically, the fixed deposit accounts and the savings and credit accounts could be worthwhile (Johnson & Scholes, 2011).
Usually the establishment of investment goals is based on the needs and wants of an individual. These goals often shape the types of investment plans a person chooses concerning what they consider important. Some of the more common goals for the short-term investment window usually involve saving for a down payment of an asset such as a vehicle, and this usually covers a period of one to three years. I would be better placed going for an investment plan with short-term maturity such as government bonds (saving bonds), insured money market account, e.g. the Federal Deposit Insurance Corporation that allows one to access funds without penalty.
Saving for the short to medium term involves such goals as saving for major expenditures such as a down payment for a house, education, travel, and capital to begin business overtime, usually between two to five years. Here, the opportunities lying in investment vehicles might include funding by short or medium term commitments. This includes investing in certificates of deposits (CDs) that earn a stable return and are comparatively low-risk.
Closely followed by this is the mid to long term investment which encompasses goals spanning between five to fifteen years. This is where investing into your child’s education, for instance, is taken care of by education plans and policies; as it covers a longer period, like stocks, it almost always carries the potential to offer higher and longer term growth than more conservative portfolios.
Lastly, the longer-term investment lies on the horizon. Everybody must expect retirement from work. This requires long term planning that should ideally begin from the moment one graduates from college and joins the workforce. Finding the right mix of long-term investment program for a specific situation is the key. Commonly, the rate of risk decreases with age.
Concerning the above four planning horizons, I would place the following investment goals to be established under their respective categories.
- Accumulating funds for retirement to cater for long term goals,
- Enhancing current income: This can be grouped under savings for the short to medium-term horizon to take care of such needs as capital investment, home, travel, and education.
- Savings for major expenditures will also be grouped under the same category with investment income in number three above for similar reasons.
- Sheltering income from taxes: Since Federal law on tax allows taxpayers to deduct certain noncash charges from their income sources; it should be relatively easy for an investor to avoid payment of taxes from an income source allowing them more money to reinvest.
These four investment goals serve as my guidelines in preparing my own investment strategies and investment plan.
Investment plan
The following details describe my potential investment plan and vision over the specified period.
Type of Investment Goals
Goal One
The first goal is saving for a down payment to buy a car. Sub goals include opening a fixed deposits account, buying US savings bonds, FDIC- insured money markets, obtaining a driver’s license, and taxi operations permits.
Goal Two
Goal 2 is savings for further studies and capital expenditures. Sub goals include selecting careers, colleges, purchasing education requirements, purchasing investment packages, writing business plans, and carrying out feasibility studies.
Goal Three
Goal 3 is savings for life and property insurance. Sub goals include car insurance and medical cover.
Goal Four
The fourth goal is accumulating funds for retirement. The Sub goals include investments in stocks, trusts, certificates of deposits, and property. The following table analyses the 5-months investment period and calculates the returns for each goal.
Evaluating Investment Vehicles
The investment goals outlined determine the investment plans to be set in place. In my case, I chose saving to pay for a down payment of my car which I had planned to put in USD 50,000 in a fixed deposit account that would earn an interest of 10% per annum. This translates to USD 59,500 at the end of the third year. This is a good return on investment considering that the principal of USD 50, 000 earned a total of USD 9,500 in five months. I would therefore keep it. Secondly, based on my needs as a student, I should be concentrating on my studies, which should work well with good planning. With the cost of higher education rising each passing year, it is probably best to be on top when it comes to college management.
The downside is that college costs are spent more rapidly than the total accumulated interest earned. Furthermore, there is always a risk that the value of education achieved may not measure up to total costs incurred. Business investment means an increased opportunity to bring more income into one’s budget. However, the cost of doing business would usually incur the cost of opportunity to another competing need, such as education. Putting a few dollars into it would mean foregoing the cost of investment in the short to medium term range, but in the end, an increased knowledge adds value to all of the activities you might have wanted to do earlier with a fresh new perspective to solving problems (Hansen & Guan, 2007).
The issue comes with choosing the right policies for my health, medical and property insurances in the belief that should I fall the victim of any of the insured risks, then I be compensated for adequately. Because these policies carry with them a hefty risk factor, they must also ensure that it cuts across different product ranges and attract a handsome return on the cost of paying for the service. On the other hand, paying for retirement benefits calls for such shots as asset diversification in order to maximize the potential of investment returns and in particular the young investors has to take a keen interest in increasing their investment portfolio with much riskier categories than an average investor would think of. As a student, I would go for a long-term investment plans that mature over many years so that I can know which stocks are performing well in terms of high returns. I would buy into the union trusts as these have an advantage of professional management, with capabilities to diversify stocks both in on- shore and offshore markets. Stock exchange, mortgages, and other forms of insured money markets would be appropriate in my case as they grow exponentially over time.
Constructing a Diversified Portfolio
The following list is therefore a combination of my preferred investment portfolio designed with a view of maximizing returns and minimizing risks through diversification.
- Car asset investment
- Units’ trusts
- Education policy
- Mortgages
- Stocks
Managing the Portfolio
In a situation where, possibly, the forecasted or expected performance does not match with the actual behavior, then there is an option to revert to other alternatives. The idea is to measure the results against your objectives and see whether there is a deviation to take corrective measures. Knowledge on tax law is considered the navigation tool to help maneuver through the muddle of investments (Hansen & Guan, 2007).
Property Investments Analysis
Investing in property is still popular despite the harsh manner in which the investors may be treated by the market. One of the reasons why I still think it is popular is the amount of money involved. Property business has the largest amounts of money and investors from many countries around the world feel the thrill to chase that money. In United States, where the observers calculated the amount in 2008, observers estimate that close to 60% of the amount of money in the economy was in the housing and property sector. This is an indication of what is actually happening in the other parts of the world despite the lack of stats.
In financial terms, investing in property is a risky affair. The amount of debt and uncertainty involved is too much. This is considering the fact that properties are quite expensive. The amount of debt that banks have to extend to pull off one property deal is too much. Uncertainty comes when it becomes apparent that one cannot individually predict most of the dynamics that surround the property business. This includes the nature of population growth and its effect on market. In the United States, the fear is that it is hard to predict the future of the property market in light of the burgeoning population. This makes and creates an insatiable market for the property owners and developers especially considering a perfect American family need a house, a car and a job. However, it also raises the issue of land, which is a fixed resource. This means that they think of better way s to round that issue. Hence, the developers build tall houses like Burj Khalifa, which raises the nature of risk. In fact, many economists and observers in economy circles concur that after a phenomenally tall building is put up an economic slump follows.
The riskiness associated with property continues to make this sector less thrilling foe investors. It is very attractive in economic booms. During this time, lenders (read banks) extend credit quite easily. The terms for getting a loan get even more relaxed. However, when an economic slump happens, like in the 2008 American housing crises, banks run away from lenders. These institutions tighten their lending measures and get stricter in following up loans. Since property is quite expensive, most borrowers on normal occasion borrow as much as 100% of the property value. Therefore, when the prices of the commodities fall they face insurmountable levels of debts and institutions unwilling to bail them. The only resort is to sell the property at very low prices to cover part of the debt. This cycle is not predictable. However, history has shown that in crisis situations banks run away from investors. The most unwelcome thing is that an investor never knows when these situations strike.
How safe is the property itself in the long term? Many observers argue that the property is forever unsafe. The other factors can easily be mitigated but the safety of the property is not a guarantee. Because of the scarcity of the most important resource in property investments, land, most buildings in major towns and cities are built upwards. This increases the level of likelihood in causing damage. Insuring the property is an expensive affair in the long term. It is even more volatile in countries vulnerable for earthquakes and natural disasters like tsunami. It is also subject to terrorism. The latest case of terrorist target is the world trade center in the United States. The point is that tall and magnificent buildings become terrorists’ targets in as much as it is not directly connected to their interests (Johnson & Scholes, 2011).
References
Hansen, D. & Guan, L. (2007). Cost Management: Accounting & Control. New York: South-Western Pub.
Johnson, G. & Scholes, K. (2011). Exploring Strategy Text & Cases. New York: FT Prentice Hall.
Do you need this or any other assignment done for you from scratch?
We have qualified writers to help you.
We assure you a quality paper that is 100% free from plagiarism and AI.
You can choose either format of your choice ( Apa, Mla, Havard, Chicago, or any other)
NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.
NB: All your data is kept safe from the public.